AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 7, 1997, by and among
DI INDUSTRIES, INC., a Texas corporation ("Parent"), DRILLERS, INC., a Texas
corporation (the "Purchaser") and a wholly-owned subsidiary of Parent, and GREY
WOLF DRILLING COMPANY, a Texas corporation (the "Company").
Parent, the Purchaser and the Company agree as follows:
ARTICLE 1
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the Texas Business
Corporation Act (the "TBCA"), the Company will be merged with and into the
Purchaser (the "Merger") as soon as practicable following the satisfaction or
waiver, if permissible, of the conditions set forth in Article 5 hereof.
Following the Merger, the Purchaser will continue as the surviving corporation
(the "Surviving Corporation") under the name "GREY WOLF DRILLING COMPANY" and
will continue its existence under the laws of the State of Texas, and the
separate corporate existence of the Company will cease.
Section 1.2. EFFECTIVE TIME. The Merger will be consummated by filing with
the Texas Secretary of State articles of merger executed in accordance with the
relevant provisions of the TBCA. The Merger will become effective upon the
issuance of a certificate of merger by the Texas Secretary of State (the time
the Merger becomes effective being the "Effective Time").
Section 1.3. EFFECTS OF THE MERGER. The Merger will have the effects set
forth in the TBCA.
Section 1.4. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of the Purchaser will be the Articles of Incorporation
and Bylaws of the Surviving Corporation.
Section 1.5. DIRECTORS AND OFFICERS. The directors and the officers of the
Purchaser immediately before the Effective Time will be the directors and
officers of the Surviving Corporation until their respective successors are duly
elected or appointed and qualified.
Section 1.6. CONVERSION OF SHARES OF COMPANY COMMON STOCK.
(a) (i) Subject to Sections 1.6(c), 1.6(d), 1.6(e) and 1.6(f), at the
Effective Time each issued and outstanding share of common stock without par
value of the Company ("Company Common Stock") will be converted into the right
to receive the "Share Fraction" (defined below) of:
(x) an amount in cash (the "Cash Consideration") equal to the
"Closing Cash Consideration" (defined below), plus
(y) a number of shares (the "Stock Consideration") of the common stock,
$0.10 par value, of Parent ("Parent Common Stock") equal to the
"Aggregate Stock Consideration" (defined below), plus (if applicable
under the provisions of Section 1.6(a)(vi))
(z) an amount, if any, in cash (the "Contingent Cash Consideration") equal
to the "Aggregate Contingent Cash Consideration" (defined below).
The Cash Consideration, the Stock Consideration, and, if applicable, Contingent
Cash Consideration are collectively referred to herein as the "Merger
Consideration."
(ii) The "Closing Cash Consideration" means $56,600,000, less such
amount, if any, as shall be deducted from the Closing Cash Consideration
pursuant to Section 1.6(f), and plus the amount, if any, of the "Additional
Closing Cash Consideration" which shall be added thereto pursuant to Section
1.6(a)(vi).
(iii) The "Aggregate Stock Consideration" means 14,000,000 shares
of Parent Common Stock, plus or minus such number, if any, of shares of Parent
Common Stock by which the Aggregate Stock Consideration shall be increased or
decreased pursuant to Section 1.6(e), and plus such number, if any, of shares of
Parent Common Stock as shall be added to the Aggregate Stock Consideration
pursuant to Section 1.6(f).
(iv) The "Aggregate Contingent Cash Consideration" means an
amount, if any, equal to the sum of the "Contingent Cash Consideration" of all
"Stockholders" as such terms are defined in the Escrow Agreement described in
Section 1.6(a)(vi) determined as of the "Distribution Date" as provided for in
said Escrow Agreement.
(v) The "Share Fraction" means a fraction having "1" as its
numerator and having as its denominator the number of shares of the Company
Common Stock outstanding at the Effective Time (except and excluding any shares
of Company Common Stock issued and held in the Company's treasury immediately
before the Effective Time).
(vi) Promptly after designation by the Company and approval
by Parent of the Designated Bank pursuant to Section 1.7(a), the Company,
Parent,
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the Purchaser, Messrs. Xxxxx K. B. Xxxxxx and Xxxxxxx X. Xxxxx, as "Stockholder
Representatives," and the Designated Bank as escrow agent (in said capacity
being herein called "Escrow Agent") shall enter into an Escrow Agreement in
substantially the form attached hereto and incorporated herein as Schedule 1.6
(the "Escrow Agreement"). Unless otherwise stated herein, terms defined in the
Escrow Agreement shall have the meaning therein stated when used in this
Agreement. Unless the Escrow Agreement terminates prior to the Effective Time
pursuant to Section 4 of the Escrow Agreement, Parent or Purchaser shall deposit
with the Escrow Agent for inclusion in the Escrow Fund the sum of $5,000,000 at
or immediately after the Effective Time. Further, if the Escrow Agreement is not
thus terminated prior to the Effective Time and the Merger occurs, Parent and
the Surviving Corporation shall be jointly and severally obligated to pay or
cause to be paid and agree to pay or cause to be paid to each Stockholder on the
Distribution Date the Contingent Cash Consideration, if any, owing to such
Stockholder as described in clause (z) of Section 1.6(a)(i) of this Agreement,
unless the Termination Date occurs pursuant to Section 5 of the Escrow
Agreement. Said agreement of Parent and the Surviving Corporation to pay or
cause to be paid the Contingent Cash Consideration, if any, to each Stockholder
shall be secured by the security interest and common law pledge, assignment and
lien on the Escrow Fund granted in Section 14 of the Escrow Agreement. If,
however, the Escrow Agreement is terminated prior to the Effective Time pursuant
to clause (i) or clause (ii) of Section 4 of the Escrow Agreement, no amount of
Contingent Cash Consideration shall be payable to the holders of Company Common
Stock or included in the Merger Consideration pursuant to Section 1.6(a)(i)
above, and the Closing Cash Consideration shall be increased by adding thereto
an amount (the "Additional Closing Cash Consideration") equal to $5,000,000,
less the amount, if any, of any "Settlement Payment" (defined below). If, in the
discretion of the Company, the Company shall settle the Lawsuit and Subject
Claims and obtain an agreement for a full release of the Subject Claims by TEPCO
prior to the Effective Time, the amount, if any, of money paid or payable by the
Company to TEPCO in consideration for such release of the Subject Claims is
herein called the "Settlement Payment." The Company shall be entitled, in its
discretion, to effect such a settlement at any time prior to the Effective Time;
provided only that the Company shall not, without the consent of Parent (which
consent shall not unreasonably be withheld or delayed), make or agree to make a
Settlement Payment in excess of $5,000,000 to effect such a settlement (which
the Company has no intention whatsoever of doing) or undertake any affirmative
obligation to TEPCO or any other person in consideration for a release of the
Subject Claims other than to make a Settlement Payment (if any) in money and, if
and to the extent the Company should so elect, to release (in whole or in part)
claims of the Company against TEPCO and indemnify TEPCO against such claims (to
the extent thus released) and to effect a dismissal of the Lawsuit. By approving
this Agreement, the shareholders of the Company shall adopt and approve, and
consent to and join in the terms of, the Escrow Agreement, and shall agree to
the appointment of the Stockholder Representatives and confirm the authority of
the Stockholder Representatives to enter into the Escrow Agreement and to
exercise the rights and authority and discretion as the representatives of the
shareholders of the Company and have and be entitled to the benefit of the
rights and releases therein granted to them.
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(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time all shares of Company Common Stock will
cease to be outstanding and will be canceled and retired and will cease to
exist, and each holder of shares of Company Common Stock will thereafter cease
to have any rights with respect to such shares of Company Common Stock, except
the right to receive, without interest, the Merger Consideration (including cash
in lieu of fractional shares of Parent Common Stock in accordance with Section
1.7(d)) upon the surrender of a certificate representing such shares of Company
Common Stock (a "Company Certificate").
(c) Notwithstanding anything contained in this Section 1.6 to the
contrary, each share of Company Common Stock issued and held in the Company's
treasury immediately before the Effective Time will, by virtue of the Merger,
cease to be outstanding and will be canceled and retired without payment of any
consideration therefor.
(d) Notwithstanding anything in this Section 1.6 to the contrary,
shares of Company Common Stock that are issued and outstanding immediately
before the Effective Time and that are held by shareholders who have not voted
such shares in favor of the Merger and who shall have properly exercised their
rights of appraisal for such shares in the manner provided by the TBCA (the
"Dissenting Shares") will not be converted into or be exchangeable for the right
to receive the Merger Consideration, unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost his right to
appraisal and payment, as the case may be. If such holder shall have so failed
to perfect or shall have effectively withdrawn or lost such right, his shares
will thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon.
(e) As provided in Section 1.6(a), the number of shares of Parent
Common Stock included in the Aggregate Stock Consideration has initially been
agreed to be 14,000,000 shares. It is, however, agreed and stipulated that if
the "Parent Common Stock Price" (as defined below) shall be less than $3.00 or
more than $4.00, the number of shares of Parent Common Stock included in the
Aggregate Stock Consideration shall be increased or decreased above or below
14,000,000 shares (before giving effect to any increase in the number of shares
of Parent Common Stock included in the Aggregate Stock Consideration pursuant to
Section 1.6(f), if applicable) as provided hereinafter in this Section. If the
Parent Common Stock Price is less than $3.00, the number of shares of Parent
Common Stock included in the Aggregate Stock Consideration shall be increased
pursuant to this Section 1.6(e) to a number of shares equal to $42,000,000
divided by the Parent Common Stock Price. If the Parent Common Stock Price is
more than $4.00, the number of shares of Parent Common Stock included in the
Aggregate Stock Consideration shall be decreased pursuant to this Section 1.6(e)
to the greater of (x) 11,666,667 shares, or (y) a number of shares equal to
$56,000,000 divided by the Parent Common Stock Price. The "Parent Common Stock
Price" means an amount equal to the average of the closing sales price of Parent
Common Stock on the American Stock Exchange Consolidated Tape as reported by the
WALL STREET JOURNAL
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(Southwest Addition) on each of the ten consecutive trading days immediately
preceding the third trading day before the Effective Time of the Merger. The
Company agrees that it will not, and agrees that it will request each of its
officers and directors to agree that they will not, engage in trading in Parent
Common Stock during the twenty consecutive days immediately preceding the
Effective Time of the Merger.
(f) If the number of shares of Parent Common Stock included in the
Aggregate Stock Consideration (after giving effect to any increase or decrease
in such number of shares pursuant to Section 1.6(e), if applicable) is not
sufficient to achieve the "Required Ratio" (hereinafter defined), then the
number of shares of Parent Common Stock included in the Aggregate Stock
Consideration (after giving effect to any increase or decrease in such number of
shares pursuant to Section 1.6(e), if applicable) shall be increased by such
additional number of shares of Parent Common Stock as shall be required to
achieve the "Required Ratio" (hereinafter defined). If the number of shares of
Parent Common Stock included in the Aggregate Stock Consideration is increased
pursuant to this Section 1.6(f), then the amount of the Closing Cash
Consideration shall be reduced by deducting from the Closing Cash Consideration
an amount equal to the product of (x) the number of additional shares of Parent
Common Stock by which the Aggregate Stock Consideration has been increased
pursuant to this Section 1.6(f), multiplied by (y) the Parent Common Stock
Price. The "Required Ratio", for purposes hereof, shall mean that the number of
shares of Parent Common Stock included in the Aggregate Stock Consideration,
after the adjustments thereof, if any, made pursuant to Section 1.6(e) and this
Section 1.6(f), multiplied by the Parent Common Stock Price (the product being
called the "Stock Value"), is equal to forty-five percent (45%) of the sum of
the Stock Value and an amount (the "Additional Amount") determined as follows:
(i) If the Escrow Agreement is terminated prior to the Effective
Time pursuant to clause (i) or clause (ii) of Section 4 of the Escrow Agreement,
the "Additional Amount" shall be equal to the Closing Cash Consideration (as
adjusted pursuant to Section 1.6(a)(vi) and this Section 1.6(f)); or
(ii) If the Escrow Agreement is not terminated prior to the
Effective Time pursuant to Section 4 of the Escrow Agreement, the "Additional
Amount" shall be equal to the sum of the Closing Cash Consideration (as adjusted
pursuant to this Section 1.6(f)) and $5,000,000.
Section 1.7. EXCHANGE PROCEDURES; FRACTIONAL SHARES.
(a) Promptly after the Effective Time, (i) Parent or the Purchaser
shall deposit (or cause to be deposited) with a National Bank (the "Designated
Bank") doing business in Houston, Texas, to be designated by the Company within
twenty (20) days after the date of this Agreement subject to approval of Parent
(which approval shall not unreasonably be withheld or delayed) as exchange agent
(in said capacity being herein called the "Exchange Agent"), for the benefit of
the holders of record of shares of Company Common Stock immediately before the
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Effective Time (excluding any shares of Company Common Stock that will be
canceled pursuant to Section 1.6(c)), for exchange in accordance with this
Article 1, cash in the amount of the Closing Cash Consideration, and (ii) Parent
shall deposit (or cause to be deposited) with the Exchange Agent, for the
benefit of the holders of record of shares of Company Common Stock immediately
before the Effective Time (excluding any shares of Company Common Stock that
will be canceled pursuant to Section 1.6(c)), certificates representing the
Aggregate Stock Consideration ("Parent Certificates") issued in the names of
such respective holders for the Stock Consideration to be received by such
respective holders, for exchange in accordance with this Article 1 (the cash and
shares deposited pursuant to clauses (i) and (ii) being hereinafter referred to
as the "Exchange Deposit"). Parent Common Stock into which Company Common Stock
shall be converted pursuant to the transactions contemplated hereby will be
deemed to have been issued at the Effective Time.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of Company Common Stock
immediately before the Effective Time (excluding any shares of Company Common
Stock that will be canceled pursuant to Section 1.6(c) or Dissenting Shares) (A)
a letter of transmittal (the "Company Letter of Transmittal") (which shall
specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon delivery of the Company Certificates
to the Exchange Agent, and shall be in such form and have such other provisions
as the Purchaser shall reasonably specify, including without limitation
provisions designed to comply with any necessary tax withholding obligations
required by applicable law (if any there be) and (B) instructions for use in
effecting the surrender of the Company Certificates in exchange for the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented thereby.
(c) Upon surrender of a Company Certificate for cancellation to the
Exchange Agent, together with the Company Letter of Transmittal, duly executed,
and such other documents as the Purchaser or the Exchange Agent shall reasonably
request, with signatures thereon guaranteed, the holder of such Company
Certificate will be entitled to receive in exchange therefor (A) a bank check in
the amount equal to the Cash Consideration which such holder has the right to
receive pursuant to the provisions of this Article 1 (plus any cash in lieu of
fractional shares of Parent Common Stock pursuant to Section 1.7(d) and less any
required tax withholding, if any there be), and (B) a Parent Certificate
representing that number of shares of Parent Common Stock that such holder has
the right to receive pursuant to this Article 1 as the Stock Consideration, and
the Company Certificate so surrendered will forthwith be canceled. Certificates
representing shares of Parent Company Stock issued to affiliates of the Company
(as defined for purposes of Rule 145 under the Securities Act) shall bear a
restrictive legend in a form reasonably required by the Parent. Until
surrendered as contemplated by this Section 1.7, each Company Certificate will
be deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration with respect to the shares of Company Common
Stock formerly represented thereby.
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(d) No fractional shares of Parent Common Stock shall be issued
pursuant to the Merger. In lieu of the issuance of any fractional share of
Parent Common Stock pursuant to the Merger, cash adjustments will be paid to
holders in respect of any fractional share of Parent Common Stock that would
otherwise be issuable, and the amount of such cash adjustment shall be equal to
the product of such fractional amount and the Parent Common Stock Price.
(e) Any portion of the Exchange Deposit (including the proceeds of any
investments thereof) that remains unclaimed by the holders of Company Common
Stock six months after the Effective Time will be returned to the Surviving
Corporation. Any holders of Company Certificates who have not theretofore
surrendered such Company Certificates as set forth in Section 1.7(c) hereof
shall thereafter look only to the Surviving Corporation for payment of their
claims for the Merger Consideration provided in Section 1.6 hereof, without any
interest thereon, or for payment of the fair value of their Dissenting Shares.
If any Company Certificates shall not have been surrendered before seven years
after the Effective Time (or immediately before such earlier date on which any
payment in respect thereof would otherwise escheat or become the property of a
governmental authority pursuant to applicable law), the Merger Consideration in
respect of such Company Certificates will, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interests of any person previously entitled to any such Merger
Consideration.
(f) If the Escrow Agreement is not terminated prior to the Effective
Time pursuant to clause (i) or clause (ii) of Section 4 of the Escrow Agreement,
and if the Termination Date does not occur pursuant to Section 5 of the Escrow
Agreement, the Aggregate Contingent Cash Consideration shall be paid and
distributed from the Escrow Fund by the Escrow Agent to itself in its capacity
as the Exchange Agent on the Distribution Date. Upon payment of the Aggregate
Contingent Cash Consideration to the Exchange Agent, the Aggregate Contingent
Cash Consideration shall be the property of the Stockholders in proportion to
the respective amounts of the Contingent Cash Consideration payable to the
Stockholders pursuant to clause (z) of Section 1.6(a)(i) and shall be received
and held by the Exchange Agent as bailee for said Stockholders; and as promptly
as practicable after the Distribution Date the Exchange Agent shall distribute
and pay the applicable Contingent Cash Consideration to each Stockholder by bank
check issued and mailed to such Stockholder at the Stockholder's address
provided pursuant to the Company Letter of Transmittal.
Section 1.8. DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock that are issued and outstanding
immediately before the Effective Time and which are held by shareholders who
have not voted such shares of Company Common Stock in favor of the Merger and
shall have delivered a written objection to the Merger in the manner provided in
the TBCA (the "Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration provided in Section 1.6 hereof, unless and
until such holders shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal and payment under the TBCA. If any
such holder shall have so failed to
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perfect or shall have effectively withdrawn or lost such right, such holder's
shares of Company Common Stock will thereupon be deemed to have been converted
into the right to receive, as of the Effective Time, the Merger Consideration
provided in Section 1.6 hereof, without any interest thereon.
Section 1.9. CONVERSION OF PURCHASER'S COMMON STOCK. Each share of common
stock, par value $0.10 per share, of the Purchaser issued and outstanding
immediately before the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, will be converted into one issued and
outstanding share of common stock of the Surviving Corporation.
Section 1.10. REGISTRATION STATEMENTS.
(a) The Company and Parent will prepare and file with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933 (the
"Securities Act") as promptly as practicable, and will use all reasonable
efforts to have declared effective by the Commission, a prospectus/proxy
statement with respect to the approval of the Merger, including a registration
statement on Form S-4 (the "Registration Statement") for the purpose of
registering the Parent Common Stock to be issued to the holders of the Company
Common Stock as the Stock Consideration. As promptly as practicable after the
Registration Statement has been declared effective by the Commission, the
Company will mail the prospectus/proxy statement contained therein to its
stockholders.
(b) (i) If the Merger occurs, as promptly as practicable after the
receipt of a written demand therefor (a "Registration Demand") from a "Holder"
or "Holders" (as hereinafter defined) who holds or hold, in the aggregate, in
excess of 1% of the Parent Common Stock then outstanding, Parent will, on one
occasion only, prepare and file with the Commission under the Securities Act a
registration statement on Form S-3 (the "Shelf Registration Statement") for the
purpose of registering the resale in the market from time to time of "Subject
Securities" (as below defined) by Holders or by potential assignees of such
Holders to which all or a portion of such Holders' Subject Securities may be
transferred in a No-Sale Transaction (as hereinafter defined). As used herein,
(i) "Subject Securities" means shares of Parent Common Stock issued incident to
the Merger to Holders and any common stock or other security issued or issuable
as a dividend or other distribution with respect to, or in exchange for, or upon
conversion or in replacement of, any of such Parent Common Stock, (ii) "Holders"
means holders of Company Common Stock at the Effective Time or any person who
becomes a holder of Subject Securities after the Effective Time as a result of a
No-Sale Transaction and (iii) "No- Sale Transaction" means a transfer from a
Holder of Subject Securities that does not constitute a "sale" (as such term is
understood and defined under the Securities Act), including without limitation a
distribution from a Holder that is a corporation, partnership, joint venture,
limited liability company, association or trust to the owner of a beneficial
interest in such Holder. Notwithstanding the foregoing, no Holder shall be
entitled to include Subject Securities in a Shelf Registration Statement unless
such Holder is identified in a written notice (a "Seller Designation Notice,"
whether one or more) to Parent prior to or within five days after receipt by
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Parent of the first Registration Demand received by Parent, specifying (i) the
address to which notices may be given by Parent to such Holder pursuant to this
Section 1.10 until such address is changed by written notice given by such
Holder to Parent and (ii) the number of shares of Subject Securities owned by
such Holder and the number of such shares to be included in the Shelf
Registration Statement; PROVIDED that Parent agrees that Parent will include in
such Shelf Registration Statement potential sales of Subject Securities by
potential assignees in No-Sale Transactions of all or a part of a Holder's
Subject Securities if such potential assignees and the number, if any, of shares
of Parent Common Stock then owned by such potential assignees are identified in
a Seller Designation Notice.
(ii) Parent will use its best efforts to have the Shelf
Registration Statement promptly declared effective by the Commission and
thereafter to maintain the effectiveness of the Shelf Registration Statement and
to maintain such Shelf Registration Statement "current" (as below defined) at
all times until the "Registration Termination Date" (as below defined). Parent
shall promptly give written notice to the Holders when the Registration
Statement has been declared effective by the Commission and is available for use
by Holders for the resale of Subject Securities. The "Registration Termination
Date" means the second anniversary of the date (the "Effective Registration
Date") when the Shelf Registration Statement is first declared effective by the
Commission; PROVIDED that the Registration Termination Date shall be extended
for a period of time after the second anniversary of the Effective Registration
Date corresponding to the sum of (A) all periods of time after the expiration of
45 days after the date of receipt by Parent of a Registration Demand and prior
to the Registration Termination Date (as theretofore extended pursuant to this
provision, if applicable) during which Holders are unable to use the Shelf
Registration Statement for resale of Subject Securities because the Shelf
Registration Statement has not been declared effective by the Commission or is
otherwise not effective or current, and (B) all periods of time prior to the
Registration Termination Date (as theretofore extended pursuant to this
provision, if applicable) during which Holders are prohibited from using the
Shelf Registration Statement for resale of Subject Securities by reason of
giving of a notice from Parent pursuant to Section 1.10(b)(iv).
(iii) The Shelf Registration Statement shall not be considered to
be "current" at any time when, by reason of occurrence of any event or by reason
of the passage of time, such Shelf Registration Statement does not meet the
requirements of Section 10, Section 12(2) or Section 17 of the Securities Act,
or such Shelf Registration Statement contains an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Shelf Registration
Statement shall disclose that Holders may elect to resell Subject Securities
without registration of such sales under the Shelf Registration Statement, by
making such sales under and as permitted by Rules 144 or 145, as applicable, of
the Commission under the Securities Act.
(iv) If at any time or times after the Shelf Registration
Statement is declared effective by the Commission, the Parent determines that
the
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offering of Parent Shares under the Shelf Registration Statement would be
significantly disadvantageous to the Parent because of, or improper in view of
(or improper without disclosure in the prospectus included in the Shelf
Registration Statement of), the existence or anticipation of a material
financing, merger, acquisition or other material transaction involving the
Parent or its subsidiaries that has not been publicly disclosed, the
unavailability of any required financial statements for reasons substantially
beyond the control of the Parent, or other similar events or conditions
involving the Parent or its subsidiaries that have not been publicly disclosed
(a "Disadvantageous Condition"), the Parent shall be entitled to either suspend
the effectiveness of the Shelf Registration Statement with the Commission or
suspend the availability of the Shelf Registration for resales of Subject
Securities by Holders, or may take both such actions, and shall promptly notify
all Holders thereof by delivery of written notice (a "Suspension Notice");
provided, however, that Parent's obligation to maintain the Shelf Registration
Statement current under this Section 1.10(b) shall not be suspended by reason of
Parent's failure to disclose information at a time when public disclosure of
such information is required by law. Upon receipt of a Suspension Notice,
Holders shall immediately discontinue the use of the Shelf Registration
Statement for any purpose until notified by the Parent that the Shelf
Registration Statement is current and available for use by Holders for sales of
Subject Securities. The Parent shall not be entitled to suspend the
effectiveness of the Shelf Registration Statement or its availability for
resales for more than (A) 60 consecutive days, or (B) 180 days within any twelve
month period. As promptly as practicable after the Disadvantageous Condition has
been publicly disclosed or the Parent determines that the Disadvantageous
Condition no longer exists, the Company shall amend or supplement the Shelf
Registration Statement to the extent necessary to make the Shelf Registration
Statement current, and shall give prompt written notice to all Holders when the
Shelf Registration Statement is again available for resales of Subject
Securities.
(v) Parent shall promptly notify all Holders of Subject Securities
of, and confirm in writing, the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose. Parent shall use its best
efforts to obtain the withdrawal of any order suspending the effectiveness of
the Shelf Registration Statement at the earliest possible time.
(c) (i) If at any time during the "Registration Period" (as hereinafter
defined) Parent proposes to file a registration statement under the Securities
Act with respect to an underwritten public offering by the Parent for its own
account or for the account of any other person, including any security
convertible into or exchangeable for any equity securities (other than (A) a
registration statement on Form S-4 or S-8 (or any substitute form for comparable
purposes that may be adopted by the Commission), (B) a registration statement
filed in connection with an exchange offer or an offering of securities solely
to the Parent's existing security holders, (C) a registration statement that is
on a form pursuant to which an offering of the Subject Securities cannot be
registered, or (D) a registration statement only for debt securities or
convertible or exchangeable
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securities under which no Parent Common Stock other than Parent Common Stock
issuable upon conversion or exchange is to be registered), then Parent shall in
each case give written notice of such proposed filing to the Holders of Subject
Securities (limited to Holders theretofore identified in any Holder Designation
Notice theretofore received by Parent) at least 20 days before the anticipated
filing date, and such notice shall offer such Holders the opportunity to
register such number of Subject Securities as each such Holder may request. Upon
the written request of any Holder received by Parent within ten days after the
date of Parent's delivery of its notice to the Holder of its intention to file
such a registration statement, Parent shall, subject to the conditions and in
accordance with the procedures set forth herein, use its best efforts to cause
the managing underwriter or underwriters of a proposed underwritten offering to
permit the Subject Securities requested by the Holder to be included in the
registration statement for such offering on the same terms and conditions as any
similar securities of Parent included therein. Notwithstanding the foregoing, if
the managing underwriter or underwriters of such offering indicates in writing
to the Parent its reasonable belief that the inclusion of the Subject Securities
requested to be included might reasonably be expected to jeopardize the success
of the offering of the securities of Parent to be offered and sold by Parent for
its own account, then the amount of securities to be offered for the account of
the Holders shall be reduced to the extent necessary to reduce the total amount
of securities to be included in such offering to the amount recommended by such
managing underwriter or underwriters (which recommendation may be that no
securities to be sold by Holders be included in such registration statement),
and selected in the following order of priority: (A) first, all of the
securities that Parent proposes to sell for its own account, if any; (B) second,
any securities held by persons who, as of the date of this Agreement, are
contractually entitled to priority over Holders in the inclusion of their
securities in such registration; (C) third, the Subject Securities requested to
be included in such registration by the Holders that have requested their
Subject Securities to be included therein and any securities proposed to be
included by other persons who, as of the date of this Agreement, are
contractually entitled to include a portion of their securities in such
registration on a pro rata basis with Holders (I.E., such shares to be allocated
between Holders and non-Holders based on the amount of securities that each
proposes to offer in relation to the total amount of securities proposed to be
offered by all such selling shareholders); and (D) fourth, any other securities
to be offered and sold by other holders of Parent's securities. The
"Registration Period" as such term is used in this Section shall commence on the
date of receipt by Parent of a Registration Demand; and the Registration Period
shall continue until the Registration Termination Date.
(ii) Parent may, without the consent of any selling Holder,
withdraw any registration statement and abandon any proposed offering initiated
by Parent, notwithstanding the request of a Holder to participate therein in
accordance with this Section 1.10(c) if Parent determines that such action is in
the best interests of Parent.
(d) Parent will indemnify and hold harmless each Holder, each of such
Holder's officers, directors, partners, or members, as the case may be, and each
11
person controlling such Holder, with respect to which registration or
qualification of Subject Securities has been effected pursuant to Section 1.10
against all claims, losses, damages, and liabilities, joint or several (or
actions in respect thereof), arising out of or based upon any untrue statement
(or alleged untrue statement) of a material fact contained in any registration
statement, prospectus, or offering circular, or in any document incorporated by
reference in any of the foregoing, or arising out of or based upon any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by Parent of any rule or regulation promulgated under the Securities
Act applicable to Parent and relating to action or inaction required of Parent
in connection with any such registration or qualification, and will promptly
reimburse each such Holder, each of such Holder's officers, directors, partners,
or members, as the case may be, and each person controlling such Holder, for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claims, loss, damage, liability or action;
PROVIDED, however, that Parent will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based upon any untrue statement or omission based upon written information
furnished to Parent by such Holder specifically for inclusion in any such
registration statement, prospectus or offering circular. The obligations of
Parent under the foregoing indemnity agreement shall survive the completion of
the offering of Subject Securities under any registration statement provided for
in this Section 1.10.
(e) Each Holder with respect to which registration or qualification of
Subject Securities has been effected pursuant to this Section 1.10 will
indemnify and hold harmless Parent, each of Parent's officers, directors, and
each person controlling Parent, against all claims, losses, damages, and
liabilities, joint or several (or actions in respect thereof), arising out of or
based upon any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, or offering circular, or in
any document incorporated by reference in any of the foregoing, or arising out
of or based upon any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation by such Holder of any rule or regulation
promulgated under the Securities Act applicable to such Holder and relating to
action or inaction required of such Holder in connection with any such
registration or qualification, and will promptly reimburse Parent, each of
Parent's officers, directors, and each person controlling Parent, for any legal
and any other expenses reasonably incurred in connection with investigating or
defending any such claims, loss, damage, liability or action; PROVIDED, however,
that such Holder will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense does not arise out of or is not based
upon any untrue statement or omission based upon written information furnished
by such Holder specifically for inclusion in any such registration statement,
prospectus or offering circular. The obligations of Holders under the foregoing
indemnity agreement shall survive the completion of the offering of Subject
Securities under any registration statement provided for in this Section 1.10.
12
(f) All expenses incident to Parent's performance of or compliance with
this Section 1.10, including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Subject Securities), rating agency fees, printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the securities to be registered on the American Stock Exchange
and all securities exchanges on which similar securities issued by Parent are
then quoted or listed, the fees and disbursements of counsel for Parent and its
independent certified public accountants (including the expenses of any special
audit or comfort letters required by or incident to such performance),
securities act liability insurance (if Parent elects to obtain such insurance),
the fees and expenses of any special experts retained by Parent in connection
with such registration, and fees and expenses of other persons retained by
Parent, in connection with each registration hereunder (but not including
discounts, commissions, fees or expenses payable to underwriters that are
attributable to the sale of Subject Securities or the fees and expenses of
counsel for any selling Holder) (collectively, the "Registration Expenses") will
be borne by Parent.
(g) Parent will also take such action as may be required to be taken
under applicable blue sky laws in connection with issuance of the Parent Common
Stock pursuant to this Agreement and in connection with resale of Subject
Securities by Holders pursuant to the Shelf Registration Statement or pursuant
to Section 1.10(c)(i); PROVIDED that Parent will not be required to become
qualified as a foreign corporation in any jurisdiction.
Section 1.11. SHAREHOLDERS' MEETING; PROXY STATEMENT. The Company, acting
through its Board of Directors, will, in accordance with applicable law, the
Company's Articles of Incorporation and its Bylaws:
(i) duly call, give notice of, convene and hold a special meeting of
its shareholders as soon as practicable after the effectiveness of the
Registration Statement for the purpose of considering and taking action
upon this Agreement; and
(ii) subject to the fiduciary duties of the Company's Board of
Directors under applicable law as advised by counsel, include in the
Registration Statement the recommendation of the Board of Directors of the
Company that the shareholders of the Company vote in favor of approval and
adoption of this Agreement.
Section 1.12. CLOSING. Upon the terms and subject to the conditions hereof,
as soon as practicable following the satisfaction or waiver of the conditions
set forth in Section 5.1 hereof, and in any event within ten days thereafter,
the Company and the Purchaser will execute and file articles of merger in the
manner required by the TBCA and the parties will take all such other and further
actions as may be required by law to make the Merger effective.
13
Section 1.13. EMPLOYEE TRUST. After the satisfaction or waiver of the
conditions set forth in Section 5.1 hereof, and on the date (the "Trust
Establishment Date") which is one day prior to the Effective Time, if:
(i) the conditions precedent set forth in Sections 5.2 and 5.3 hereof
would be satisfied if the Trust Effective Date were the Effective Time, or,
if applicable, the party or parties entitled to do so have irrevocably
agreed to waive satisfaction of any such condition precedent which would
not thus be satisfied; and
(ii) none of the conditions or circumstances authorizing termination of
this Agreement under Section 6.1 hereof have occurred or exist as of the
Trust Establishment Date, or if applicable, the Company, Parent and the
Purchaser have all agreed to waive any right to terminate this Agreement
pursuant to Section 6.1 by reason of the occurrence or existence of any
such condition or circumstance which has occurred or exists as of the Trust
Establishment Date,
the Company shall establish an irrevocable trust (the "Employee Trust") by
execution of a Trust Agreement (the "Trust Agreement") with the Designated Bank
as trustee (in such capacity being herein called the "Trustee") in the form of
Schedule 1.13 attached hereto and incorporated herein, and will contribute and
pay to the Trustee for inclusion in the principal of the Employee Trust the sum
of $2,400,000 in cash. As more fully set forth in and subject to the provisions
of the Trust Agreement, the Employee Trust shall be for the benefit of those
employees of the Company identified in Exhibit A to the Grey Wolf Drilling
Company Deferred Compensation Plan (the "Plan") attached to the Trust Agreement
who remain employed by the Company on the date of establishment of the Employee
Trust (the "Grey Wolf Employees").
Section 1.14. CONTRIBUTION BY XXXXXX. If the Merger occurs, then promptly
after the Effective Time, Xxxxx K.B. Xxxxxx (the President of the Company and
one of the major holders of the Company Common Stock, herein called "Xxxxxx")
shall be required to, and by his joinder in this Agreement Xxxxxx hereby agrees
that he will, contribute and pay to the Trustee the sum of $1,650,000 in cash to
be added to the principal of the Employee Trust and held and distributed by the
Trustee to Grey Wolf Employees pursuant to the Trust Agreement and Plan. Xxxxxx,
individually, is executing this Agreement solely to evidence his agreement to
the terms and provisions of this Section 1.14, as consideration for and to
induce the Company, Parent and the Purchaser to enter into and perform this
Agreement.
Section 1.15. APPOINTMENT OF PARENT DIRECTORS; CHANGE OF NAME. Promptly
after the Effective Time, the Board of Directors of Parent shall elect Xxxxx K.
B. Xxxxxx and Xxxxxxx X. Xxxxxxx to serve as members of the Board of Directors
of Parent, to serve until the next regularly scheduled election of members of
the Board of Directors of Parent. At the next annual shareholder meeting after
the Effective Time, the Parent shall, if it has not previously done so,
circulate a proxy statement
14
to its shareholders soliciting their approval to the change of Parent's name so
that it includes the words "Grey Wolf."
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and the Purchaser that,
except as otherwise disclosed to Parent and the Purchaser before the execution
hereof on a schedule making reference to this Article 2:
Section 2.1. ORGANIZATION AND QUALIFICATION. The Company is a duly
organized and validly existing corporation in good standing under the laws of
its jurisdiction of incorporation, with all requisite corporate power and
authority to own its properties and conduct its business as it is now being
conducted, except where the failure to be in good standing would not have a
Material Adverse Effect (as hereinafter defined). The Company is duly qualified
and in good standing as a foreign corporation authorized to do business in each
of the jurisdictions in which the character of the properties owned or held
under lease by it or the nature of the business transacted by it makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not have a Material Adverse Effect. The Company has no direct or
indirect subsidiaries. The Company has heretofore made available to Parent and
the Purchaser accurate and complete copies of the Articles of Incorporation and
Bylaws of the Company as currently in effect.
Section 2.2. CAPITALIZATION. The authorized capital stock of the Company
consists of 10,000,000 shares of Company Common Stock. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable and free of preemptive rights. As of
the date hereof, (a) 2,987,379 shares of Company Common Stock are issued and
outstanding and (b) an additional 3,800 shares of Company Common Stock are held
in the treasury of the Company. Except as set forth in Schedule 2.2 hereto,
there are not as of the date hereof any outstanding or authorized options,
warrants, calls, rights, commitments or any other agreements of any character by
which the Company is bound requiring it to issue or sell (i) any shares of its
capital stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of its capital stock or (ii)
any options, warrants, calls, rights, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the right
to subscribe for, any shares of its capital stock. To the knowledge of the
Company, there are no voting or other stockholder agreements to which any
Company Common Stock is subject.
Section 2.3. AUTHORITY CONCERNING THIS AGREEMENT. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby (subject to approval and
adoption of this Agreement by the shareholders of the Company in accordance with
applicable
15
law). The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than approval and adoption of this Agreement by the shareholders of the
Company in accordance with applicable law). This Agreement has been duly and
validly executed and delivered by the Company and, assuming this Agreement
constitutes a valid and binding agreement of each of Parent and the Purchaser,
this Agreement constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy or principles applicable to
creditors' rights generally or governing the availability of equitable relief.
The Company's Board of Directors has, subject to its continuing duties to the
shareholders of the Company, (i) resolved that the Merger is fair to the
Company's shareholders, and (ii) resolved to recommend authorization of the
Merger and adoption of the Agreement by the Company's shareholders. The Company
represents that it has received the opinion of Xxxxxxxxx & Company, Inc. that
the proposed consideration to be received by the shareholders of the Company is
fair to such shareholders from a financial point of view.
Section 2.4. REPORTS; FINANCIAL STATEMENTS. The audited and unaudited
consolidated balance sheets of the Company and the related statements of
earnings, stockholders' equity and changes in financial position set forth in
Schedule 2.4 hereto present fairly the financial position of the Company as of
their respective dates, and the results of its operations and the changes in its
financial position, as the case may be, for the periods presented therein, all
in conformity with generally accepted accounting principles applied on a
consistent basis except as otherwise noted therein and subject, in the case of
the unaudited interim financial statements, to normal year-end adjustments and
any other adjustments described therein. Since October 31, 1996, there has not
been any change in the assets, liabilities, financial condition, or operations
of the Company from that reflected in such financial statements, other than
changes in the ordinary course of business and other than the exercise by the
Company in January 1997 of the option to purchase interests in seven drilling
rigs under the March 1, 1995, lease agreement with L&GW, Inc. described in the
Notes to Financial Statements of the Company's Financial Statements as of
October 31, 1996, set forth in Schedule 2.4 and payment of the option purchase
price of approximately $1,480,000 for the interests of L&GW, Inc. in said seven
drilling rigs, none of which individually or in the aggregate have had or will
have a Material Adverse Effect.
Section 2.5. THE REGISTRATION STATEMENT. None of the information relating
to the Company supplied in writing by the Company specifically for inclusion in
the Registration Statement (and any amendments thereof), at the time the
Registration Statement becomes effective or at the time that the
prospectus/proxy statement contained therein is first published, sent or given
to the Company's shareholders, shall contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
16
Section 2.6. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the Articles of Incorporation or Bylaws (or other similar
governing documents) of the Company; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
authority, except (i) in connection with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) pursuant to the
Securities Act, (iii) the filing and recordation of articles of merger as
required by the TBCA, or (iv) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, in
the aggregate would not have a Material Adverse Effect or materially adversely
affect the ability of the Company to consummate the Merger; (c) except as set
forth in Schedule 2.6 hereto, result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, license, agreement or other instrument or obligation to
which the Company is a party or by which the Company or any of its assets may be
bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which in the aggregate would not have a Material Adverse Effect or materially
adversely affect the ability of the Company to consummate the Merger; or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its assets, except for violations that in
the aggregate would not have a Material Adverse Effect or materially adversely
affect the ability of the Company to consummate the Merger. Notwithstanding the
foregoing provisions of this Section 2.6, it is expressly stipulated that it is
intended that at or immediately prior to the Effective Time the May 31, 1996,
amended and restated loan agreement ("Loan Agreement") between the Company and
Bank One, Texas, N.A. will be terminated; and Parent and the Purchaser
acknowledge that some of the actions herein provided to be taken by the Company
may violate or fail to comply with requirements of the Loan Agreement and agree
that any violation of or failure to comply with requirements of the Loan
Agreement resulting from Company's compliance with or performance of its
agreements under this Agreement shall not be deemed to violate or breach the
representations or warranties of Company under this Agreement.
Section 2.7. BROKERAGE FEES AND COMMISSIONS. Except for the fees and
expenses payable to Xxxxxxxxx & Company, Inc. pursuant to a letter agreement
dated July 18, 1996, a copy of which has previously been delivered to Parent, no
person or entity is entitled to receive from the Company any investment banking,
brokerage or finder's fee in connection with this Agreement or the transactions
contemplated hereby.
Section 2.8. EMPLOYMENT AGREEMENTS. Except as set forth in Schedule 2.8
hereto, there exist no employment, consulting, severance or indemnification
agreements between the Company and any current or former director, officer or
employee of the Company.
Section 2.9. TAXES. All returns and reports, including, without
limitation, information and withholding returns and reports ("Tax Returns") of
or relating to
17
any foreign, federal, state or local tax, withholding obligation, assessment or
other governmental charge ("Taxes" or a "Tax") that are required to be filed on
or before the Effective Time by or with respect to the Company have been or will
be duly and timely filed, and all Taxes, including, without limitation, interest
and penalties, due and payable pursuant to such Tax Returns have been paid or
adequately provided for in reserves established by the Company, except where the
failure to file, pay or provide for would not, either individually or in the
aggregate, have a Material Adverse Effect. There is no material claim against
the Company with respect to any Taxes, and no material assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return of the
Company that has not been adequately provided for in reserves established by the
Company.
Section 2.10. ENVIRONMENTAL. The Company is in substantial compliance with
all applicable federal, state and local laws and regulations relating to
pollution control and environmental contamination including, but not limited to,
all laws and regulations governing the generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of Hazardous
Materials and all laws and regulations with regard to record keeping,
notification and reporting requirements respecting Hazardous Materials. For
purposes of this Section 2.10, "substantial compliance" shall mean compliance,
except to the extent that failure to comply would not have a Material Adverse
Effect. The term "Hazardous Materials" means material, substances, waste or
by-products defined as "hazardous substances, "hazardous wastes" or "solid
wastes" in the Comprehensive Environmental Responses, Compensation, and
Liability Act of 1980, 42 U.S.C. Sections 9601-9657 and any amendments thereto,
or the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901-6987 and
any amendments thereto.
The Company is not subject to any order or decree nor has it received,
within the past three years, any notice from any governmental agency with
respect to any alleged violation by the Company of, or the incurrence of any
remedial obligation by the Company under, any applicable federal, state or local
environmental or health and safety statutes and regulations.
Section 2.11. LITIGATION, ETC. As of the date hereof, except as set forth
in Schedule 2.11 hereto, there is no action or proceeding pending or, to the
knowledge of the Company, threatened to which the Company is or would be a party
before any court or governmental authority acting in an adjudicative capacity or
any arbitrator or arbitration tribunal with respect to which there is a
reasonable likelihood of a determination that would have a Material Adverse
Effect. The Company is not subject to any outstanding order, writ, injunction or
decree that would have a Material Adverse Effect. The Company is in compliance
with all laws, rules or regulations applicable to it, except where failure to be
in compliance would not have a Material Adverse Effect. To the knowledge of the
Company, as of the date hereof it has not received any threats of litigation
from any party seeking to restrain or set aside the execution of this Agreement
or the consummation of the Merger, and no shareholder of the Company has
informed any officer or director of the Company of an intention or possible
intent of such shareholder to exercise dissenter's rights with respect to the
Merger.
18
Section 2.12. EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 2.8 and
Schedule 2.12 hereto list all written employee benefit plans and collective
bargaining, labor and employment agreements and severance agreements or other
similar arrangements (together with all documents or instruments establishing or
constituting any related trust, annuity contract or other funding instrument),
and whether or not legally enforceable, to which the Company is a party or by
which the Company is bound or has continuing liability thereunder, including (1)
any profit-sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, severance, or incentive compensation
plan, agreement or arrangement, (2) any welfare benefit plan, agreement or
arrangement or any plan, agreement or arrangement providing for "fringe
benefits" or perquisites to employees, officers, directors or agents, including
benefits relating to automobiles, clubs, vacation, child care, parenting or
maternity leave, sabbaticals, sick leave, medical expenses, dental expenses,
disability, accidental death or dismemberment, hospitalization, life insurance
and other types of insurance, (3) any employment agreement, or (4) any other
"employee benefit plan" (within the meaning of Section 3(3) of ERISA) (each, a
"Benefit Plan"). Each Benefit Plan has been maintained and contributed to in
compliance with the requirements of applicable law, except for such failures to
maintain or contribute that would not, in the aggregate, have a Material Adverse
Effect, and each such Benefit Plan can, except as set forth in Schedule 2.12
hereto, be terminated by the Company within a period of 30 days without the
payment of any additional compensation or amount or the additional vesting or
acceleration of any such benefits.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND THE PURCHASER
Parent and the Purchaser each represents and warrants to the Company as
follows:
Section 3.1. ORGANIZATION AND QUALIFICATION. Each of the Parent and the
Purchaser is a duly organized and validly existing corporation in good standing
under the laws of its jurisdiction of incorporation, with all requisite
corporate power and authority to own its properties and conduct its business as
it is now being conducted, except where the failure to be in good standing would
not have an adverse effect on the financial condition, business or operations of
Parent and its subsidiaries taken as a whole that is material to Parent and its
subsidiaries taken as a whole. Each of Parent and the Purchaser is duly
qualified and in good standing as a foreign corporation authorized to do
business in each of the jurisdictions in which the character of the properties
owned or held under lease by it or the nature of the business transacted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing would not have an adverse effect on the financial
condition, business or operations of Parent and its subsidiaries taken as a
whole that is material to Parent and its subsidiaries taken as a whole. The only
direct or indirect subsidiaries of Parent are those set forth in Exhibit 22 to
19
Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
or in Schedule 3.1 hereto.
Section 3.2. AUTHORITY CONCERNING THIS AGREEMENT. Parent and the Purchaser
each has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Parent and the Purchaser and the consummation
by Parent and the Purchaser of the transactions contemplated hereby have been
duly and validly authorized by the Boards of Directors of Parent and the
Purchaser and by Parent as the sole shareholder of the Purchaser, and no other
corporate proceedings on the part of Parent or the Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and the Purchaser and, assuming this Agreement constitutes a valid and
binding obligation of the Company, this Agreement constitutes a valid and
binding agreement of each of Parent and the Purchaser, enforceable against each
of Parent and the Purchaser in accordance with its terms, except as such
enforceability may be limited by bankruptcy or principles applicable to
creditors' rights generally or governing the availability of equitable relief.
Section 3.3. REPORTS; FINANCIAL STATEMENTS.
(a) Since September 30, 1993, Parent has filed with the Securities and
Exchange Commission (the "SEC") all forms, reports and documents required to be
filed by it pursuant to the Securities Act or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the SEC
thereunder, all of which have complied as of their respective filing dates in
all material respects with the applicable provisions of the Securities Act and
the Exchange Act, and the rules and regulations of the SEC thereunder, and none
of such forms, reports or documents, including without limitation any financial
statements or schedules included therein, at the time filed, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The audited or unaudited consolidated balance sheets of Parent and
subsidiaries and the related consolidated statements of earnings, stockholders'
equity and changes in financial position (including the related notes thereto)
included in Parent's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1995, 1994, and 1993, or in Parent's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1996, present fairly the financial
position of Parent and its subsidiaries as of their respective dates, and the
results of their operations and the changes in their financial position, as the
case may be, for the periods presented therein, all in conformity with generally
accepted accounting principles applied on a consistent basis except as otherwise
noted therein and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein.
20
Section 3.4. THE REGISTRATION STATEMENT. None of the information relating
to the Parent and its subsidiaries, at the time the Registration Statement
becomes effective or at the time that the prospectus/proxy statement contained
therein is first published, sent or given to the Company's shareholders, shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 3.5. CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Parent and the Purchaser nor the consummation
of the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the respective Certificate of Incorporation or Bylaws
(or other similar governing documents) of Parent or the Purchaser; (b) require
any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority, except (i) in connection with the
HSR Act, (ii) pursuant to the Securities Act or the Exchange Act, (iii) the
filing and recordation of articles of merger as required by the TBCA, or (iv)
where the failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, in the aggregate would not have any adverse
effect on the financial condition, business or operations of Parent and its
subsidiaries that is material to Parent and its subsidiaries taken as a whole or
materially adversely affect the ability of Parent and the Purchaser to
consummate the Merger; (c) except as set forth in Schedule 3.5 hereto, result in
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement or other instrument or obligation to which Parent, the
Purchaser or any of Parent's other subsidiaries is a party or by which Parent,
the Purchaser or any of Parent's other subsidiaries or any of their assets may
be bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which in the aggregate would not have any adverse effect on the financial
condition, business or operations of Parent and its subsidiaries which is
material to Parent and its subsidiaries taken as a whole or materially adversely
affect the ability of Parent and the Purchaser to consummate the Merger, or (d)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, the Purchaser, any of Parent's other subsidiaries or any
of their assets, except for violations which in the aggregate would not have any
adverse effect on the financial condition, business or operations of Parent and
its subsidiaries which is material to Parent and its subsidiaries taken as a
whole or materially adversely affect the ability of Parent and the Purchaser to
consummate the Merger. Notwithstanding the foregoing provisions of this Section
3.5, the Company acknowledges that some of the actions herein provided to be
taken by the Parent and the Purchaser may violate or fail to comply with the
requirements of the Senior Secured Reducing Revolving Credit Agreement among the
Parent, the Purchaser, Bankers Trust Company, and certain other parties dated as
of December 31, 1996 (the "Credit Agreement"), and agree that any violation or
failure to comply with the requirements of the Credit Agreement resulting from
the Parent's or the Purchaser's compliance with or performance of its agreements
under this Agreement shall not be deemed to violate or breach the
representations or warranties of the Parent or the Purchaser under this
Agreement if at the Effective
21
Time such Credit Agreement is either no longer in effect or any such violation
or failure to comply has been waived thereunder.
Section 3.6. BROKERAGE FEES AND COMMISSIONS. No person or entity is
entitled to receive from Parent or any of its subsidiaries any investment
banking, brokerage or finder's fee in connection with this Agreement or the
transactions contemplated hereby.
Section 3.7. FINANCING. Prior to July 1, 1997, and at the Effective Time,
Parent and the Purchaser shall have funds available, or shall have written
commitments from reputable financial institutions (copies of which shall have
been delivered to the Company) for funds, sufficient to consummate the Merger on
the terms contemplated hereby, and at the Effective Time, Parent and the
Purchaser will have available all of the funds necessary for the consummation of
the Merger and to make all payments or deposits of funds provided to be made
pursuant to Section 1.6(a)(vi) and Section 1.7(a).
ARTICLE 4
COVENANTS
Section 4.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement (including matters referred to on the Schedules hereto), during
the period from the date hereof to the Effective Time, unless otherwise agreed
to in writing by Parent, the Company will conduct its business in the ordinary
course consistent with past practice and will use best efforts to preserve
intact the business organization of the Company, to keep available as a group
the services of its current officers and key employees, and to preserve the good
will of its material customers. Without limiting the generality of the
foregoing, except as otherwise contemplated by this Agreement or as otherwise
agreed to in writing by Parent, prior to the Effective Time, the Company will
not (a) issue, sell or pledge, or authorize or propose the issuance, sale or
pledge of (i) any shares of capital stock of the Company or any securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of capital stock of the Company, or any options, warrants,
calls, rights, commitments or any other agreements of any character to purchase
or acquire any shares of capital stock of the Company or any securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for, any such shares of capital stock, or grant or accelerate any right to
convert or exchange any securities of the Company for shares of Company Common
Stock, or (ii) any other securities in respect of, in lieu of, or in
substitution for, shares of Company Common Stock outstanding on the date hereof;
(b) redeem or otherwise acquire, or propose to redeem or otherwise acquire, any
of the outstanding equity securities of the Company (including shares of Company
Common Stock); (c) declare, set aside or pay any dividend or other distribution
in respect of any shares of capital stock of the Company; (d) make any
acquisition, by means of a merger or otherwise, of a material amount of assets
or securities; (e) agree to any sale, lease, encumbrance or other disposition of
a material amount of assets or securities or any material change in its
capitalization, other than sales or other
22
dispositions in the ordinary course consistent with past practice; (f) enter
into any material contract other than in the ordinary course of business or
agree to any release or relinquishment of any material contract rights; (g)
incur any long-term debt or short-term debt for borrowed money except for debt
incurred in the ordinary course consistent with past practice; (h) propose or
adopt any amendments to the Articles of Incorporation or Bylaws of the Company;
(i) enter into any new employment, consulting, severance or indemnification
agreement with any officer, director or key management employee; or (j) agree in
writing or otherwise to take (i) any of the foregoing actions or (ii) any action
which would make any representation or warranty of the Company herein untrue or
incorrect in any material respect. Without limiting the foregoing, the Company
shall not be permitted to pay bonuses and grant salary increases without the
prior written consent of Purchaser.
Section 4.2. ACQUISITION PROPOSALS. From and after the date hereof, the
Company will not, directly or indirectly, and will instruct its officers,
directors, employees, agents or advisors or other representatives or consultants
not to, directly or indirectly, solicit or initiate any proposals or offers from
any person relating to any acquisition or purchase of all or a material amount
of the assets of, or any securities of, or any merger, consolidation or business
combination with, the Company (any such proposal or offer being referred to
herein as an "Acquisition Proposal"), and shall immediately cease and cause to
be terminated any existing activities, discussions or negotiations with any
persons conducted heretofore with respect to any such Acquisition Proposal;
PROVIDED, however, that the Company may furnish information and may engage in
discussions or negotiations with any person if, following the receipt of an
unsolicited bona fide written Acquisition Proposal from any such person (i)
counsel advises the Company's directors that failure to furnish such information
or engage in such discussions or negotiations could involve the Company's
directors in a breach of their fiduciary duties and (ii) the Company's directors
believe, in good faith, after consultation with the Company's financial
advisors, that such person may make a bona fide proposal for a transaction more
favorable to the Company's shareholders than the transactions contemplated by
the Merger; PROVIDED FURTHER, however, that nothing contained in this Section
4.2 shall prohibit the Company or its Board of Directors from making such
disclosure to the Company's shareholders which, in the judgment of the Board of
Directors with the advice of counsel, may be required under applicable law. The
Company will promptly notify Parent of the receipt of any Acquisition Proposal
and, subject to the fiduciary duties of the Company's board of directors, keep
Parent informed of the status thereof.
Section 4.3. ACCESS TO INFORMATION.
(a) Between the date hereof and the Effective Time, the Company shall
(i) give Parent, the Purchaser and their authorized representatives such access
during regular business hours to the Company's books, records, properties,
personnel and to such other information as Parent and the Purchaser reasonably
request and shall instruct the Company's independent public accountants to
provide access to their work papers and such other information as Parent and the
Purchaser
23
may reasonably request, and (ii) cause its officers to furnish Parent and the
Purchaser with such financial and operating data and other information with
respect to the business and properties of the Company as Parent and the
Purchaser may reasonably request.
(b) Information obtained by Parent and the Purchaser and their
representatives pursuant to this Agreement shall be subject to the provisions of
the Confidentiality Agreement between Parent and the Company dated September 16,
1996, which agreement remains in full force and effect.
Section 4.4. BEST EFFORTS. Upon the terms and subject to the conditions
hereof, and to the fiduciary duties of the Board of Directors of the Company
under applicable law as advised by counsel, all of the parties hereto agree to
use their best efforts to take, or cause to be taken, all appropriate action,
and to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement
and to cooperate in connection with the foregoing, including using best efforts
(a) to obtain any necessary waivers, consents and approvals from other parties
to material notes, licenses, agreements, and other instruments and obligations;
(b) to obtain any material consents, approvals, authorizations and permits
required to be obtained under any federal, state or local statute, rule or
regulation; (c) to defend all lawsuits or other legal proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby; and
(d) promptly to effect all necessary filings and notifications including, but
not limited to, filings under the HSR Act and prompt submissions of information
requested by governmental authorities. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of the Surviving Corporation
and Parent on behalf of the Company and the Purchaser shall take all such
action.
Section 4.5. COMPLIANCE WITH ANTITRUST LAWS. Each of Parent, the Purchaser
and the Company will use its best efforts to resolve such objections, if any,
which may be asserted with respect to the Merger under the antitrust laws. In
the event a suit is instituted challenging the Merger as violative of the
antitrust laws, each of Parent, the Purchaser and the Company will use its best
efforts to resist or resolve such suit. Each of Parent, the Purchaser and the
Company will use its best efforts to take such action as may be required (a) by
the Antitrust Division of the Department of Justice or the Federal Trade
Commission in order to resolve such objections as either of them may have to the
Merger under the antitrust laws or (b) by any federal or state court of the
United States, in any suit brought by a private party or governmental entity
challenging the Merger as violative of the antitrust laws, in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary restraining
order or other order which has the effect of preventing the consummation of the
Merger; PROVIDED, however, that the best efforts of Parent and the Purchaser
shall not include (a) proffering Parent and the Purchaser's willingness to
accept an order providing for the divestiture of such of the properties, assets,
operations, or business of the Company (or, in lieu thereof, such properties,
assets, operations, or business of Parent and the Purchaser or any
24
of Parent and the Purchaser's affiliates) as are necessary to permit the
consummation of the transactions contemplated by this Agreement, including an
offer to hold separate such properties, assets, operations or businesses pending
any such divestiture, or (b) proffering Parent and the Purchaser's willingness
to accept any other conditions, restrictions, limitations or agreements
affecting the full rights of ownership of the Company's assets (or any portion
thereof) as may be necessary to permit the consummation of the transactions
contemplated by this Agreement.
Section 4.6. INDEMNIFICATION AND INSURANCE.
(a) It is understood and agreed that the Company shall indemnify and
hold harmless, and, after the Effective Time, the Surviving Corporation and
Parent shall indemnify and hold harmless, each present and former employee,
agent, officer or director of the Company (the "Indemnified Parties") to the
fullest extent permitted under applicable law against any losses, claims,
damages, liabilities, costs, expenses, judgments and amounts paid in settlement
("Damages") in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to any action or omission occurring
prior to or at the Effective Time (including, without limitation, any claim,
action, suit, proceeding or investigation which arises out of or relates to the
transactions contemplated hereby) (a "Claim") without regard to the form of
action whether in law or in equity and including but not limited to claims based
on NEGLIGENCE OR STRICT LIABILITY OF ANY INDEMNIFIED PARTY or any other theory
of recovery. These rights to indemnification and the obligations set forth in
this Section 4.6(a) shall survive the Merger and shall continue in full force
and effect for a period of not less than six years from the Effective Time. In
the event any Indemnified Party asserts in writing that he is entitled to be
indemnified and held harmless against any potential Damages arising out of or
pertaining to any Claim prior to the end of such six-year period, all rights to
indemnification in respect of any such Damages shall continue until disposition
of any such Claim. Without limiting the foregoing, the Company and Parent, and,
after the Effective Time, the Surviving Corporation and Parent, to the fullest
extent permitted under applicable law, will periodically advance expenses as
incurred with respect to any Claim or potential Claim; PROVIDED that the person
to whom expenses are advanced, if required by applicable law, provides a written
affirmation of his good faith belief that he has met the standard of conduct
prescribed by law as being necessary for indemnification and a written
undertaking to repay such advances if it is ultimately determined by a court of
competent jurisdiction that such person is not entitled to indemnification
pursuant to this Section 4.6(a).
(b) In the event any Claim is brought against any Indemnified Party
(whether before or after the Effective Time) in connection with which such
Indemnified Party asserts that he is entitled to be indemnified and held
harmless pursuant to Section 4.6(a) hereof, the Company (or, after the Effective
Time, the Surviving Corporation) shall have the right to assume the defense
thereof and shall not be liable to any Indemnified Party for any legal expenses
of other counsel or other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if the Surviving
Corporation elects not to assume such defense or if such counsel for the
Indemnified Parties advises that
25
there are issues which raise conflicts between the Surviving Corporation and the
Indemnified Parties, (i) the Indemnified Parties may retain counsel reasonably
satisfactory to the Company (or the Surviving Corporation and Parent after the
Effective Time), (ii) the Company (or, after the Effective Time, the Surviving
Corporation and Parent) shall pay all fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received, so long as the
Indemnified Party has delivered the written items set forth in the last sentence
of Section 4.6(a) to the extent required by applicable law and (iii) the Company
(or, after the Effective Time, the Surviving Corporation and Parent) will use
their best efforts to assist in the vigorous defense of any such matter. Neither
the Company, the Surviving Corporation nor Parent shall be liable for any
settlement effected without their written consent, which consent, however, shall
not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under Section 4.6(a) hereof, upon learning of any such Claim,
shall notify the Company or the Surviving Corporation thereof but any failure to
so notify the Company or the Surviving Corporation shall not relieve either of
them or Parent of its obligations under this Section 4.6 unless it has been
actually prejudiced by such lack of notice. The Indemnified Parties as a group
may retain only one law firm in each jurisdiction to represent them with respect
to any such matter unless there is, under applicable standards of professional
conduct (based on the advice of counsel to the Indemnified Parties), a conflict
of interest on any significant issue between the positions of any two or more
Indemnified Parties.
(c) Parent and the Surviving Corporation shall use their best efforts
to cause to be maintained in effect for six years from the Effective Time the
current policies of directors' and officers' liability insurance maintained by
the Company with respect to all matters, including the transactions contemplated
hereby, occurring prior to or at the Effective Time; PROVIDED, HOWEVER, that
Parent and the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are no less
advantageous so long as no lapse in coverage occurs as a result of such
substitution; and PROVIDED FURTHER, that the Parent and the Surviving
Corporation shall be entitled to reduce the coverage provided by such directors'
and officers' liability insurance if and to the extent required to cause the
total annual premium for such directors' and officers' liability insurance not
to exceed a total annual premium of $150,000. Upon request of any former officer
or director of the Company, Parent will provide to such former officer or
director a certificate from the insurer under the directors' and officers'
liability insurance policy provided for in this Section 4.6(c) as to the nature
and amount of the insurance coverage provided by such policy and stating that
such policy will not be canceled, terminated or amended without prior written
notice being mailed to such former officer or director. If Parent or the
Surviving Corporation fail at any time to maintain in effect directors' and
officers' liability insurance provided for in this Section 4.6(c) at a time when
such insurance is required under this Section 4.6(c), any former officer or
director of the Company may procure and maintain a directors' and officers'
liability insurance policy providing such insurance for the benefit of the
former officers and directors of the Company for such period of time as is
required under this Section 4.6(c), and Parent and the Surviving Corporation
shall be jointly and severally obligated to reimburse such former officer or
director,
26
upon demand from time to time, for all premiums paid for such insurance up to a
maximum of $150,000 per annum in the aggregate for all such former officers and
directors, less all premium amounts actually paid by the Company for such
directors' and officers' liability insurance policy.
(d) The Bylaws of Parent will contain the provisions with respect to
indemnification and insurance set forth in Article IX of the Parent's Bylaws, as
in effect on the date hereof, which provisions will not be amended for a period
of six years from the Effective Time in any manner that would adversely affect
the rights thereunder of individuals who on or prior to the Effective Time were
directors, officers, employees or agents of the Company, except if such
amendment is required by law.
Section 4.7. 401(K) PLAN; EXECUTIVE OFFICE. The Surviving Corporation
will replace the Grey Wolf Drilling Co. Employees' 401(k) and Profit Sharing
Plan with another plan or plans providing, in the aggregate, for a substantially
equivalent or greater level of compensation, funding, and benefits for employees
of the Company who remain employed by the Surviving Corporation after the
Effective Time. The Surviving Corporation shall maintain its executive
headquarters in the Houston area for a period of not less than one year from the
Effective Time.
Section 4.8. SECURITY INTEREST AND LIEN. Parent and Purchaser covenant,
warrant and represent that the security interest and common law pledge,
assignment and lien in and to the Escrow Fund granted to the Stockholders and
Stockholder Representatives pursuant to Section 14 of the Escrow Agreement will
be and remain a first and prior security interest and common law pledge,
assignment and lien in and to said Escrow Fund at the Effective Time and at all
times thereafter until completion of disbursement of the Escrow Fund by the
Escrow Agent pursuant to the Escrow Agreement.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The obligations of each party to effect the Merger are subject to the
satisfaction or waiver, if permissible, at or prior to the Effective Time, of
the following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite affirmative vote of the shareholders of the Company in accordance
with the TBCA and the Company's Articles of Incorporation;
(b) no statute, rule, regulation, order, decree, ruling or injunction
shall have been promulgated, enacted, or issued by any court or
governmental authority of competent jurisdiction which is in effect and has
the effect of prohibiting the consummation of the Merger;
27
(c) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(d) the Parent Common Stock Price shall not be less than $2.20
or more than $4.80;
(e) Parent and the Purchaser shall have obtained and have in hand
sufficient funds, or binding written commitments from responsible and
reputable financial institutions reasonably satisfactory to the Company to
provide such funds, to enable Parent and the Purchaser to pay the Closing
Cash Consideration as required in Section 1.7 and to make the deposit (if
any) provided to be made pursuant to Section 1.6(a)(vi) without resulting
in a breach or violation of the representations and warranties set forth in
Section 3.5; and
(f) the Escrow Agreement shall have been executed and delivered by the
Parent, the Company, the Stockholder Representatives, and Designated Bank
as provided for in Section 1.6(a)(vi).
Section 5.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND THE
PURCHASER. The obligations of Parent and the Purchaser under this Agreement are
subject to the satisfaction (or waiver by Parent and the Purchaser), at or prior
to the Effective Time, of each of the following conditions:
(a) All representations and warranties of the Company contained herein
or in any certificate or document delivered to Parent and the Purchaser
pursuant hereto shall be true and correct on and as of the date made, and
the Company shall have performed all obligations and agreements, and
complied with all covenants and conditions, contained in this Agreement to
be performed or complied with by it prior to or at the Effective Time.
(b) There shall have been no Material Adverse Change from the date of
this Agreement until the Effective Time.
(c) The Parent shall have received a favorable opinion of Xxxxxx
Xxxxxxxx LLP or of KPMG Peat Marwick, L.L.P., addressed to Parent and in
form and substance reasonably satisfactory to it to the effect that the
Merger will constitute a reorganization for federal income tax purposes
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code").
(d) The number of shares of Company Common Stock held by persons who
have evidenced an intent to exercise dissenters' rights of appraisal shall
not be in excess of five percent of the outstanding Company Common Stock.
28
(e) The holders of shares of Company Common Stock who will receive, in
the aggregate, ninety percent of the Stock Consideration shall have
executed letters stating that they have no plan or intent to sell,
exchange, transfer, distribute or otherwise reduce their risk of ownership
of the Parent Common Stock they will receive in the Merger; provided that
no such holder shall have liability to Parent or the Surviving Corporation
by reason of execution or delivery of any such letter or any representation
made therein.
Section 5.3. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligations of Company under this Agreement are subject to the satisfaction (or
waiver by the Company), at or prior to the Effective Time, of the following
conditions:
(a) All representations and warranties of Parent and the Purchaser
contained herein or in any certificate or document delivered to the Company
pursuant hereto shall be true and correct on and as of the date made, and
Parent and the Purchaser shall have performed all obligations and
agreements, and complied with all covenants and conditions contained in
this Agreement to be performed or complied with by them prior to or at the
Effective Time.
(b) The Company shall have received a favorable opinion of Xxxxxx
Xxxxxxxx LLP or of KPMG Peat Marwick, L.L.P., addressed to the Company and
its stockholders and in form and substance reasonably satisfactory to it to
the effect that the Merger will constitute a reorganization for federal
income tax purposes within the meaning of Section 368(a) of the Code.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, notwithstanding approval and adoption of this Agreement by the
shareholders of the Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company, Parent and the Purchaser;
(b) by the Purchaser and Parent or the Company if any court or
governmental authority of competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action, permanently enjoining
or otherwise prohibiting the consummation of the Merger and such order,
decree, ruling or other action shall have become final and nonappealable;
29
(c) by the Company if, prior to the Effective Time, the Company is not
in breach of its obligations under Section 4.2 and a person other than the
Purchaser shall have made an unsolicited bona fide proposal for a
transaction, which the Company's Board of Directors believes, in good
faith, after consultation with the Company's financial advisors, is more
favorable to the Company's shareholders than the transactions contemplated
by the Merger;
(d) by the Parent if neither the Parent nor the Purchaser is in
material breach of this Agreement and the Company's Board of Directors
shall have (i) withdrawn its recommendation that the shareholders of the
Company vote in favor of approval and adoption of this Agreement, or (ii)
recommended or approved the acceptance or approval by stockholders of the
Company of any Acquisition Proposal (other than one by Parent or its
affiliates);
(e) by the Company, if the Company is not in material breach of this
Agreement and the Effective Time shall not have occurred on or prior to
July 1, 1997; or
(f) by Parent, if neither Parent nor the Purchaser is in material
breach of this Agreement and the Effective Time shall not have occurred on
or prior to July 1, 1997.
Section 6.2. EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1 hereof, this Agreement,
except for Section 4.3(b) hereof and Section 7.9 hereof, shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its directors, officers, employees, agents or shareholders. Nothing in this
Section 6.2 shall relieve any party hereto of any liability for a breach of this
Agreement.
Section 6.3. AMENDMENT. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, Parent and the Purchaser at any time before or after
approval and adoption of this Agreement by the shareholders of the Company but,
after any such shareholder approval and adoption, no amendment shall be made
which decreases the consideration provided for in Section 1.6 or changes the
form thereof or which adversely affects the rights of the Company's shareholders
hereunder, without the approval of a the holders of at least two-thirds of the
outstanding shares of Company Common Stock. This Agreement may not be amended
except by an instrument in writing signed on behalf of the parties hereto.
Section 6.4. EXTENSION; WAIVER. At any time prior to the Effective Time,
the Company on the one hand and the Parent and the Purchaser on the other, by
action taken by or on behalf of the Board of Directors of the Company, Parent
and the Purchaser, may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein of any other party or in
any
30
document, certificate or writing delivered pursuant hereto by any other party or
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of any party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE 7
MISCELLANEOUS
Section 7.1. SURVIVAL. The representations and warranties made in Articles
2 and 3 hereof shall not survive the Effective Time. Except for those covenants
and agreements which by their terms contemplate performance after the Effective
Time, all covenants and agreements set forth herein shall not survive the
Merger. This Section 7.1 shall not limit the term of any covenant or agreement
which by its terms contemplates performance after the Effective Time.
Section 7.2. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, including the
exhibits and schedules hereto and the documents and instruments referred to
herein, and the Confidentiality Agreement between Parent and the Company, dated
September 16, 1996, (a) constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise; provided that the Purchaser may assign any of its rights
and obligations to any other wholly owned subsidiary of Parent, but no such
assignment shall relieve the Purchaser of its obligations hereunder.
Section 7.3. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provisions of this Agreement, which shall remain in
full force and effect in such jurisdiction, or the validity or enforceability of
such provision in any other jurisdiction.
Section 7.4. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered if delivered in person, by cable, telegram or telex,
or five business days after delivery if delivered by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows:
If to Parent and the Purchaser:
DI Industries, Inc.
625 Paragon Center One
000 Xxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: X. X. Xxxxxxxx, President
31
With a copy to:
Gardere Xxxxx Xxxxxx & Xxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
If to the Company:
Grey Wolf Drilling Company
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: J. K. B. Xxxxxx, President
With a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx
or to such other address as the person to whom notice is to be given shall have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 7.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable hereto.
Section 7.6. DESCRIPTIVE HEADINGS; SCHEDULES.
(a) The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(b) The reference to any matter on any Schedule hereto shall not be
deemed an admission that such matter is material.
Section 7.7. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Agreement
except pursuant to Sections 1.6, 1.7, 1.10, 4.6 and 4.7 hereof (which are
intended to be for the benefit of the persons described therein and may be
enforced by such persons).
32
Section 7.8. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
Section 7.9. EXPENSES.
(a) Except as otherwise provided in this Section 7.9, all costs and
expenses incurred in connection with the transactions contemplated hereby shall
be paid by the party incurring such expenses, whether or not such transactions
shall be consummated.
(b) If this Agreement is terminated by the Company pursuant to Section
6.1(c), or by the Parent pursuant to Section 6.1(d), then Company shall pay to
Parent, on demand, as the sole remedy of Parent and the Purchaser under this
Agreement, a fee of $2,000,000 in full reimbursement and compensation for
Parent's time and effort in negotiating and entering into this Agreement and
taking actions pursuant thereto.
(c) If closing of the Merger under this Agreement does not occur
because the condition set forth in Section 5.1(e) is not satisfied, then Parent
shall pay to Company on demand, as Company's sole remedy under this Agreement,
$2,000,000 as liquidated damages in full reimbursement and compensation to
Company and its shareholders.
Section 7.10. CERTAIN DEFINITIONS. As used herein:
(a) "subsidiary" shall mean, when used with reference to any entity,
any corporation a majority of the outstanding voting securities of which
are owned directly or indirectly by such former entity.
(b) "Material Adverse Effect" shall mean any adverse change in the
financial condition, business or operations of the Company which is
material to the Company.
(c) "best efforts" means a party's best efforts in accordance with
reasonable commercial practice and without the incurrence of unreasonable
expense or the initiation or continuation of any litigation.
(d) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(e) "person" means any individual, corporation, partnership, limited
liability company, joint venture, association, trust, or government or any
agency or department thereof.
Section 7.11. PRESS RELEASES. Parent and the Company will seek to consult
with each other before issuing any press release or otherwise making any public
statement with respect to the transactions contemplated hereby.
33
Section 7.12. SALES TAXES. Any sales or use tax imposed by any domestic or
foreign taxing authority with respect to the property of the Company due with
respect to the Merger shall be borne by the Parent or Surviving Corporation and
expressly shall not be a liability of the shareholders of the Company.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its officers thereunto duly authorized
on the day and year first above written.
PARENT:
DI INDUSTRIES, INC.
By X. X. Xxxxxxxx, President
PURCHASER:
DRILLERS, INC.
By X. X. Xxxxxxxx, President
COMPANY:
GREY WOLF DRILLING COMPANY
By J. K. B. Xxxxxx, President
XXXXX K. B. XXXXXX, INDIVIDUALLY
34
SCHEDULE 1.6
ESCROW AGREEMENT
This ESCROW AGREEMENT ("Agreement"), dated as of
____________, 1997, between DI INDUSTRIES, INC., a Texas corporation ("Parent"),
DRILLERS, INC., a Texas corporation and wholly owned subsidiary of Parent
("Purchaser"), GREY WOLF DRILLING COMPANY, a Texas corporation ("Company"),
XXXXX K. B. XXXXXX ("Xxxxxx"), XXXXXXX X. XXXXX ("Xxxxx") (Xxxxxx and Xxxxx
being herein sometimes individually referred to as a "Stockholder
Representative" or collectively referred to as the "Stockholder
Representatives"), and , a national banking association ("Escrow Agent"),
WITNESSETH:
WHEREAS, Parent, Purchaser and the Company have entered into an
Agreement and Plan of Merger dated March ___, 1997 (as amended from time to
time, the "Merger Agreement"), which provides, among other things, for the
merger (the "Merger") of Company into and with Purchaser, with the Purchaser
being the surviving corporation (the "Surviving Corporation") with the result
that the Surviving Corporation will be a wholly owned subsidiary of Parent; and
WHEREAS, the parties to this Agreement desire, pursuant to Section
1.6(a)(vi) of the Merger Agreement, to provide for the deposit, investment and
reinvestment and distribution of an Escrow Fund as hereinafter provided, for the
purpose of providing for payment of any Final Judgment Amount or Approved
Settlement Amount for which the Surviving Corporation may become liable in
connection with the Lawsuit, and to provide for the payment of Contingent Cash
Consideration (if any) to the Stockholders of Company on the Distribution Date
pursuant to the Merger Agreement if the Escrow Fund has not theretofore been
fully distributed or expended pursuant to Section 5 of this Agreement.
NOW, THEREFORE, in consideration of the premises and as required
pursuant to the Merger Agreement, the parties hereto hereby agree as follows:
1. DEFINITIONS. Unless otherwise stated herein, terms defined in the
Merger Agreement shall have the meaning therein stated when used in this
Agreement, and the following terms shall have the following meanings:
(a) "Approved Settlement" shall mean a settlement agreement approved by
the Stockholder Representatives (subject to Section 15 hereof) pursuant to
which the Subject Claims shall be fully and finally released by TEPCO.
(b) "Approved Settlement Amount" shall mean the amount of money
required to be paid to TEPCO by the Surviving Corporation pursuant to an
Approved Settlement in consideration for a full and final release of the
Subject Claims, minus any amounts payable to TEPCO from the Surviving
Corporation pursuant to such Approved Settlement which are paid, or
reimbursed to the Surviving Corporation or Parent, pursuant to insurance
policies of the Company (if any) covering the Subject Claims.
(c) "Contingent Cash Consideration" shall mean, as to each Stockholder,
an amount, if any, equal to (i) the Escrow Account Balance, (ii) divided by
the number of shares of the Company Common Stock outstanding at the
Effective Time (except and excluding any shares of Company Common Stock
issued and held in the Company's treasury immediately before the Effective
Time), and (iii) multiplied by the number of shares of Company Common Stock
held by such Stockholder at the Effective Time (except and excluding any
Dissenting Shares as to which such Stockholder shall not have failed to
perfect, or effectively withdrawn or lost, his right to appraisal and
payment with respect thereto prior to the Distribution Date).
(d) "Designated Attorneys" shall mean the law firm of Fulbright &
Xxxxxxxx L.L.P. or such other attorney or law firm as shall from time to
time hereafter be designated by Stockholder Representatives (with the
consent of the Surviving Corporation, which consent shall not unreasonably
be withheld or delayed) to represent the Company, Surviving Corporation and
Parent (and any of them) in the Lawsuit.
(e) "Distribution Date" means the date which is the first business day
(excluding Saturdays, Sundays and holidays on which National Banks in
Houston, Texas are authorized to close) ensuing after the expiration of 20
days after the first to occur of (i) receipt of notice by the Escrow Agent
from the Stockholder Representatives and the Surviving Corporation that the
Subject Claims have been disposed of by final judgment in the Lawsuit not
subject to further appeal denying the Subject Claims, (ii) the date of
distribution from the Escrow Fund and payment by the Escrow Agent to the
Surviving Corporation of the Final Judgment Amount pursuant to paragraph
5(a) of this Agreement (without causing the Termination Date to occur), or
(iii) the date of distribution from the Escrow Fund and payment by the
Escrow Agent to the Surviving Corporation of the Approved Settlement Amount
pursuant to paragraph 5(b) of this Agreement (without causing the
Termination Date to occur). When and if a judgment denying the Subject
Claims has been entered in the Lawsuit and has become final and not subject
to further appeal, the Surviving Corporation shall join
2
with the Stockholder Representatives in giving notice of such fact to the
Escrow Agent pursuant to clause (i) of the last preceding sentence,
promptly upon request by the Stockholder Representatives.
(f) "Effective Time" shall mean the effective time of the Merger as
provided in the Merger Agreement.
(f) "Escrow Account Balance" shall mean the amount, if any, held in the
Escrow Fund by the Escrow Agent pursuant to this Agreement on the
Distribution Date, including the initial escrow deposit of $5,000,000 made
pursuant to Section 2 of this Agreement and all income and interest earned
on and profits realized from and proceeds of investments of the Escrow
Fund, LESS, however, any losses incurred from investments of the Escrow
Fund and any amounts paid or owing from the Escrow Fund on or prior to the
Distribution Date pursuant to Section 5 hereof to pay expenses or fees of
the Escrow Agent, to pay amounts payable to the Surviving Corporation for
Reimbursable Expenses and certain taxes payable by the Surviving
Corporation pursuant to Section 8 hereof, to pay expenses of the
Stockholder Representatives, or to pay a Final Judgment Amount or Approved
Settlement Amount to the Surviving Corporation.
(g) "Escrow Fund" shall mean the initial deposit of $5,000,000 made by
Purchaser with the Escrow Agent pursuant to Section 3 of this Agreement and
all investments of the Escrow Fund and income and interest earned on and
profits realized from investments of the Escrow Fund prior to the
Distribution Date, subject to the provisions of Section 7 hereof.
(h) "Final Judgment" shall mean a final judgment rendered in the
Lawsuit which is not subject to further appeal, pursuant to which TEPCO is
awarded the right to receive payment of any amount from the Surviving
Corporation based upon the Subject Claims.
(i) "Final Judgment Amount" shall mean the net amount of money (after
deduction of any offsetting amounts awarded the Surviving Corporation
pursuant to the Final Judgment) which TEPCO is entitled to recover from the
Surviving Corporation based upon the Subject Claims pursuant to a Final
Judgment, minus any amounts payable to TEPCO from the Surviving Corporation
pursuant to such Final Judgment which are paid, or reimbursed to the
Surviving Corporation or Parent, pursuant to insurance policies of the
Company (if any) covering the Subject Claims.
(j) "Lawsuit" shall mean Cause No. 96-49194, styled TEPCO,
INC. V. GREY WOLF DRILLING COMPANY, now pending in the 164th Judicial
3
District Court of Xxxxxx County, Texas, and any other lawsuits arising
during the term of this Agreement in which the Subject Claims are asserted
by TEPCO against the Company or Surviving Corporation.
(k) "Lawsuit Expenses" shall have the meaning specified in Section 13
of this Agreement.
(l) "Reimbursable Expenses" shall have the meaning specified in Section
13 of this Agreement.
(m) "Stockholder" means a holder of Company Common Stock at the
Effective Time, and any person who shall have succeeded to the right of
such holder to receive payment of the Contingent Cash Consideration prior
to the Distribution Date by will or intestate succession or by operation of
law.
(n) "Subject Claims" shall mean the claims asserted by TEPCO against
the Company in the Lawsuit as set forth in the Plaintiff's Original
Petition heretofore filed in the Lawsuit or which may be asserted by TEPCO
against the Company or Surviving Corporation in the Lawsuit based upon the
facts, events or circumstances described or referred to in the Plaintiff's
Original Petition heretofore filed in the Lawsuit.
(o) "TEPCO" shall mean TEPCO, Inc., the plaintiff in the Lawsuit, and
any successor to the claims against the Company (or Successor Corporation
following the Merger) asserted by the plaintiff in the Lawsuit.
(p) "Termination Date" means the date (if such date occurs) when all
amounts remaining in the Escrow Fund are disbursed and distributed pursuant
to Section 5 of this Agreement.
2. APPOINTMENT OF ESCROW AGENT; FEES AND EXPENSES. Parent, Purchaser
and Company hereby appoint ____________________, as Escrow Agent for the
purposes set forth herein, and the Escrow Agent hereby accepts such appointment
on the terms herein provided. From and after the execution of this Agreement,
the Escrow Agent shall be entitled to be paid or reimbursed for the Escrow
Agent's fees for services under this Agreement in accordance with the Escrow
Agent's fee schedule in effect from time to time, and for reasonable
out-of-pocket expenses (including, without limitation, reasonable attorneys'
fees) incurred by the Escrow Agent in connection with the performance of its
services as Escrow Agent pursuant to this Agreement, which fees and expenses may
be withdrawn from the Escrow Fund by the Escrow Agent and paid to itself from
time to time upon giving of written notice by the Escrow Agent to the Surviving
Corporation and the Stockholder Representatives of the amount and nature of such
fees and expenses. If
4
the Escrow Fund is insufficient to pay the fees and expenses of the Escrow
Agent, the Surviving Corporation agrees to pay such fees and expenses to the
extent not paid from the Escrow Fund.
3. DEPOSIT OF ESCROW FUND. For the purposes herein set forth, unless
this Agreement is terminated pursuant to Section 4 hereof prior to the Effective
Time, Parent or Purchaser (who shall be jointly and severally liable to do so)
shall, at or immediately after the Effective Time of the Merger, deposit with
the Escrow Agent the sum of $5,000,000, which shall be included in the Escrow
Fund hereunder. The Escrow Fund will be held, invested, reinvested and disbursed
by the Escrow Agent in accordance with the terms hereof.
4. TERMINATION PRIOR TO EFFECTIVE TIME. If (i) the Subject Claims are
fully and finally released prior to the Effective Time, (ii) a judgment denying
the Subject Claims in their entirety is entered in the Lawsuit and becomes final
and not subject to further appeal prior to the Effective Time, or (iii) the
Merger Agreement is terminated pursuant to the provisions of the Merger
Agreement prior to the Effective Time, then in any such event this Agreement
shall terminate and be of no further force or effect; and neither Parent nor
Purchaser shall be obligated to deposit any amount with the Escrow Agent
pursuant to Section 3 of this Agreement.
5. APPLICATION OF ESCROW FUND BEFORE DISTRIBUTION DATE; TERMINATION
DATE. At all times before the close of business on the Distribution Date, the
Escrow Fund will be retained by the Escrow Agent and shall be distributed or
expended at any time or from time to time to the extent required to effect
payment of the following:
(a) If at any time the Escrow Agent shall receive notice from the
Stockholder Representatives and the Surviving Corporation that a Final
Judgment exists, specifying the Final Judgment Amount payable to TEPCO
pursuant to such Final Judgment, the Escrow Agent shall, as promptly as
practicable, liquidate investments of the Escrow Fund (to the extent
required) and distribute from the Escrow Fund (up to all amounts then
remaining in the Escrow Fund) and pay to the Surviving Corporation such
Final Judgment Amount or such lesser total amount as shall then remain in
the Escrow Fund after payment of any amounts then authorized to be
disbursed from the Escrow Fund pursuant to paragraph 5(c), 5(d), or 5(e) of
this Agreement. When and if a Final Judgment exists the Surviving
Corporation shall join with the Stockholder Representatives in giving
notice to the Escrow Agent that such Final Judgment exists, promptly upon
request after determination of the amount of the Final Judgment Amount.
(b) If at any time the Escrow Agent shall receive notice from the
Stockholder Representatives that an Approved Settlement exists, specifying
the amount of the Approved Settlement Amount payable to
5
TEPCO pursuant to such Approved Settlement, the Escrow Agent shall, as
promptly as practicable, liquidate investments of the Escrow Fund (to the
extent required) and distribute from the Escrow Fund (up to all amounts
then remaining in the Escrow Fund) and pay to the Surviving Corporation
such Approved Settlement Amount or such lesser total amount as shall then
remain in the Escrow Fund after payment of any amounts then authorized to
be disbursed from the Escrow Fund pursuant to paragraph 5(c), 5(d) or 5(e)
of this Agreement.
(c) From time to time when and as authorized pursuant to Section 2 of
this Agreement, the Escrow Agent shall liquidate investments of the Escrow
Fund (to the extent required) and disburse funds from the Escrow Fund to
pay or reimburse the Escrow Agent for fees of the Escrow Agent for its
service hereunder and for expenses reasonably incurred by Escrow Agent in
connection with this Agreement, to the extent that such fees or expenses
can be paid or reimbursed from amounts then remaining in the Escrow Fund.
(d) From time to time when and as authorized pursuant to Section 8 of
this Agreement, the Escrow Agent shall liquidate investments of the Escrow
Fund (to the extent required) and disburse funds from the Escrow Fund to
reimburse the Surviving Corporation for Reimbursable Expenses and certain
taxes paid or payable by the Surviving Corporation as described in said
Section 8, to the extent that such Reimbursable Expenses and taxes can be
reimbursed from amounts then remaining in the Escrow Fund.
(e) From time to time when and as authorized pursuant to Section 11 of
this Agreement, the Escrow Agent shall liquidate investments of the Escrow
Fund (to the extent required) and disburse funds from the Escrow Fund to
pay or reimburse the Stockholder Representatives, and either of them, for
expenses reasonably incurred by the Stockholder Representatives in
connection with this Agreement, to the extent that such expenses can be
paid or reimbursed from amounts then remaining in the Escrow Fund.
If at any time the entirety of the then remaining Escrow Fund shall be required
to be distributed and disbursed pursuant to this Section 5, the date of final
disbursement and distribution of the remaining funds in the Escrow Fund by the
Escrow Agent pursuant to this Section 5 shall be the Termination Date. If the
Termination Date occurs, the Distribution Date will not occur, and no amount of
the Escrow Fund will be disbursed or distributed by the Escrow Agent pursuant to
Section 6 of this Agreement.
6
6. APPLICATION OF ESCROW FUND ON THE DISTRIBUTION DATE. If the
Termination Date does not occur and an event which will cause the Distribution
Date to occur after the expiration of 20 days pursuant to paragraph 1(e) shall
have occurred, then at least five days prior to the Distribution Date the Escrow
Agent shall liquidate all investments of the Escrow Fund. On the Distribution
Date, the Escrow Agent shall distribute and pay to itself in its capacity as the
Exchange Agent pursuant to the Merger Agreement, as bailee for the Stockholders
for distribution to the Stockholders pursuant to the Merger Agreement, an amount
of the Escrow Account Balance equal to the sum of the Contingent Cash
Consideration of all Stockholders. Payment by Escrow Agent of the sum of the
Contingent Cash Consideration of all Stockholders to itself in its capacity as
the Exchange Agent under the Merger Agreement as bailee for the Stockholders as
provided for herein shall be deemed to constitute payment to each Stockholder of
the Contingent Cash Consideration owing by Parent and the Surviving Corporation
to such Stockholder for all purposes including Section 14 of this Agreement. Any
amount of the Escrow Account Balance in excess of the sum of the Contingent Cash
Consideration of all Stockholders (consisting of the amount, if any, of the
Escrow Account Balance which would be payable as Contingent Cash Consideration
with reference to Dissenting Shares if all Stockholders who owned such
Dissenting Shares at the Effective Time had effectively withdrawn their right to
appraisal and payment with respect thereto) shall be distributed and paid by the
Escrow Agent to the Surviving Corporation on the Distribution Date. The right of
a Stockholder to receive payment through the Exchange Agent of any amount of the
Escrow Account Balance pursuant to this Section 6 may not be transferred or
otherwise assigned by the Stockholder to any person, unless such transfer occurs
by will or intestate succession or by operation of law. Parent shall provide a
statement to the Stockholder Representatives and the Escrow Agent no later than
five days prior to the Distribution Date setting forth the aggregate percentage
of the Escrow Account Balance to be distributed to the Exchange Agent on the
Distribution Date as the sum of the Contingent Cash Consideration of all
Stockholders.
7. INVESTMENT OF THE ESCROW FUND. The Escrow Agent shall invest and
reinvest the Escrow Fund in readily marketable securities of the United States
of America or its lawful agencies or in securities guaranteed by the full faith
and credit of the United States, which securities, in each case, shall have
maturities of one year or less after purchase thereof by the Escrow Agent. It is
expressly agreed and stipulated that none of the Escrow Agent, the Parent, the
Surviving Corporation or the Stockholder Representatives shall in any way
whatsoever be liable for losses on any investment of the Escrow Fund, including,
but not limited to, losses from market risks, due to premature liquidation or
resulting from other actions taken pursuant to this Agreement. The Escrow Agent
shall provide written reports to the Surviving Corporation and the Stockholder
Representatives (i) prior to the fifteenth day of each month until the
Distribution Date or Termination Date occurs, and (ii) if the Termination Date
does not occur, prior to the fifteenth day of the month next succeeding the
month during which the Distribution Date occurs, or (iii) if the Termination
Date occurs, prior to the fifteenth day of the month next succeeding the
7
month during which the Termination Date occurs, in each case showing investments
and reinvestments made of the Escrow Fund, income or interest received on
investments of the Escrow Fund, proceeds received and profits or losses realized
on sales of investments of the Escrow Fund, and disbursements, if any, from the
Escrow Fund through the end of the last preceding calendar month. Additionally,
at any time upon request from the Surviving Corporation or the Stockholder
Representatives the Escrow Agent shall provide them with a special report
reflecting such of the information specified in the last preceding sentence as
they shall request with respect to the period since the end of the period
covered by the last report provided pursuant to the last preceding sentence down
to the date of such special report. All income and profits realized on
investment and reinvestment and sale or liquidation of investments of the Escrow
Fund shall become a part of the Escrow Fund, and all losses and expenses
suffered or incurred on investment and reinvestment and sale or liquidation of
investments of the Escrow Fund shall be deducted from and shall no longer
constitute part of the Escrow Fund.
8. TAXES ON INCOME AND PROFITS OF ESCROW FUND; REIMBURSABLE EXPENSES.
Any income or profits realized from investment or reinvestment or sale or
liquidation of investments of the Escrow Fund by the Escrow Agent which are
taxable for federal income tax purposes ("Taxable Income or Profits"), and any
expenses or losses incurred in connection with the Escrow Fund and this
Agreement and the investment or reinvestment or sale or liquidation of the
Escrow Fund which are payable or deducted from the Escrow Fund and are
deductible for federal income tax purposes ("Deductible Expenses or Losses")
shall be deemed for federal income tax purposes to be income, profits, expenses
or losses, as applicable, of the Surviving Corporation and not the Escrow Fund
or Stockholders. The Surviving Corporation or Parent, as applicable, shall
report and pay any federal income taxes attributable to the amount, if any, of
such Taxable Income or Profits in excess of such Deductible Expenses or Losses,
as applicable. Upon payment of any such taxes, the Surviving Corporation shall
certify in writing to the Escrow Agent and the Stockholder Representatives that
it has paid such taxes, specifying the amount thereof and the amounts of the
Taxable Income or Profits and Deductible Expenses or Losses (as applicable)
taken into account in determining the amount of such taxes. Additionally, on or
prior to the Distribution Date, the Surviving Corporation shall certify in
writing to the Escrow Agent and the Stockholder Representatives the amount, if
any, of any additional federal income taxes not theretofore paid by the
Surviving Corporation or Parent which the Surviving Corporation or Parent will
be required to pay on account of the amount, if any, of Taxable Income or
Profits in excess of Deductible Expenses or Losses. In each instance, the amount
of the federal income taxes paid or payable by the Surviving Corporation or
Parent with respect to the excess, if any, of Taxable Income or Profits above
Deductible Expenses or Losses shall be calculated at the Parent's marginal
federal corporate income tax rate actually applicable to the Parent's taxable
income, if any, for the tax year of the Parent during which the applicable
Taxable Income or Profits accrued; and if for any tax year of the Surviving
Corporation or Parent the Deductible Losses or Expenses available for deduction
from Taxable Income or Profits for such tax year
8
shall exceed such Taxable Income or Profits, the excess shall be carried forward
to the succeeding tax year or years and deducted from Taxable Income or Profits
in such succeeding tax year or years for purposes of calculating the amount, if
any, of the federal income tax paid or payable by the Surviving Corporation or
Parent with respect to Taxable Income or Profits for such succeeding tax year or
years. The amounts of federal income taxes paid or payable by the Surviving
Corporation or Parent on account of an excess of Taxable Income or Profits above
Deductible Expenses or Losses which shall be certified by the Surviving
Corporation to the Escrow Agent and Stockholder Representatives from time to
time as provided for above in this section shall be distributed and paid by the
Escrow Agent from the Escrow Fund to the Surviving Corporation (or Parent if
directed by the Surviving Corporation) within five days after receipt of each
such certification. Additionally, upon payment by the Surviving Corporation from
time to time of any Lawsuit Expenses (as defined in Section 13 below) incurred
after the Effective Time, the Surviving Corporation shall certify in writing to
the Escrow Agent and the Stockholder Representatives that it has paid such
Lawsuit Expenses, specifying in reasonable detail the nature and amounts thereof
and the amount of the Reimbursable Expenses (as defined, and calculated as
provided, in said Section 13) for which the Surviving Corporation is entitled to
reimbursement from the Escrow Fund by reason of payment of such Lawsuit
Expenses. Additionally, on or prior to the Distribution Date, the Surviving
Corporation shall certify in writing to the Escrow Agent and the Stockholder
Representatives the amount, if any, of any additional Lawsuit Expenses which
have been incurred by the Surviving Corporation after the Effective Time and
which it will be required to pay but which have not theretofore been paid by it,
specifying in reasonable detail the nature and amounts of such Lawsuit Expenses
and the amount of the Reimbursable Expenses (as defined, and calculated as
provided, in said Section 13) for which the Surviving Corporation is entitled to
reimbursement from the Escrow Fund by reason of being required to pay such
Lawsuit Expenses. The amounts of Reimbursable Expenses for which the Surviving
Corporation is entitled to reimbursement from the Escrow Fund by reason of
Lawsuit Expenses paid or payable by the Surviving Corporation which shall be
certified by the Surviving Corporation to the Escrow Agent and Stockholder
Representatives from time to time as provided for above in this section shall be
distributed and paid by the Escrow Agent from the Escrow Fund to the Surviving
Corporation within five days after receipt of each such certification. If
requested by Escrow Agent, Parent and the Surviving Corporation shall provide
the Escrow Agent with taxpayer identification numbers for Parent and the
Surviving Corporation promptly after receipt of such request.
9. LIABILITY OF ESCROW AGENT. The duties of the Escrow Agent hereunder
will be limited to the observance of the express provisions of this Agreement;
and all parties acknowledge and agree that the Escrow Agent is acting solely and
exclusively as a depository hereunder. The Escrow Agent will not be subject to,
or be obligated to recognize, any other agreement between the parties hereto or
directions or instructions not specifically set forth or provided for herein.
The Escrow Agent may rely upon and act upon any instrument received by it
9
pursuant to the provisions of this Agreement that it reasonably believes to be
genuine and in conformity with the requirements of this Agreement. The Escrow
Agent shall never be required to use, advance or risk its own funds or otherwise
incur financial liability in the performance of any of its duties or the
exercise of any of its rights and powers hereunder. The Escrow Agent may consult
with its counsel or other counsel satisfactory to it concerning any question
relating to its duties or responsibilities hereunder or otherwise in connection
herewith and shall not be liable for any action taken, suffered or omitted by it
in good faith upon the advice of counsel. Without limiting the foregoing, the
Escrow Agent will not be liable for any error of judgment or any act done or
omitted to be done or any step taken by it in good faith or for any mistake of
fact or law or for anything that it might do or refrain from doing in connection
with this Agreement, INCLUDING, WITHOUT LIMITATION, NEGLIGENCE OF ESCROW AGENT,
except to the extent such actions or omissions shall be proved to constitute
gross negligence or willful misconduct on the part of the Escrow Agent.
10. INDEMNIFICATION OF ESCROW AGENT. PARENT AND THE SURVIVING
CORPORATION, JOINTLY AND SEVERALLY, WILL INDEMNIFY AND HOLD THE ESCROW AGENT
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, COSTS, DAMAGES OR EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEYS' FEES) IT MAY SUSTAIN BY
REASON OF ITS SERVICES AS ESCROW AGENT HEREUNDER, BUT ONLY TO THE EXTENT SUCH
LOSSES, COSTS, DAMAGES OR EXPENSES EXCEED THE AMOUNT OF THE FUNDS AVAILABLE IN
THE ESCROW FUND TO PAY OR REIMBURSE SAME, AND EXCEPT SUCH LOSSES, COSTS, DAMAGES
OR EXPENSES INCURRED BY REASON OF ACTS OR OMISSIONS FOR WHICH THE ESCROW AGENT
IS LIABLE OR RESPONSIBLE UNDER THE PROVISIONS OF THE LAST SENTENCE OF SECTION 9
OF THIS AGREEMENT. THE FOREGOING INDEMNITY AGREEMENT SHALL SURVIVE THE
RESIGNATION OF THE ESCROW AGENT OR THE TERMINATION OF THIS ESCROW AGREEMENT.
11. STOCKHOLDER REPRESENTATIVES. Company hereby appoints Xxxxx K. B.
Xxxxxx and Xxxxxxx X. Xxxxx as Stockholder Representatives to act hereunder on
behalf of all Stockholders as herein provided. In consideration of Xxxxx K. B.
Xxxxxx and Xxxxxxx X. Xxxxx (and any successor Stockholder Representative)
acting as the Stockholder Representatives hereunder on behalf of all
Stockholders, each such Stockholder, by accepting the Merger Consideration in
respect of such Stockholder's shares of Company Common Stock pursuant to the
Merger Agreement and becoming a beneficiary of this Agreement, consents to and
affirms the appointment of the Stockholder Representatives to act hereunder on
behalf of all Stockholders as herein provided, authorizes the Stockholder
Representatives to act on behalf of such Stockholder pursuant to the terms of
this Agreement, and releases each Stockholder Representative from liability for
any error of judgment or action taken or not taken by such Stockholder
Representative in connection with this Agreement, INCLUDING, WITHOUT LIMITATION,
NEGLIGENCE OF SUCH
10
STOCKHOLDER REPRESENTATIVE, except only for such Stockholder
Representative's gross negligence or willful misconduct, and further agrees,
without limiting the foregoing, that each Stockholder Representative shall be
fully protected and shall have no liability if acting in good faith in
conformity with the opinion of counsel. The Stockholder Representatives shall
not be deemed to be trustees and shall not be held to a standard of conduct
applicable to a trustee or other fiduciary. Any action taken by any one of the
Stockholder Representatives shall be deemed for all purposes as an action taken
by both Stockholder Representatives and shall bind the Stockholders accordingly;
but no Stockholder Representative shall be liable for any action or omission of
any other Stockholder Representative in which the former Stockholder
Representative did not participate. In each instance, in case of the
resignation, death or inability to act of a Stockholder Representative, a
successor Stockholder Representative shall be designated by Stockholders
formerly holding a majority of the outstanding shares of Company Common Stock at
the Effective Time of the Merger, any such designation to be evidenced by a
writing signed by such Stockholders and to take effect when executed copies
thereof have been delivered to the Escrow Agent and the Surviving Corporation.
The remaining Stockholder Representative shall continue to serve and act on
behalf of the Stockholder Representatives under this Agreement pending
designation of any such successor Stockholder Representative. Each successor
Stockholder Representative shall have all the power, authority, rights, and
privileges hereby conferred upon an original Stockholder Representative
hereunder, and the term Stockholder Representative as used herein shall be
deemed to include each such successor Stockholder Representative. Each
Stockholder Representative shall be entitled to be reimbursed from the Escrow
Fund, as provided in paragraph 5(e) of this Agreement, all reasonable
out-of-pocket expenses (including, without limitation, reasonable attorneys'
fees) incurred in connection with the performance of services as Stockholder
Representative pursuant to this Agreement, upon presentation to the Escrow Agent
and the Surviving Corporation of a statement and reasonable supporting evidence
of payment by such Stockholder Representative of such expenses.
12. RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign from its
duties hereunder by giving written notice of such resignation to Parent, the
Surviving Corporation, and the Stockholder Representatives at least 30 days
prior to the effective date of such resignation. A successor Escrow Agent shall
be appointed by agreement of Parent and the Stockholder Representatives, which
appointment shall be evidenced by a written agreement signed by Parent and the
Stockholder Representatives, copies of which shall be delivered to the Escrow
Agent. Upon the effective date of resignation by the Escrow Agent, the Escrow
Agent shall deliver the Escrow Fund to the successor Escrow Agent appointed as
aforesaid. If a successor Escrow Agent has not been appointed prior to the
effective date of resignation by the Escrow Agent, the Escrow Agent's sole
responsibility after the effective date of such resignation shall be, at the
election of the Escrow Agent:
11
(a) to hold the Escrow Fund (without any obligation to reinvest the
same) and to deliver the same to a designated successor Escrow Agent, if
any, thereafter appointed by Parent and the Stockholder Representatives as
above provided, or in accordance with the directions of a final order or
judgment of a court of competent jurisdiction, or
(b) to institute a petition for interpleader in a court of competent
jurisdiction and pay and deliver the Escrow Fund into the registry of such
court,
in either which event the Escrow Agent's obligations hereunder shall cease and
terminate upon payment or delivery of the Escrow Fund as provided in paragraph
(a) or (b), as applicable, of this section.
13. CONTROL OF LAWSUIT. The Company believes that the Subject Claims
asserted by TEPCO in the Lawsuit are entirely without merit and believes that if
the Lawsuit is tried the Subject Claims will be denied in their entirety and the
Company will recover judgment against TEPCO on its counterclaim which has been
asserted in the Lawsuit. The Company has agreed to enter into this Escrow
Agreement incident to execution of the Merger Agreement solely to avoid
potential delay in or interference with closing of the Merger which might
otherwise result from the pendency of the nebulous and unquantified claims for
alleged "damages" which have been asserted by TEPCO in its petition filed in the
Lawsuit. The Designated Attorneys shall be engaged to represent the Company and,
after the Effective Time, the Surviving Corporation (and Parent, if it is made a
party to the Lawsuit) in connection with the investigation, preparation for
trial, trial and any appeal of any judgment entered in the Lawsuit and in
connection with any mediation or other settlement negotiations in connection
with the Subject Claims and the Lawsuit. The fees (calculated at the customary
hourly rates charged by the Designated Attorneys from time to time) and charges
for expenses of the Designated Attorneys for such services and all other costs
and expenses and court costs in connection with the Lawsuit and any appeal of
any judgment entered therein, except only amounts of a Final Judgment Amount or
Approved Settlement Amount which are to be paid out of the Escrow Fund as
provided for in Section 5 of this Agreement, are herein collectively called
"Lawsuit Expenses." The Company and, after the Effective Time, the Surviving
Corporation shall bear and pay the Lawsuit Expenses; PROVIDED that the Surviving
Corporation shall be entitled to receive reimbursement from the Escrow Fund from
time to time (to the extent of the funds available in the Escrow Fund to effect
such reimbursement) as provided in Section 8 of this Agreement for amounts
(herein called "Reimbursable Expenses") equal to one-half (1/2) of all Lawsuit
Expenses incurred after the Effective Time which are paid or incurred by the
Surviving Corporation from time to time and which have not theretofore been
taken into account in certificates of Lawsuit Expenses and Reimbursable Expenses
theretofore provided by the Surviving Corporation to the Escrow Agent and
Stockholder Representatives pursuant to said Section 8. From and after the
Effective Time, the Stockholder Representatives shall be authorized
12
and empowered to control and direct and shall control and direct the handling of
the Lawsuit by the Designated Attorneys; and the Surviving Corporation and
Parent shall provide such assistance and cooperation as shall be reasonably
requested by the Designated Attorneys, including production of documents and
records, provision of depositions or testimony of employees as witnesses, and
provision of such information as shall be available to the Company, Surviving
Corporation or Parent. After the Effective Time, the Surviving Corporation shall
be entitled to participate in (but not control) the defense of the Lawsuit
through attorneys of its choice at its sole cost and expense (which shall not
constitute "Lawsuit Expenses") and shall be entitled to updates of the status of
the Lawsuit from the Designated Attorneys from time to time upon request. After
the Effective Time, the Stockholder Representatives shall be entitled, if they
so elect in the exercise of their discretion, to approve and to require that the
Surviving Corporation and Parent (and either of them, as applicable) enter into
a settlement agreement with TEPCO providing for a full and final release of the
Subject Claims and dismissal of the Lawsuit; provided that the Stockholder
Representatives shall not be authorized, without consent of the Surviving
Corporation and Parent, to approve a settlement which will require the Surviving
Corporation or Parent to pay any amount of money in excess of funds available to
be paid and which are paid out of the Escrow Fund pursuant to this Agreement or
are paid or reimbursed pursuant to insurance policies (if any) maintained by the
Company covering the Subject Claims, or which will require the Surviving
Corporation or Parent to undertake any affirmative obligation (other than
customary agreements to indemnify TEPCO with respect to claims of the Company,
Parent or Surviving Corporation against TEPCO which are released pursuant to a
settlement) to TEPCO or any other person other than for the payment of amounts
of money which are available to be paid and are paid out of the Escrow Fund
pursuant to this Agreement or are paid or reimbursed pursuant to insurance
policies (if any) maintained by the Company covering the Subject Claims;
provided that the Stockholder Representatives shall be entitled and authorized,
if they so elect in the exercise of their discretion, to approve and require the
Surviving Corporation and Parent to enter into a settlement which will require
that the Surviving Corporation or Parent release (in whole or in part) any
counterclaim or counterclaims against TEPCO which have been or are asserted in
the Lawsuit on behalf of the Company, Surviving Corporation or Parent as full or
partial consideration for the full and final release of the Subject Claims.
Parent and Purchaser recognize and acknowledge that a conflict of interest may
exist as between Parent and the Surviving Corporation, on the one hand, and the
Stockholders and Stockholder Representatives, on the other hand, concerning
negotiation or approval of any proposed or possible settlement of the Lawsuit
and Subject Claims; and Company, Parent and Purchaser expressly agree and
stipulate (subject to and without waiving the rights of Parent and the Surviving
Corporation under Section 15 of this Agreement) that:
(a) The Designated Attorneys shall be authorized and directed to, and
shall, render and provide advice, assistance and recommendations concerning
any proposed or possible settlement of the
13
Lawsuit and Subject Claims based solely on the opinion of the Designated
Attorneys, in the exercise of their professional judgment and discretion,
as to whether any such settlement would be in the best interest of the
Stockholders, and WITHOUT REGARD to whether any such settlement would be in
the best interest of the Surviving Corporation or Parent. Specifically, and
without limiting the foregoing, the Designated Attorneys shall have no duty
or obligation whatsoever to the Surviving Corporation or Parent to
recommend or to attempt to negotiate or obtain a settlement of the Lawsuit
or Subject Claims unless the Designated Attorneys conclude, in the exercise
of their professional judgment and discretion, that such settlement would
be in the best interest of the Stockholders (determined without regard for
the interests of the Surviving Corporation or Parent). The Surviving
Corporation and Parent shall consult with and shall rely upon counsel other
than the Designated Attorneys with reference to any proposed or possible
settlement of the Lawsuit and Subject Claims; and the Designated Attorneys
shall have no liability or responsibility whatsoever to the Surviving
Corporation or Parent for any decision, advice or recommendation of the
Designated Attorneys concerning whether to approve or disapprove or to seek
to obtain or negotiate any possible or proposed settlement of the Lawsuit
or Subject Claims or any action or omission of the Designated Attorneys in
connection with negotiating or attempting to negotiate any such settlement.
(b) The Stockholder Representatives shall be authorized and empowered
to, and shall, make decisions whether to seek to settle, or to approve any
proposed or possible settlement providing for a full release of, the
Subject Claims based solely on the opinion of the Stockholder
Representatives, in the exercise of their discretion, as to whether any
such settlement would be in the best interest of the Stockholders, and
WITHOUT REGARD to whether any such settlement would be in the best interest
of the Surviving Corporation or Parent. Specifically, and without limiting
the foregoing, the Stockholder Representatives shall have no duty or
obligation whatsoever to the Surviving Corporation or Parent to approve or
to attempt to negotiate or obtain a settlement of the Lawsuit or Subject
Claims unless the Stockholder Representatives conclude, in the exercise of
their discretion, that such settlement would be in the best interest of the
Stockholders (determined without regard for the interests of the Surviving
Corporation or Parent); and the Stockholder Representatives shall have no
liability or responsibility whatsoever to the Surviving Corporation or
Parent for any decision of the Stockholder Representatives concerning
whether to approve or disapprove or to seek to obtain or negotiate any
possible or proposed settlement of the Lawsuit or Subject Claims or any
action or omission of the Stockholder
14
Representatives in connection with negotiating or attempting to negotiate
any such settlement.
14. SECURITY INTEREST AND PLEDGE. Under the provisions of the Merger
Agreement, unless the Termination Date occurs, Parent and the Surviving
Corporation are jointly and severally liable and responsible to pay or cause to
be paid, and have agreed to pay or cause to be paid, the Contingent Cash
Consideration to the respective Stockholders on the Distribution Date. To secure
such obligation of Parent and the Surviving Corporation to pay such Contingent
Cash Consideration to the respective Stockholders as provided in the Merger
Agreement, Parent and Purchaser (as the corporate entity which will be the
Surviving Corporation upon the Merger) hereby pledge and collaterally assign to
the Stockholders and the Stockholder Representatives for the use and benefit of
and as representatives of the Stockholders, and grant to the Stockholders and
the Stockholder Representatives for the use and benefit of and as
representatives of the Stockholders a lien on and a continuing security interest
in and to, the Escrow Fund (including, without limitation, all bank accounts in
which the Escrow Agent may at any time deposit funds in the Escrow Fund, all
securities in which the Escrow Fund may at any time or times be invested or
reinvested by the Escrow Agent, all income from and proceeds of securities in
which the Escrow Fund is at any time or times invested or reinvested by the
Escrow Agent, all money at any time held by the Escrow Agent as a part of the
Escrow Fund, and all accounts, documents, instruments and general intangibles at
any time owing to or held by the Escrow Agent and constituting a part of the
Escrow Fund). If the Distribution Date occurs, failure of the Parent and
Surviving Corporation to pay or cause to be paid the Contingent Cash
Consideration to any Stockholder on the Distribution Date shall constitute a
default. Upon any such default, the pledge and collateral assignment and lien
and security interest in and to the Escrow Fund herein granted to the
Stockholders and to the Stockholder Representatives for the use and benefit of
and as representatives of the Stockholders may be enforced or foreclosed by the
Stockholder Representatives for the use and benefit of the Stockholders in any
manner authorized by applicable law, including, without limitation, in
accordance with the provisions of Subchapter E of Chapter 9 of the Uniform
Commercial Code of Texas (including, without limitation, exercise of the rights
and powers and in accordance with the provisions and procedures provided for or
described in any or all of Sections 9.502, 9.503 and 9.504 of the Uniform
Commercial Code of Texas), with the proceeds of the Escrow Fund, after deduction
of expenses of enforcement or foreclosure, to be applied toward payment of the
Contingent Cash Consideration owing to the respective Stockholders, in
proportion to the respective amounts of the Contingent Cash Consideration owing
to such respective Stockholders. Prior to the Effective Time, Parent and the
Purchaser will execute and file financing statements under the Uniform
Commercial Code in favor of the Stockholder Representatives as secured parties
to evidence and perfect the security interest in the Escrow Fund hereinabove
granted by Parent and the Purchaser (to the extent, if any, that filing of a
financing statement is required to perfect such security interest), and
immediately after the Effective Time the Surviving Corporation shall execute and
file a financing statement (in the same form
15
as the financing statement executed and filed by the Purchaser of even date
herewith) in the name of the Surviving Corporation as debtor in favor of the
Stockholder Representatives as secured parties to further evidence and perfect
such security interest. Parent and Surviving Corporation will timely execute and
file continuation statements as and when required under Section 4.403 of the
Uniform Commercial Code of Texas to maintain the effectiveness of such financing
statements at all times until the Contingent Cash Consideration has been paid to
the Stockholders or the Termination Date has occurred. Upon payment of the
Contingent Cash Consideration to the Stockholders or upon occurrence of the
Termination Date, the Stockholder Representatives shall, upon request, execute
and deliver to Parent and the Surviving Corporation termination statements with
respect to the financing statements and continuation statements (if any)
executed and filed by Parent, the Purchaser and the Surviving Corporation
pursuant to this Section, as provided for in Section 9.404 of the Uniform
Commercial Code of Texas. Escrow Agent acknowledges and agrees that Escrow Agent
shall receive, hold and maintain possession and control of the Escrow Fund as
bailee of and for the Stockholder Representatives and Stockholders as secured
parties and as holders of the common law pledge and assignment and lien herein
granted in and to the Escrow Fund (including, without limitation, all bank
accounts in which the Escrow Agent may at any time deposit funds in the Escrow
Fund, all securities in which the Escrow Fund may at any time or times be
invested or reinvested by the Escrow Agent, all income from and proceeds of
securities in which the Escrow Fund is at any time or times invested or
reinvested by the Escrow Agent, all money at any time held by the Escrow Agent
as a part of the Escrow Fund, and all accounts, documents, instruments and
general intangibles at any time owing to or held by the Escrow Agent and
constituting a part of the Escrow Fund) at all times until distribution of the
Escrow Fund by the Escrow Agent on the Distribution Date pursuant to Section 6
of this Agreement or occurrence of the Termination Date (whichever first
occurs); provided, of course, that Escrow Agent may disburse or distribute
amounts from the Escrow Fund from time to time as and when required under the
provisions of Section 5 or Section 6 of this Agreement, and amounts thus
disbursed or distributed from the Escrow Fund pursuant to and as authorized in
Section 5 of this Agreement shall not thereafter be subject to the security
interest and common law pledge and assignment and lien herein granted to the
Stockholders and Stockholder Representatives.
15. ARBITRATION REGARDING PROPOSED SETTLEMENT AGREEMENTS.
Notwithstanding the provisions of Section 13 of this Agreement, if at any time
or times during the term of this Agreement TEPCO shall make an offer ("TEPCO
Settlement Offer") to settle and release the Subject Claims which would require
payment of an Approved Settlement Amount from the Escrow Fund if such offer were
accepted and approved by the Stockholder Representatives, and if the Stockholder
Representatives do not approve or accept such TEPCO Settlement Offer but the
Surviving Corporation believes that such TEPCO Settlement Offer is fair and
reasonable and should be accepted, the Surviving Corporation shall have the
right to require that the decision ("Disputed Decision") whether to accept or
reject
16
the TEPCO Settlement Offer be determined by arbitration as hereinafter provided,
by giving written notice (an "Arbitration Demand Notice") to the Stockholder
Representatives. If the Surviving Corporation gives an Arbitration Demand Notice
to the Stockholder Representatives with respect to a TEPCO Settlement Offer, the
Surviving Corporation and Stockholder Representatives shall endeavor in good
faith to agree upon a "Qualified Arbitrator" (as hereinafter defined) to whom
the Disputed Decision shall be submitted for resolution. If a Qualified
Arbitrator has not been selected by agreement within ten days after giving of an
Arbitration Demand Notice to the Stockholder Representatives, either the
Surviving Corporation or the Stockholder Representatives shall have the right to
request that a Qualified Arbitrator be appointed by the Judge of the United
States District Court for the Southern District of Texas, Houston Division, who
is senior in service. A "Qualified Arbitrator" shall be a neutral, licensed,
well-regarded attorney practicing in Houston, Texas, who has significant
experience in, and who regularly engages in, the defense of commercial
litigation and who does not represent and has not represented the Company or
Parent or any of Parent's subsidiaries or either of the Stockholder
Representatives (and who is not and has not within the preceding five years been
associated with a law firm which represents or has within the preceding five
years represented the Company or Parent or any of Parent's subsidiaries or
either of the Stockholder Representatives). Upon the selection or appointment of
a Qualified Arbitrator, the Qualified Arbitrator shall be provided access to all
available information and files concerning the Lawsuit and Subject Claims and
the TEPCO Settlement Offer, subject only to such restrictions as shall be
necessary to preserve the attorney-client privilege and work-product privilege
with respect to privileged communications between the Designated Attorneys and
the Company, Surviving Corporation (and Parent, if applicable) and Stockholder
Representatives and the work-product of the Designated Attorneys; and the
Surviving Corporation and Stockholder Representatives shall each be afforded the
right to present their views and arguments to the Qualified Arbitrator as to
whether the TEPCO Settlement Offer is fair and reasonable and should be accepted
or rejected. The Qualified Arbitrator shall render a decision, in the exercise
of his professional judgment and discretion, whether the TEPCO Settlement Offer
is fair and reasonable and should be accepted or rejected, based upon the
assumptions and standards hereinafter specified. In making such decision, the
Qualified Arbitrator shall assume that this Escrow Agreement does not exist and
that any obligation of the Surviving Corporation or Parent to pay any amount of
Contingent Cash Consideration to the Stockholders is wholly independent of and
would not be affected in any manner by the Lawsuit or Subject Claims or any
settlement of the Subject Claims or final judgment, either favorable or adverse,
entered in the Lawsuit, and shall further assume that the Surviving Corporation
and Parent and Parent's shareholders would be required to bear the entire cost,
expense and burden of the settlement proposed in the TEPCO Settlement Offer and
would likewise be required to bear the entire cost, expense and burden of
continuing to defend the Subject Claims and of appeal and, if required, payment
of any adverse judgment which might be entered in the Lawsuit (without either
increasing or diminishing any obligations to or rights with respect to the
Stockholders); and such decision shall be based upon the opinion of
17
the Qualified Arbitrator, in the exercise of his professional judgment and
discretion, whether acceptance or rejection of the TEPCO Settlement Offer would
be advisable or inadvisable and in or not in the best interest of the Surviving
Corporation and Parent based upon the aforesaid assumptions. The decision of the
Qualified Arbitrator with reference to a Disputed Decision shall be signed by
the Qualified Arbitrator and provided in writing to the Stockholder
Representatives and the Surviving Corporation and shall be final and binding
upon the Stockholder Representatives, Stockholders, Parent and the Surviving
Corporation. The decision shall not state reasons for the conclusions of the
Qualified Arbitrator, but shall simply state the decision of the Qualified
Arbitrator whether the TEPCO Settlement Offer should be accepted or rejected
based upon the assumptions and standards prescribed herein. All hearings and
proceedings in connection with arbitration of any Disputed Decision and any
decision of the Qualified Arbitrator shall be maintained confidential to the
maximum extent allowed by law, except that the decision of the Qualified
Arbitrator may be disclosed if and to the extent required to enforce compliance
with such decision by the Stockholder Representatives, if necessary. If the
Qualified Arbitrator renders a decision that a TEPCO Settlement Offer should be
accepted, such decision shall specify the Approved Settlement Amount which would
be required to be paid to TEPCO pursuant to an Approved Settlement in accordance
with such TEPCO Settlement Offer; and the Stockholder Representatives shall be
required to approve the acceptance by the Surviving Corporation (and Parent, if
applicable) of such TEPCO Settlement Offer, and, if TEPCO agrees, the Surviving
Corporation (and Parent, if applicable) shall enter into an Approved Settlement
in accordance with such TEPCO Settlement Offer providing for payment of the
Approved Settlement Amount specified in the Qualified Arbitrator's decision, in
which event the Stockholder Representatives shall promptly give notice of such
Approved Settlement and the Approved Settlement Amount payable to TEPCO pursuant
to such Approved Settlement as provided for in paragraph 5(b) of this Agreement.
The Designated Attorneys shall represent the Stockholder Representatives in
connection with any arbitration of a Disputed Decision; and the fees and expense
charges of the Designated Attorneys in connection such arbitration shall be paid
by the Surviving Corporation and shall be deemed and considered to be "Lawsuit
Expenses" as hereinabove defined (so that the Surviving Corporation may certify
such Lawsuit Expenses to the Escrow Agent to request reimbursement from the
Escrow Fund of one-half thereof as Reimbursable Expenses as provided for in
Section 8 of this Agreement). The Surviving Corporation shall also bear and pay
all fees and expenses of the Qualified Arbitrator and any fees or expenses of
attorneys or other representatives of the Surviving Corporation in connection
with any arbitration of a Disputed Decision; and such fees and expenses shall
likewise be deemed to be "Lawsuit Expenses" as hereinabove defined (so that the
Surviving Corporation may certify such Lawsuit Expenses to the Escrow Agent to
request reimbursement from the Escrow Fund of one-half thereof as Reimbursable
Expenses as provided for in Section 8 of this Agreement) A Qualified Arbitrator
to whom a Disputed Decision is submitted for decision by arbitration pursuant to
this section shall not have an attorney-client relationship with, or have or be
subject to the duties or responsibility of an attorney
18
representing, any of the Stockholders, the Stockholder Representatives, the
Surviving Corporation or Parent; and such Qualified Arbitrator shall have no
liability to any of the Stockholders, Stockholder Representatives, Surviving
Corporation or Parent for any decision with respect to a Disputed Decision
rendered by such Qualified Arbitrator in good faith in the exercise of such
Qualified Arbitrator's professional judgment and discretion. The arbitration
agreement set forth in this section is made pursuant to the Federal Arbitration
Act, 9 U.S.C. sections 1, et seq. ("Arbitration Act"); and, pursuant to section
9 of the Arbitration Act, a judgment of the United States District Court for the
Southern District of Texas, Houston Division, shall be entered to enforce any
decision of a Qualified Arbitrator requiring approval of a TEPCO Settlement
Offer pursuant to an arbitration hereunder, upon the request of the Surviving
Corporation if the Stockholder Representatives shall fail or refuse to comply
with their agreements with respect to compliance with such decision set forth
herein.
16. NOTICES. All notices, requests, claims, demands and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered against
receipt therefor, (b) mailed by registered or certified mail, return receipt
requested and postage prepaid, in the United States mail, or (c) sent by telefax
machine, in each case to the address or telefax number, as the case may be, set
forth below:
If to the Escrow Agent:
If to Parent or the Purchaser or the Surviving Corporation:
DI Industries, Inc.
625 Paragon Center One
000 Xxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: X. X. Xxxxxxxx, President
Fax No.: (000) 000-0000
19
With a copy to:
Gardere Xxxxx Xxxxxx & Xxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
If to the Company:
Grey Wolf Drilling Company
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: J. K. B. Xxxxxx, President
Fax No.: (000) 000-0000
With a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
If to the Stockholder Representatives:
Xxxxx K. B. Xxxxxx
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
and
Xxxxxxx X. Xxxxx
000 X. Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Fax No.: (000) 000-0000
With a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
20
Delivery of any communication given in accordance herewith shall be effective
only upon actual receipt thereof by the party or parties to whom such
communication is directed. Any party to this Agreement may change the address to
which communications to such party hereunder are to be directed by giving notice
to the other parties hereto in the manner provided in this section. Any notice
delivered to the Escrow Agent with respect to any payment requested to be made
from the Escrow Fund shall specifically reference the governing Section of this
Agreement pursuant to which such payment request is being made.
17. FURTHER RIGHTS OF ESCROW AGENT. In the event of any conflicting or
inconsistent claims or demands being made against the Escrow Agent in connection
with the subject matter of this Agreement, or in the event the Escrow Agent is
in doubt as to what action it should take hereunder, the Escrow Agent may, at
its option, refuse to comply with any claims or demands on it, or refuse to take
any other action hereunder so long as such disagreement continues or such doubt
exists, and in any such event, the Escrow Agent shall not be or become liable in
any way or to any person for its failure or refusal to act, and the Escrow Agent
shall be entitled to continue to refrain from acting until (i) the rights of all
parties have been fully and finally adjudicated by a court of competent
jurisdiction, or (ii) all differences shall have been settled and all doubt
resolved by agreement among all of the interested parties, and the Escrow Agent
shall have been notified thereof in writing signed by all such parties. In
addition to the foregoing rights, in the event the Escrow Agent has any doubt as
to the course of action it should take under this Agreement, the Escrow Agent is
hereby authorized to petition any District Court of Xxxxxx County, Texas, or the
United States District Court for the Southern District of Texas, Houston
Division, for instructions or to interplead the funds or assets so held
(including the Escrow Fund) into such court. The parties agree to the
jurisdiction of either of said courts over their persons as well as the Escrow
Fund. The Purchaser and Parent hereby agree to indemnify and hold the Escrow
Agent harmless from any liability or losses occasioned thereby and to pay any
and all of its fees, costs, expenses, and counsel fees and expenses incurred in
any such action to the extent that any such fees, costs, expenses, or counsel
fees and expenses are not paid out of the Escrow Fund and agree that upon the
deposit of the Escrow Fund in the registry of the court in any such interpleader
action the Escrow Agent and its servants, agents, employees or officers will be
relieved of further liability under this Agreement.
18. AMENDMENT; WAIVER. No amendment, modification or waiver of any
provision of this Agreement or consent to any departure by any party from the
provisions hereof shall be effective in any event unless the same shall be in
writing and signed by all parties to this Agreement, and then any such waiver or
consent shall be effective only in the specific instance and purpose for which
given.
19. BINDING EFFECT. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors, heirs,
devisees, executors, administrators, personal representatives, legal
representatives, trustees,
21
receivers and assigns and shall also inure to the benefit of the Stockholders
and Designated Attorneys; provided that (a) the Escrow Agent may not assign its
duties or rights hereunder without prior consent of the Parent and Stockholder
Representatives, and (b) the right of the Surviving Corporation to receive
payment of any amount of the Escrow Account Balance on the Distribution Date
pursuant to Section 6 of this Agreement may not be assigned or transferred
except incident to the merger or consolidation of the Surviving Corporation into
or with another corporation or entity, the sale of all or substantially all the
assets of the Surviving Corporation, or otherwise by operation of law; and
provided, further, that except as otherwise hereinabove expressly provided in
this section, this Agreement shall be for the sole and exclusive benefit of the
parties hereto, and nothing in this Agreement, express or implied, is intended
to confer or shall be construed as conferring upon any other person any rights,
remedies or any other type or types of benefits.
20. SEVERABILITY. If one or more of the provisions hereof shall for any
reason be held invalid, illegal or unenforceable in any respect under applicable
law, such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein, and the
remaining provisions hereof shall be given full force and effect.
21. CHOICE OF LAWS AND FORUM. This Agreement shall be construed under
and governed by the laws of the State of Texas, excluding, however, its
conflicts of laws rules which might result in giving application to the laws of
any other jurisdiction. The parties hereto agree and stipulate that the forum
for resolution of any dispute arising under this Agreement shall be Xxxxxx
County, Texas, and each party hereto hereby consents, and submits itself, to the
jurisdiction of any state or federal court sitting in Xxxxxx County, Texas.
22. GENERAL. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute but one and the same instrument. Unless the context
shall otherwise require, the singular shall include the plural and vice versa,
and each pronoun in any gender shall include all other genders.
22
WITNESS the execution hereof to be effective as of the date first above
written.
PARENT:
DI INDUSTRIES, INC.
By X. X. Xxxxxxxx, President
PURCHASER:
DRILLERS, INC.
By X. X. Xxxxxxxx, President
COMPANY:
GREY WOLF DRILLING COMPANY
By J. K. B. Xxxxxx, President
STOCKHOLDER REPRESENTATIVES:
XXXXX K. B. XXXXXX
XXXXXXX X. XXXXX
ESCROW AGENT:
By
Name:
Title:
23
SCHEDULE 1.13
TRUST UNDER GREY WOLF DRILLING COMPANY
DEFERRED COMPENSATION PLAN
(a) This Trust Agreement made on the effective date of this Trust
Agreement set out hereinafter, by and between GREY WOLF DRILLING COMPANY
("Company") and ______________________________ ("Trustee");
(b) WHEREAS, Company has adopted the deferred compensation plan
("Plan") attached hereto and incorporated herein as Appendix A;
(c) WHEREAS, Company has incurred or expects to incur liability under
the terms of the Plan with respect to the individuals participating in the Plan;
(d) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;
(e) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and plan for the purpose of providing
deferred compensation for a designated group of employees of the Company
identified in the Plan;
(f) WHEREAS, it is the intention of Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee in trust Two Million, Four
Hundred Thousand Dollars ($2,400,000), which shall become the principal of the
Trust to be held, administered and disposed of by Trustee as provided in this
Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Company and shall be used exclusively for
the uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Trust Agreement shall be mere unsecured
contractual rights of Plan participants and their beneficiaries against Company.
Any assets held by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as defined in
Section 3(a) herein.
(e) Pursuant to an Agreement and Plan of Merger ("Merger Agreement")
dated as of _____________, 1997, between and among Company, DI Industries, Inc.
and Drillers, Inc. ("Purchaser"), joined by Xxxxx K. B. Xxxxxx ("Xxxxxx"), it is
contemplated that Company will be merged into and with Purchaser (the "Merger").
Under the Merger Agreement, Company has required Xxxxxx to agree that, if the
Merger occurs, Xxxxxx will make an irrevocable contribution ("Additional
Contribution") of One Million Six Hundred Fifty Thousand Dollars ($1,650,000) to
the Trust. If the Merger occurs, Company expects that Xxxxxx will make such
Additional Contribution to the Trust and Trustee shall be entitled (but shall
not be obligated) to exercise any right of Company under the Merger Agreement to
require making of such Additional Contribution by Xxxxxx; but Company shall have
no liability whatsoever to Trustee or any Plan participant or beneficiary for
failure or refusal of Xxxxxx to make such Additional Contribution or any part
thereof, nor shall Trustee have any liability whatsoever to any Plan participant
or beneficiary for failure or refusal of Xxxxxx to make such Additional
Contribution or any part thereof.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Except as otherwise provided herein, Trustee shall make payments to
the Plan participants and their beneficiaries in accordance with and subject to
the terms and conditions of the Plan. Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits pursuant to the
terms of the Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan shall be determined by Company or such party as it
shall
2
designate under the Plan, and any claim for such benefits shall be considered
and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants
or their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where principal and earnings are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay
its debts as they become due, or (ii) Company is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the President of Company shall have the
duty to inform Trustee in writing of Company's Insolvency. If a person
claiming to be a creditor of Company alleges in writing to Trustee that
Company has become Insolvent, Trustee shall determine whether Company is
Insolvent and, pending such determination, Trustee shall discontinue
payment of benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or has
received notice from Company or a person claiming to be a creditor alleging
that Company is Insolvent, Trustee shall have no duty to inquire whether
Company is Insolvent. Trustee may in all events rely on such evidence
concerning Company's solvency as may be furnished to Trustee and that
provides Trustee with a reasonable basis for making a determination
concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this trust Agreement shall in any
way diminish any rights of Plan participants or their beneficiaries to
pursue their rights as
3
general creditors of Company with respect to benefits due under the Plan or
otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement
only after Trustee has determined that Company is not Insolvent (or is no
longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan during the
period of such discontinuance, less the aggregate amount of any payments made to
Plan participants or their beneficiaries by Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
SECTION 4. PAYMENTS TO COMPANY. Except as provided in Section 3 hereof,
Company shall have no right or power to direct Trustee to return to Company or
to divert to others any of the Trust assets before all payments of benefits have
been made to Plan participants and their beneficiaries pursuant to the terms of
the Plan.
SECTION 5. INVESTMENT AUTHORITY.
(a) In no event may Trustee invest in securities (including stock or
rights to acquire stock) or obligations issued by Company, other than a de
minimis amount held in common investment vehicles in which Trustee invests. All
rights associated with assets of the Trust shall be exercised by Trustee or the
person designated by Trustee, and shall in no event be exercisable by or rest
with Plan participants.
(b) Trustee shall invest the assets of the Trust only in (i)
interest-bearing accounts or short-term certificates of deposit in banks in
which deposits are insured by the Federal Deposit Insurance Corporation, in such
amounts and in such manner that the entire amount of the Trust assets deposited
or invested with or in each such bank shall at all times be fully insured by the
Federal Deposit Insurance Corporation, (ii) overnight government cash funds
invested in debt instruments issued by the United States government or a lawful
agency thereof or guaranteed by the full faith and credit of the United States,
or (iii) short-term debt instruments issued by the United States government or a
lawful agency thereof or guaranteed by the full faith and credit of the United
States. "Short-term" shall mean instruments which by their terms mature not more
than one year from the date of their purchase; and the Trustee shall endeavor to
limit the term of any instruments in which Trust assets are invested with a view
to insuring availability of cash when
4
required to make distributions from the Trust while minimizing penalties or
losses incident to sale or liquidation of such instruments.
SECTION 6. DISPOSITION OF INCOME. During the term of this Trust, all
income received by the Trust, net of expenses and taxes, shall be accumulated
and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE. Trustee shall keep accurate and
detailed records of all investments, receipts, disbursements and all other
transactions required to be made, including such specific records as shall be
agreed upon in writing between Company and Trustee. Within sixty days following
the close of each calendar year and within thirty days after the removal or
resignation of Trustee, Trustee shall deliver to Company a written account of
its administration of the Trust during such year or during the period from the
close of the last preceding year to the date of such removal or resignation,
setting forth all investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the end of such year or
as of the date of such removal or resignation, as the case may be.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plan or this Trust and is given in writing
by Company. In the event of a dispute between Company and a party, Trustee may
apply to a court of competent jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, Trustee shall be entitled to obtain payment from the
Trust of Trustee's costs, expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto.
(c) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
Trustee shall be entitled to obtain payment from the Trust of fees and expenses
of such legal counsel; and Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith upon the advice of counsel.
5
(d) Trustee may hire accountants or other professionals to assist it in
performing any of its duties or obligations hereunder. Trustee shall be entitled
to obtain payment from the Trust of fees and expenses of such professionals.
(e) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein.
(f) The duties of Trustee hereunder will be limited to the observance
of the express provisions of this Trust Agreement and the Plan. Trustee will not
be subject to, or be obligated to recognize, any other agreement between the
parties hereto or directions or instructions not specifically set forth or
provided for herein or in the Plan. Trustee may rely upon and act upon any
instrument received by it pursuant to the provisions of this Trust Agreement or
the Plan that it reasonably believes to be genuine and in conformity with the
requirements of this Trust Agreement or the Plan. Trustee shall never be
required to use, advance or risk its own funds or otherwise incur financial
liability in the performance of any of its duties or the exercise of any of its
rights and powers hereunder. Without limiting the foregoing, Trustee will not be
liable for any error of judgment or any act done or omitted to be done or any
step taken by it in good faith or for any mistake of fact or law or for anything
that it might do or refrain from doing in connection with this Agreement,
INCLUDING, WITHOUT LIMITATION, NEGLIGENCE OF TRUSTEE, except to the extent such
actions or omissions shall be proved to constitute gross negligence or willful
misconduct on the part of Trustee.
(g) Company will indemnify and hold Trustee harmless from and against
any and all losses, costs, damages or expenses (including, but not limited to,
reasonable attorneys' fees) it may sustain by reason of its services as Trustee
hereunder, but only to the extent such losses, costs, damages or expenses exceed
the amount of the funds available in the Trust to pay or reimburse same, and
except such losses, costs, damages or expenses incurred by reason of acts or
omissions for which Trustee is liable or responsible under the provisions of the
last sentence of Section 8(f) of this Trust Agreement. The foregoing indemnity
agreement shall survive the resignation of Trustee or the termination of this
Trust Agreement.
(h) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE. All expenses and fees
of Trustee in connection with the administration of the Trust shall be paid from
the Trust. If there are insufficient assets remaining in the Trust to pay any
such expenses or fees of Trustee, Company shall be obligated to pay or reimburse
Trustee for all such expenses or fees not paid from the Trust.
6
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company, which
shall be effective thirty days after receipt of such notice unless Company and
Trustee agree otherwise.
(b) Trustee may be removed by Company on thirty days notice or upon
shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within thirty days after receipt of
notice of resignation, removal or transfer, unless Company extends the time
limit.
(d) If Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this section. If no such appointment has
been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section 10(a)
or 10(b) hereof, Company may appoint any bank trust department or other party
that may be granted corporate trust powers under state law, as a successor to
replace Trustee upon such resignation or removal. The appointment shall be
effective when accepted in writing by the new Trustee, who shall have all of the
rights and powers of the former Trustee, including ownership rights in the Trust
assets. The former Trustee shall execute any instrument necessary or reasonably
requested by Company or the successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 5, 7 and 8 hereof. The successor Trustee shall not be responsible for
any claim or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time it
becomes successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable.
7
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan. Upon termination of the Trust any assets remaining in
the Trust shall be returned to Company.
SECTION 13. NOTICES. All notices, requests, claims, demands and other
communications required or permitted to be given under this Trust Agreement
shall be in writing and shall be deemed to have been duly given if (a) delivered
against receipt therefor, (b) mailed by registered or certified mail, return
receipt requested and postage prepaid, in the United States mail, or (c) sent by
telefax machine, in each case to the address or telefax number, as the case may
be, set forth below:
If to Trustee:
Attention:
Fax No.:
If to Company:
Grey Wolf Drilling Company
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: J. K. B. Xxxxxx, President
Fax No.: (000) 000-0000
SECTION 14. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
8
SECTION 15. EFFECTIVE DATE. The effective date of this Trust
Agreement shall be __________________, 1997.
COMPANY
GREY WOLF DRILLING COMPANY
By J. K. B. Xxxxxx, President
TRUSTEE
By
Name:
Title:
9
APPENDIX A
GREY WOLF DRILLING COMPANY
DEFERRED COMPENSATION PLAN
GREY WOLF DRILLING COMPANY
DEFERRED COMPENSATION PLAN
WHEREAS, GREY WOLF DRILLING COMPANY desires to establish the Grey Wolf
Drilling Company Deferred Compensation Plan, to provide a deferred compensation
plan for a designated group of employees in recognition and appreciation of, and
as compensation for, their many years of valuable and faithful service and so as
to retain their loyalty and to offer a further incentive to them to maintain
their standard of performance and refrain from voluntarily terminating their
employment by the Corporation for at least the one year term of the Plan as
hereinafter provided;
NOW, THEREFORE, GREY WOLF DRILLING COMPANY adopts the Grey Wolf
Drilling Company Deferred Compensation Plan as follows:
ARTICLE I
DEFINITIONS
1.1. ALLOCATION FACTOR. "Allocation Factor" means the "Allocation
Factor" number set out opposite a Participant's name in Exhibit A hereto.
1.2. BENEFICIARY. "Beneficiary" means a person or entity designated by
a Participant under the terms of this Plan to receive any amounts distributed
under the Plan upon the death of the Participant prior to the Termination Date.
1.3. BOARD OF DIRECTORS. "Board of Directors" means the Board of
Directors of the Corporation.
1.4. CAUSE. "Cause" means the commission by a Participant of an act
constituting fraud, embezzlement, theft, dishonesty in the course of employment
by the Corporation, or other act of material misconduct or constituting a felony
under the laws of any state or of the United States to which the Corporation or
the Participant is subject, and which act results (or is intended to result
directly or indirectly) in the Participant's material gain or personal
enrichment or in causing material detriment to the Corporation.
1.5. CORPORATION. "Corporation" means Grey Wolf Drilling Company and
its successors, including, without limitation, the surviving corporation
following the anticipated merger of Grey Wolf Drilling Company into and with
Drillers, Inc. (if such merger occurs), as provided for in that certain
Agreement and Plan of Merger dated March __, 1997, between and among Grey Wolf
Drilling Company, DI Industries, Inc., and Drillers, Inc., joined by Xxxxx K. B.
Xxxxxx.
1.6. CORPORATION REPRESENTATIVE. "Corporation Representative" means the
President or any other officer of the Corporation who has been authorized by the
Board of Directors of the Corporation as of any particular relevant time to make
determinations of eligibility of Participants (or their Beneficiaries) to
receive payment of the Participant's Plan Benefit Amount and to make
determinations as to the forfeiture by Participants of their entitlement to
receive payment of any deferred compensation pursuant to the Plan.
1.7. DISABILITY. "Disability" means an injury or any other physical or
mental condition that results in the inability of a Participant to perform such
Participant's regular duties as an employee of the Corporation, incapacitating
such Participant for a continuous period exceeding sixty days, excluding any
leaves of absence approved by the Corporation. If the employment of a
Participant by the Corporation shall be terminated either by withdrawal or
resignation by the Participant from such employment or the discharge by the
Corporation of such Participant from such employment while a Disability of such
Participant continues after expiration of a continuous period of Disability
exceeding sixty days, it shall be deemed that the employment of such Participant
has been terminated by reason of "Disability" for purposes of this Plan.
1.8. FORMER PARTICIPANT. "Former Participant" means a person named in
Exhibit A who has forfeited such person's entitlement to participate in the Plan
or receive payment of any deferred compensation from the Plan pursuant to
Section 2.2 of this Plan or whose employment by the Corporation has been
terminated for any reason prior to the Termination Date (including, without
limitation, termination of employment by reason of death, Disability, voluntary
withdrawal or resignation by the Participant, or discharge of the Participant
from employment by the Corporation). As to a Former Participant who dies after
the Interim Termination Date of such Former Participant, the terms "Former
Participant" or "Participant" shall also include the estate of such deceased
Former Participant where appropriate.
1.9. GOOD CAUSE EVENT. "Good Cause Event" means, as to any
Participant, the occurrence of any of the following events:
(a) the assignment by the Corporation to the Participant, without the
Participant's consent, of duties that are materially inconsistent with the
Participant's duties to the Corporation or position as an employee of the
Corporation at the time of such assignment, or the removal by the
Corporation from the Participant, without the Participant's consent, of a
material portion of those duties usually appertaining to the Participant's
position with the Corporation at the time of such removal, or a material
change by the Corporation, without the Participant's consent, in the
Participant's responsibilities to the Corporation; or
2
(b) a reduction by the Corporation in the amount of the Participant's
base salary or wages (including any entitlement to overtime compensation)
as of the date of this Agreement (or as subsequently increased), or the
failure of the Corporation to pay such base salary or wages to the
Participant at or prior to the times when such base salary or wages have
heretofore been customarily paid to the Participant by the Corporation, in
each case without the consent of the Participant; or
(c) the discontinuance (without comparable replacement) or material
reduction by the Corporation of the Participant's participation in any
bonus or other employee benefit arrangement (including, without limitation,
any thrift, life insurance, medical, dental, hospitalization, stock option
or retirement plan or arrangement) in which the Participant is a
participant as of the date of this Plan, as in effect on the date hereof or
as may be improved from time to time hereafter, in each case without the
consent of the Participant; or
(d) insofar only as to a Participant who is primarily assigned to and
regularly performs services in the Corporation's principal operating
offices, the moving by the Corporation of the Participant's principal
office space (other than a move to another location in Houston, Texas),
related facilities, or support personnel, from the Corporation's principal
operating offices, or the Corporation's requiring the Participant to
perform a majority of his duties outside the Corporation's principal
operating offices for a period of more than 30 consecutive days, or the
Corporation's requiring that the Participant travel in connection with the
Corporation's business to an extent and in a manner which is substantially
inconsistent with the Participant's current business travel obligations, in
each case without the consent of the Participant; or
(e) insofar only as to a Participant who is primarily assigned to and
regularly performs services in the Corporation's principal operating
offices in the Houston, Texas, area, the relocation, without the
Participant's consent, of the Corporation's principal operating offices to
a location outside the Houston, Texas, area; or
(f) insofar only as to a Participant who is primarily assigned to and
regularly performs services in the Corporation's principal operating
offices, the Corporation's requiring the Participant, without the
Participant's consent, to reside at a location more than 25 miles from the
Corporation's principal operating offices, except for occasional travel in
connection with the Corporation's business to an extent and in a manner
which is substantially consistent with the Participant's current business
travel obligations; or
3
(g) as to a Participant who has heretofore been engaged primarily in
working on or in the vicinity of drilling rigs operated by the Corporation,
the Corporation's requiring that such Participant regularly perform
services, without the Participant's consent, at locations outside the
historic area of drilling operations of the Corporation in the Gulf Coast
region in Texas and Louisiana, other than occasional work of reasonably
limited duration in connection with drilling operations in other
jurisdictions; or
(h) insofar only as to a Participant who is primarily assigned to and
regularly performs services in the Corporation's principal operating
offices,the failure of the Corporation, without the consent of the
Participant, to continue to provide the Participant with office space or
other facilities or support personnel (including, without limitation, any
applicable administrative or secretarial assistance) that are commensurate
with the Participant's responsibilities to and position with the
Corporation; or
(i) insofar only as to a Participant who is primarily assigned to and
regularly performs services in the Corporation's principal operating
offices in Houston, Texas, in the event the Participant consents to a
relocation of the Corporation's principal operating offices to a location
outside Houston, Texas, the failure of the Corporation to (A) pay or
reimburse the Participant on an after-tax basis for all reasonable moving
expenses incurred by the Participant in connection with such relocation or
(B) indemnify the Participant on an after-tax basis against any loss
realized by the Participant on the sale of his principal residence in
connection with such relocation; or
(j) the failure by the Corporation to promptly reimburse the
Participant for the reasonable business expenses incurred by the
Participant in the performance of duties for the Corporation, of the nature
of expenses for which the Participant is entitled to reimbursement in
accordance with the policy of the Corporation, unless the Participant shall
have consented to waive the right to receive reimbursement for such
expenses.
1.10. INTERIM TERMINATION DATE. "Interim Termination Date" as to any
Participant means the date prior to the Termination Date as of which the
employment of such Participant as an employee of the Corporation terminates by
reason of Disability, death, withdrawal or resignation by such Participant from
such employment, or discharge by the Corporation of such Participant from such
employment.
1.11. NET PLAN VALUE. "Net Plan Value" means, as of the Termination
Date or any Interim Termination Date, an amount equal to:
4
(a) the net book value of all assets held in the Rabbi Trust on such
date as reflected in the records of the Trustee (including, without
limitation, any "Additional Contribution" made to the Rabbi Trust by Xxxxx
K. B. Xxxxxx pursuant to the "Merger Agreement" as described in Section
1(e) of the Trust Agreement, and the income therefrom), determined on an
accrual basis in accordance with generally accepted accounting principles
consistently applied, including the principal and accrued interest of
securities and other investments held in the Rabbi Trust and determined
after deducting fees and expenses theretofore paid or accrued to the date
of determination of Net Plan Value; provided that in determining the Net
Plan Value as of the Termination Date, fees and expenses accrued to or
incurred by the Trustee after the Termination Date and prior to final
distribution of the Rabbi Trust assets shall also be deducted in
determining the Net Plan Value; plus
(b) an amount, if any, equal to all money and the principal and accrued
interest owing (as of the date of removal from the Rabbi Trust) on all
certificates of deposit and other debt instruments theretofore removed from
the assets of the Rabbi Trust to pay general creditors of the Corporation
after the Corporation has become "Insolvent" as provided in Section 3 of
the Trust Agreement (not including distributions made from the Rabbi Trust
to pay Plan Benefit Amounts to Former Participants or their Beneficiaries
pursuant to Article IV of this Plan).
1.12. PARTICIPANT. "Participant" means an employee of the Corporation
named in Exhibit A attached hereto and incorporated herein, each of whom has
been designated by the Corporation as participating in the Plan.
1.13. PARTICIPANT'S SHARE. "Participant's Share" means, as to any
particular Participant as of any date, a fraction having as its numerator that
Participant's Allocation Factor, and having as its denominator the sum of the
Allocation Factors of that Participant and all other Participants (except and
excluding Former Participants) as of such date.
1.14. PLAN. "Plan" means the Grey Wolf Drilling Company Deferred
Compensation Plan set forth in this document.
1.15. PLAN BENEFIT AMOUNT. "Plan Benefit Amount" means, as to each
Participant who does not forfeit his right to receive payment of any amount of
deferred compensation under the Plan pursuant to Section 2.2 of this Plan, an
amount calculated with respect to such Participant as follows:
(a) As to a Participant whose Initial Termination Date occurs prior to
the Termination Date, his Plan Benefit Amount shall be an amount equal to
his Participant's Share of the Net Plan Value determined as of his Interim
Termination Date; and
5
(b) As to a Participant who does not become a Former Participant prior
to the Termination Date, his Plan Benefit Amount shall be an amount equal
to his Participant's Share of the Net Plan Value determined as of the
Termination Date (subject to Section 1.11).
1.16. RABBI TRUST. "Rabbi Trust" means the rabbi trust being created by
the Corporation contemporaneously with adoption of this Plan, to which the
Corporation has contributed cash to fund the obligations of the Corporation
under this Plan.
1.17. TERMINATION DATE. "Termination Date" means the first
anniversary of the date of this Plan, on ________________, 1998.
1.18. TRUST AGREEMENT. "Trust Agreement" means the Agreement of even
date with this Plan between the Corporation and _________________________,
Trustee, pursuant to which the Rabbi Trust is being created and to which this
Plan is attached as Appendix A.
1.19. TRUSTEE. "Trustee" means the Trustee of the Rabbi Trust,
including any successor Trustee of such Rabbi Trust serving as such at any
relevant time.
ARTICLE II
ELIGIBILITY; FORFEITURE
2.1. The individuals who shall be eligible to participate in the Plan
shall be those Participants named in Exhibit A attached hereto and incorporated
herein, subject, however, to the provisions of Section 2.2.
2.2. If (a) a Participant shall be discharged by the Corporation from
employment by the Corporation for Cause at any time prior to the Termination
Date, or (b) a Participant shall voluntarily withdraw or resign from employment
by the Corporation other than by reason of the occurrence of a Good Cause Event
with respect to such Participant at any time prior to the Termination Date (not
including termination of employment of a Participant by reason of death or
Disability of such Participant), then in either such event said Participant
shall immediately cease to be eligible or entitled to participate in the Plan
and shall immediately forfeit all rights of such Participant to receive payment
of any amount of deferred compensation under the Plan.
6
ARTICLE III
VESTING
Except for the events of forfeiture described in Section 2.2, a
Participant shall have a fully nonforfeitable interest in such Participant's
Plan Benefit Amount determined as provided in this Plan upon the earliest to
occur of the following: (a) the Participant dies, (b) the Participant's
employment by the Corporation is terminated by reason of Disability of such
Participant, (c) the Participant withdraws or resigns from employment by the
Corporation by reason of the occurrence of a Good Cause Event with respect to
such Participant, (d) the Participant's employment is terminated by the
Corporation without Cause, or (e) the Termination Date occurs.
ARTICLE IV
DISTRIBUTIONS
4.1. DEATH. Upon the death of a Participant (not including a Former
Participant) prior to the Termination Date, the Participant's Beneficiary or
Beneficiaries shall receive the Participant's Plan Benefit Amount, which shall
be paid by the Trustee from the Rabbi Trust in a lump sum payment within 30 days
after the Participant's death, or as soon thereafter as is administratively
practicable (subject to Sections 4.7 and 5.1). Each Participant shall file with
the Corporation Representative a designation of one or more Beneficiaries to
whom distributions shall be made pursuant to this Section 4.1 in the event of
such Participant's death prior to the Termination Date (and prior to otherwise
becoming a Former Participant). The designation will be effective upon receipt
by the Corporation Representative of a properly executed form which the
Corporation Representative has approved for that purpose. The Participant may
from time to time revoke or change any designation of Beneficiary by filing
another approved Beneficiary designation form with the Corporation
Representative. If there is no valid designation of Beneficiary on file with the
Corporation Representative at the time of the Participant's death, or if all of
the Beneficiaries designated in the last Beneficiary designation have
predeceased the Participant or otherwise ceased to exist, the Beneficiary shall
be the Participant's spouse, if the spouse survives the Participant, or
otherwise the Participant's estate. As to any married Participant, any
Beneficiary designation which designates any person or entity other than such
Participant's spouse must be consented to in writing by the spouse in a form
acceptable to the Corporation Representative to be effective.
4.2. DISABILITY. Upon the termination of employment of a Participant
(not including a Former Participant) prior to the Termination Date by reason of
Disability of such Participant, the Participant shall receive the Participant's
Plan Benefit Amount, which shall be paid by the Trustee from the Rabbi Trust in
a lump sum payment within 30 days after the Interim Termination Date of such
7
Participant, or as soon thereafter as is administratively practicable (subject
to Sections 4.7 and 5.1).
4.3. WITHDRAWAL FOR GOOD CAUSE. Upon the withdrawal or resignation by a
Participant (not including a Former Participant) from employment by the
Corporation prior to the Termination Date by reason of the occurrence of a Good
Cause Event as to such Participant, the Participant shall receive the
Participant's Plan Benefit Amount, which shall be paid by the Trustee from the
Rabbi Trust in a lump sum payment within 30 days after the Interim Termination
Date of such Participant, or as soon thereafter as is administratively
practicable (subject to Sections 4.7 and 5.1).
4.4. DISCHARGE WITHOUT CAUSE. Upon the discharge of a Participant (not
including a Former Participant) from employment by the Corporation other than
for Cause (and other than by reason of Disability) prior to the Termination
Date, the Participant shall receive the Participant's Plan Benefit Amount, which
shall be paid by the Trustee from the Rabbi Trust in a lump sum payment within
30 days after the Interim Termination Date of such Participant, or as soon
thereafter as is administratively practicable (subject to Sections 4.7 and 5.1).
4.5. TERMINATION DATE. Each Participant who does not become a Former
Participant prior to the Termination Date shall receive such Participant's Plan
Benefit Amount, which shall be paid by the Trustee from the Rabbi Trust in a
lump sum payment within 30 days after the Termination Date, or as soon
thereafter as is administratively practicable (subject to Section 4.7 and 5.1).
4.6. RESPONSIBILITY FOR DISTRIBUTIONS AND WITHHOLDING OF TAXES. The
Corporation will calculate the amount, if any, of deductions from the amount of
the benefit to be paid under the Plan to any Former Participant or Beneficiary
for any taxes required to be withheld by federal, state or local government laws
or regulations and shall provide such information to the Trustee prior to the
date when payment of such benefit from the Rabbi Trust is due; and the Trustee
shall cause such taxes to be withheld from any distribution from the Rabbi Trust
pursuant to Article IV of this Plan and remitted to the appropriate governmental
tax agency or department.
4.7 DISPUTED AMOUNTS. If at any time when the Trustee is required to
pay a Former Participant's Plan Benefit Amount to such Former Participant (or
his Beneficiary or Beneficiaries) pursuant to any of the foregoing Sections of
this Article IV a dispute ("Subject Dispute") shall exist between the
Corporation Representative and another Former Participant (a "Disputing
Participant") as to whether such Disputing Participant is entitled to payment of
his Plan Benefit Amount (the "Disputed Plan Benefit Amount") under the Plan, and
if such Disputed Plan Benefit Amount has not been distributed from the Rabbi
Trust as a consequence of the Subject Dispute, the Trustee shall deduct the
Disputed Plan Benefit Amount from the Net Plan Value for purposes of calculating
the Plan Benefit Amount (the
8
"Preliminary Plan Benefit Amount") to be distributed to any Former Participant
(or Beneficiary) from the Rabbi Trust prior to resolution of the Subject Dispute
and shall distribute such Preliminary Plan Benefit Amount within the time
provided above in this Article IV. If, at any time after distribution of a
Preliminary Plan Benefit Amount from the Rabbi Trust pursuant to this Section,
it shall be finally determined that the Disputing Participant was not entitled
to receive payment of the Disputed Plan Benefit Amount under the Plan, the
Trustee shall, as promptly as practicable, distribute from the Rabbi Trust to
each Former Participant who has received (or to the Beneficiary or Beneficiaries
of each Former Participant who have received) payment of a Preliminary Plan
Benefit Amount by reason of the Subject Dispute, an additional amount equal to
the Participant's Share of such Former Participant of the Disputed Plan Benefit
Amount involved in the Subject Dispute.
ARTICLE V
ARBITRATION
5.1. CORPORATION REPRESENTATIVE DECISIONS. In each instance prior to
the Termination Date when the employment of a Participant by the Corporation
terminates for any reason, the Corporation Representative will promptly make a
determination, in the good faith judgment of the Corporation Representative, as
to whether the Participant has forfeited the right to receive any payment of
deferred compensation from the Plan pursuant to Section 2.2 or has become
entitled to receive payment to such Participant (or such Participant's
Beneficiaries) of the Participant's Plan Benefit Amount. The Corporation
Representative will promptly give written notice of such decision to the Trustee
and to such Participant (or to the Beneficiary or Beneficiaries or guardian of a
deceased or disabled Participant, if applicable). If the Corporation
Representative gives notice that the Participant (or Participant's
Beneficiaries) are entitled to receive payment of the Participant's Plan Benefit
Amount under the Plan, the Trustee will make payment from the Rabbi Trust to the
Participant (or Participant's Beneficiary or Beneficiaries) pursuant to Article
IV. The decision of the Corporation Representative that a Former Participant (or
his Beneficiary or Beneficiaries) is entitled to receive payment of his Plan
Benefit Amount under the Plan shall be final and conclusive and binding on all
parties; and no Participant or Former Participant shall ever have any right to
question or dispute or require change of such a decision. If, however, the
Corporation Representative gives notice that a Participant has forfeited the
right to receive any payment of deferred compensation under the Plan pursuant to
Section 2.2, the Trustee shall not make payment of any amount from the Rabbi
Trust to the Participant unless and until directed in writing by the Corporation
Representative to do so or upon receipt of a final decision of arbitrators
pursuant to Section 5.2 that such Participant is entitled to receive payment of
the Participant's Plan Benefit Amount pursuant to the Plan. If the Participant
disputes a determination by the Corporation Representative that such Participant
has forfeited the right to receive any payment of deferred compensation under
the Plan pursuant to Section 2.2, the dispute shall be resolved by arbitration
as provided in Section 5.2.
9
5.2. ARBITRATION. Any dispute between the Corporation Representative
and a Former Participant as to whether such Former Participant has forfeited any
right to receive any payment of deferred compensation from the Plan pursuant to
Section 2.2 shall be resolved by final and binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(the "AAA"). Arbitration under this section must be initiated within 60 days of
the receipt by a Former Participant of notice of a determination by the
Corporation Representative that such Former Participant has forfeited any right
to receive any payment of deferred compensation under the Plan pursuant to
Section 2.2. To initiate arbitration under this section, the Former Participant
must give written notice to the Corporation Representative. Within ten days of
the receipt of such notice, each of the Former Participant and the Corporation
Representative shall designate an arbitrator pursuant to Rule 14 of the AAA
Rules. The appointed arbitrators will appoint a neutral arbitrator from the
panel in the manner prescribed in Rule 13 of the AAA Rules. The decision of the
arbitrators selected hereunder will be final and binding on both the Former
Participant and the Corporation; and if the arbitrators decide that the Former
Participant is entitled to receive payment of the Plan Benefit Amount of such
Former Participant under this Plan, the Trustee shall promptly make payment
thereof out of the Rabbi Trust. The Corporation shall bear all arbitrators' fees
and expenses of the arbitration except attorneys' fees and expenses incurred by
the Former Participant; provided that if the arbitrators in an arbitration
proceeding pursuant to this Section 5.2 shall determine that the Former
Participant is entitled to receive payment of his Plan Benefit Amount under this
Plan, the Corporation shall reimburse the Former Participant for all reasonable
legal fees and expenses, if any, incurred by the Former Participant in
connection with the arbitration and, additionally, shall pay such Former
Participant an amount equal to interest on the amount of the Plan Benefit Amount
of such Former Participant calculated at the prime interest rate per annum as
reported in the Wall Street Journal from time to time, but in no event higher
than the maximum legal rate permissible under applicable law, for the period
from the thirtieth day after the Interim Termination Date of such Former
Participant until the date of payment of the Plan Benefit Amount to such Former
Participant. This arbitration provision is expressly made pursuant to and shall
be governed by the Federal Arbitration Act, 9 U.S.C. sections 1-14. Pursuant to
section 9 of that Act, a judgment of the United States District Court for the
Southern District of Texas shall be entered upon the award made pursuant to the
arbitration.
ARTICLE VI
AMENDMENT AND/OR TERMINATION
6.1. AMENDMENT OR TERMINATION OF THE PLAN. This Plan may not be amended
or terminated (prior to termination thereof under Section 6.2) except by
approval of the Board of Directors with the written consent of all Participants
(excluding any Former Participants who have received payment of their Plan
10
Benefit Amount or have forfeited any right to receive payment of any amount of
deferred compensation under the Plan).
6.2. This Plan will terminate when all payments of deferred
compensation which can become due to Participants (or their Beneficiaries) under
the terms hereof have been paid in full.
ARTICLE VII
FUNDING
7.1. PAYMENTS UNDER THIS PLAN ARE THE OBLIGATION OF THE CORPORATION.
The Trustee of the Rabbi Trust will pay the benefits due the Participants under
this Plan; however, should it fail to do so when a benefit is due, the benefit
shall be paid by the Corporation. If the Rabbi Trust fails to pay for any
reason, the Corporation remains liable for the payment of all benefits provided
by this Plan.
7.2. RABBI TRUST TO ENABLE CORPORATION TO MEET ITS OBLIGATIONS UNDER
THE PLAN. The Corporation has contemporaneously contributed cash to the Rabbi
Trust to fund part or all of the obligations of the Corporation under this Plan.
However, under all circumstances, the Participants shall have no rights to any
assets held in the Rabbi Trust other than those rights expressed in this Plan.
Nothing contained in the Trust Agreement which creates the Rabbi Trust shall
constitute a guarantee by the Corporation that assets of the Corporation
transferred to the Rabbi Trust will be sufficient to pay any benefits under this
Plan or would place the Participant in a secured position ahead of general
creditors should the Corporation become insolvent or bankrupt. Any trust created
by the Corporation to assist the Corporation in meeting its obligations under
this Plan, and any assets held by the trust, must conform to the terms of the
model trust described in Revenue Procedure 92-64 issued by the Internal Revenue
Service.
7.3. PARTICIPANTS MUST RELY ONLY ON GENERAL CREDIT OF THE CORPORATION.
This Plan is only a general corporate commitment and each Participant must rely
upon the general credit of the Corporation for the fulfillment of its
obligations hereunder. Under all circumstances the rights of Participants to any
asset held by the Corporation will be no greater than the rights expressed in
this Plan. Nothing contained in this Plan shall constitute a guarantee by the
Corporation that the assets of the Corporation will be sufficient to pay any
benefits under this Plan or would place the Participant in a secured position
ahead of general creditors of the Corporation; the Participants are only
unsecured creditors of the Corporation with respect to their Plan benefits and
the Plan constitutes a mere promise by the Corporation to make benefit payments
in the future. Although the Corporation has established the Rabbi Trust, as
indicated in Section 7.2, to accumulate assets to fulfill its obligations, the
Plan and the Rabbi Trust will not create any lien, claim, encumbrance, right,
title or other interest of any kind whatsoever in any Participant in any asset
held by the Corporation, contributed to
11
the Rabbi Trust or otherwise designated to be used for payment of any of its
obligations created in this Plan. No specific assets of the Corporation have
been or shall be set aside, or shall in any way be transferred to the Rabbi
Trust or shall be pledged in any way for the performance of the Corporation's
obligations under this Plan which would remove such assets from being subject to
the general creditors of the Corporation.
ARTICLE VIII
MISCELLANEOUS
8.1. LIMITATION OF RIGHTS. Nothing in this Plan shall be construed:
(a) to give a Participant any right with respect to contributions to
the Rabbi Trust described in Section 7.2, and earnings thereon, except in
accordance with the terms of this Plan;
(b) to limit in any way the right of the Corporation to terminate
a Participant's employment with the Corporation at any time;
(c) to evidence any agreement or understanding, expressed or implied,
that the Corporation will employ a Participant in any particular position
or for any particular remuneration; or
(d) to give a Participant or any other person claiming through him any
interest or right under this Plan other than that of an unsecured general
creditor of the Corporation.
8.2. DISTRIBUTIONS TO INCOMPETENTS OR MINORS. Should a Participant
become incompetent or should a Participant designate a Beneficiary who is a
minor or incompetent, the Trustee of the Rabbi Trust is authorized to pay the
funds due to the parent of the minor or to the guardian of the minor or
incompetent or directly to the minor or to apply those funds for the benefit of
the minor or incompetent in any manner the Trustee determines in its sole
discretion.
8.3. NONALIENATION OF BENEFITS. No right or benefit provided in this
Plan shall be transferable by any Participant except, upon his death, to a named
Beneficiary as provided in this Plan. No right or benefit under this Plan shall
be subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of any Participant or any
Participant's Beneficiary. Any attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge the same shall be void. No right or benefit under
this Plan shall in any manner be liable for or subject to any debts, contracts,
liabilities or torts of the person entitled to such benefits.
12
8.4. SEVERABILITY. If any term, provision, covenant or condition of
this Plan is held to be invalid, void or otherwise unenforceable, the rest of
the Plan shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
8.5. NOTICE. Any notice or filing required or permitted to be given to
the Corporation Representative or a Participant or Former Participant shall be
sufficient if in writing and hand delivered or sent by U.S. mail, postage
prepaid, to the principal office of the Corporation or to the residential
mailing address of the Participant or Former Participant. Notice will be deemed
to be given as of the date of hand delivery or if delivery is by mail, as of the
date shown on the postmark. Unless and until a Participant has received written
notice from the Corporation designating a different Corporation Representative,
the President of the Corporation shall be deemed to be the Corporation
Representative for purposes of receiving notices and designations, and changes
of designations, of Beneficiaries by the Participant. Each Corporation
Representative appointed by the Corporation from time to time shall be deemed to
have received and have on file all designations, or changes of designations, of
Beneficiaries theretofore filed by Participants with preceding Corporation
Representatives.
8.6. GENDER AND NUMBER. If the context requires it, words of one gender
when used in this Plan will include the other genders, and words used in the
singular or plural will include the other.
8.7. GOVERNING LAW. The Plan will be construed, administered and
governed in all respects by the laws of the State of Texas.
8.8. UNFUNDED ARRANGEMENT. It is intended that this Plan shall be
unfunded for tax purposes.
8.9. EFFECTIVE DATE. This Plan will be operative and effective as of
the date of execution of this document by the Corporation set out below.
IN WITNESS WHEREOF, the Corporation has executed this document on this
_____ day of ____________________ 1997.
GREY WOLF DRILLING COMPANY
By J. K. B. Xxxxxx, President
13
EXHIBIT A
GREY WOLF DRILLING COMPANY
DEFERRED COMPENSATION PLAN
(TOTAL PARTICIPANTS-196)
ALLOCATION
PARTICIPANT FACTOR
------------------------------------------------ --------
HOUSTON MANAGEMENT (6)
1. Xxxxx X. Xxxxxxxx .......................... 150
2. Xxxxx X. Xxxxxx ............................ 7,500
3. Xxx X. Xxxxxxxx ............................ 1,000
4. Xxxx X. Xxxxxxxx, Xx. ...................... 1,000
5. Xxxx X. Xxxxxxxx ........................... 400
6. Xxxxxx X. Xxxxxxxxxx ....................... 1,000
LAFAYETTE MANAGEMENT (6)
1. Xxxxxx X. Xxxxxx ........................... 300
2. Xxxxx X. Xxxxxxxx .......................... 300
3. Xxxxxx X. Xxxx ............................. 400
4. Xxxxx X. Xxxxxx ............................ 250
5. Xxxxxxx X. Stakes .......................... 300
6. Xxxxxxx X. Xxxxxxx ......................... 400
HOUSTON OFFICE STAFF (5)
1. Xxxxx X. Xxxx ............................. 120
2. Xxxxx X. Xxxxxxxx .......................... 75
3. Xxxxx X. Xxxxxx ............................ 120
4. Xxxxxxx Xxxxx .............................. 120
5. Xxxxxxx Xxxx Xxxxx ......................... 120
DUSON OFFICE STAFF (2)
1. Xxxxx Xxxxxx ............................... 100
2. Xxxxxx X. Xxxxx ............................ 100
DRILLING SUPERINTENDENTS (4)
1. Xxxxx X. Xxxxxx ............................ 500
2. Xxxxx X. Xxxxxxxxxxx ....................... 500
3. Xxxxxx Xxxxxxx ............................. 500
4. Xxxxxx X. Xxxxx, Xx. ....................... 500
RIG MANAGERS (36)
1. Xxxxxx X. Xxxxxxxxx ........................ 350
2. Xxxxxx X. Xxxxx ............................ 350
3. Xxxxxxx X. Xxxxxx .......................... 350
4. Xxxxxxx X. Xxxxxxxx ........................ 350
5. Xxxxx X. Best .............................. 350
6. Xxxxxx Xxxxx Xxxxx ......................... 350
7. Xxxx Xxxxx Xxxxxxx ......................... 350
8. Xxxxxxx Xxxxxx ............................. 350
9. Xxxx X. Xxxxxxxxxx ......................... 350
10. Xxxx X. Xxxxx .............................. 350
11. Xxxxxx Xxxxxx Xxxxx ........................ 350
12. Xxxxxx Fall ................................ 350
13. Xxxxx X. Xxxxxxx ........................... 350
14. Xxxxx X. Xxxxx ............................. 350
15. Xxxxxx X. Xxxxxxxxxx ....................... 350
16. Xxxxxx X. Xxxxxx, Xx. ...................... 350
17. Xxxxxxxx X. Xxxxxxx ........................ 350
18. Xxxxxx X. Xxxxxxx .......................... 350
19. Xxxx X. Xxxxx .............................. 350
20. Xxxx X. Xxxxxxx ............................ 350
21. Xxxxx X. Xxxxxxxxxxx ....................... 350
22. Xxxx X. Xxxxxxxxxxx ........................ 350
23. Xxxxxxx X. Xxxxxxxxxxx ..................... 350
24. Xxxxxx X. Xxxxxxxxxxx ...................... 350
25. Xxxxxxx X. XxXxxxxxx ....................... 350
26. Xxxx X. Xxxxx .............................. 350
27. Xxxxxxx Xxxxx Xxxxxx ....................... 350
28. Xxx Xxxx Xxxxxxxx .......................... 350
29. Xxxx Xxxxxx, Xx. ........................... 350
30. Xxxxxx X. Xxxxxxxxx ........................ 350
31. Xxxx X. Xxxxxxxxxx, Xx. .................... 350
32. Xxxxxx X. Xxxxxxxxxx ....................... 350
33. Xxxx X. Xxxxx .............................. 350
34. Xxxxxxx X. Xxxxx ........................... 350
35. Xxxx Xxxxxx ................................ 350
36. Xxxxxxx Xxxxxxx ............................ 350
DRILLERS (56)
1. Xxxxxxx X. Xxxx ............................ 150
2. Xxxxxxx X. Xxxxxx .......................... 150
3. Xxxxxx X. Xxxxxxx .......................... 150
4. Xxxxxx Xxxxxx Xxxxx ........................ 150
5. Xxxxxx X. Xxxxxxxx, Xx. .................... 150
6. Xxxx Xxxxxxxx .............................. 150
7. Xxxxx X. Xxxxxxx ........................... 150
8. Xxxxxx X. Xxxxxxx .......................... 150
2
9. Xxxxxx X. Xxxxxx ........................... 150
10. Xxxxxxx X. Xxxxxx .......................... 150
11. Xxxxxxx X. Xxxxxxxx ........................ 150
12. Xxxxxxx X. Xxxxxx .......................... 150
13. Xxxxx Xxxxxx Xxxxxxxxxx .................... 150
14. Xxxx X. Xxxxxx ............................. 150
15. Roicy Xxxxxxxx ............................. 150
16. Xxxx Xxxxxxxx Xxxxxx ....................... 150
17. Xxxxxx X. Xxxxxxxxx ........................ 150
18. Xxxxxx X. Xxxxxx, Xx. ...................... 150
19. Xxxxxx X. Xxxxxxxxx ........................ 150
20. Xxxx X. Xxxxx .............................. 150
21. Xxxxxxx X. Xxxxxxx ......................... 150
22. Xxxxxx X. Xxxxx ............................ 150
23. Xxxx Xxxxx Xxxxxxx ......................... 150
24. Xxxxxxxx Xxxxxx Xxxxxxxx, Xx. .............. 150
25. Xxxxxxx Xxxxx Xxxxx ........................ 150
26. Preston Xxxxxxx Xxxxxx ..................... 150
27. Xxxxx X. Xxxxxxxx .......................... 150
28. Xxxxxxx X. Xxxxx ........................... 150
29. Xxxxxxx X. Xxxxxx .......................... 150
30. Xxxx X. Xxxx ............................... 150
31. Xxxxxx X. Xxxxxxx .......................... 150
32. Xxxxxxx Xxxxx Xxxxxxxxxx ................... 150
33. Xxxx Xxxxxxxxxx, Xx. ....................... 150
34. Xxxxx X. Xxxxxxx ........................... 150
35. Xxxxx X. Xxxxxxx ........................... 150
36. Xxxxxxx X. Xxxxxxx ......................... 150
37. Xxxxxxx X. Xxxxxxx ......................... 150
38. Xxxxxx X. Xxxxxxx .......................... 150
39. Xxxxxxxx Xxxx Xxxxxxxx ..................... 150
40. Xxxxxxxx Xxxxxx Xxxxxx ..................... 150
41. Xxxxxx X. Xxxxxxx .......................... 150
42. Xxxxxxx Xxx Xxxxxxxxxx ..................... 150
43. Xxxxxxx X. Xxxxxxxxxx ...................... 150
44. Xxx Xxxxxx Xxxxx ........................... 150
45. Xxxxxxx X. Xxxxx Xx. ....................... 150
3
46. Xxxxxx X. Xxxxxxx .......................... 150
47. Xxxxxx X. Xxxxxxx .......................... 150
48. Xxxxxx X. Xxxxxx ........................... 150
49. Xxxxx Xxxx Xxxxxxx ......................... 150
50. Joby Xxxxxx Xxxxxxxxxx .................... 150
51. Xxxxx X. Xxxxxxxxxx ........................ 150
52. Xxxx Xxxxxxx Xxxxxx ........................ 150
53. Xxxxx X. Xxxxxx ............................ 150
54. Xxxxx X. Xxxx .............................. 150
55. Xxxxxxx Xxx Xxxxxx ......................... 150
56. Xxxxxx X. Xxxxxxx .......................... 000
XXXXXXXXXX, XXXXXXXX, XXXXXXXX (71)
1. Xxxxx Xxxxx ................................ 60
2. Xxxx Xxxxxxxx Xxxxxxxxx .................... 60
3. Xxxxx X. Xxxx .............................. 60
4. Xxxxx X. Xxxxx ............................. 60
5. Xxxxx X. Xxxxx ............................. 60
6. Xxxx Xxxxxxx ............................... 60
7. Xxxxxx Xxxx Xxxxxxx ........................ 60
8. Xxxxx X. Xxxxxxx ........................... 60
9. Xxxx Xxxxxxx ............................... 60
10. Joey Xxxxxx Xxxxxxxxx ...................... 60
11. Xxxxx Xxxxxx Xxxxxx ........................ 60
12. Xxxx X. Xxxxxxxxx .......................... 60
13. Xxxxxx X. Xxxxxxxxx ........................ 60
14. Xxxxxxx Xxxxxxx, Xx. ....................... 60
15. Xxxxx Xxxxxxxx ............................. 60
16. Xxxxxx X. Xxxxxxxxxxx ...................... 60
17. Xxxxx Xxx Coats ............................ 60
18. Xxxxxxx Xxx Xxxxxxx ........................ 60
19. Xxxxxx X. Xxxxxxx .......................... 60
20. Xxxxx Xxxxxxx Xxxxxxx ...................... 60
21. Xxxx Xxxx Xxxxxxx .......................... 60
22. Xxxxxxx Xxxxx Xxxxxxx ...................... 60
23. Xxxxxx X. Xxxxxxx .......................... 60
24. Xxxxx X. Xxxxxxxxx ......................... 60
25. Xxxxxx X. Xxx .............................. 60
4
26. Xxxxxx X. Xxxxxxx .......................... 60
27. Xxxxxx Xxxx Xxxx ........................... 60
28. Xxxxx Xxxxx Xxxxx .......................... 60
29. Xxx X. Xxxxxxxxx ........................... 60
30. Xxxx Xxxxx Xxxx ............................ 60
31. Xxx X. Xxxxxx .............................. 60
32. Xxxx Xxxxxxx Xxxxxxx ....................... 60
33. Xxxxxx Xxxxxx .............................. 60
34. Xxxxxx Xxxxx Xxxxxxxxx ..................... 60
35. Xxxxx Xxx Xxxxx ............................ 60
36. Xxxx X. Xxxxxxx ............................ 60
37. Xxxxxx X. XxXxxxx .......................... 60
38. Xxxxxxx X. XxXxxxx ......................... 60
39. Xxxxx X. Xxxxxxx ........................... 60
40. Xxxxxxx X. Xxxxx ........................... 60
41. Xxxxxx Xxxxxx .............................. 60
42. Xxxxxxx Xxxx Xxxxxxx ....................... 60
43. Xxxxxxx Xxx Xxxxxxx, Jr. ................... 60
44. Xxxxxx Xxx Xxxxxx, Xx. ..................... 60
45. Xxxxxx Xxxxxxx Xxxxxxxx .................... 60
46. Xxxxx Xxxx Xxxxx ........................... 60
47. Xxxx X. Xxxxxx ............................. 60
48. Xxxxxxx X. Xxxx ............................ 60
49. Xxxxxxx X. Xxxxx ........................... 60
50. Xxxxx X. Xxxxxxxxxx ........................ 60
51. Xxxxxxx Xxxxxxx ............................ 60
52. Xxxxxx H. Richard .......................... 60
53. Xxxxxxx Xxxxx Xxxxxxx ...................... 60
54. Xxxxxx X. Xxxxxxx, Xx. ..................... 60
55. Xxxx X. Xxxxxxxx ........................... 60
56. Xxxxxxx Xxxxxx ............................. 60
57. Xxxxx Xxxx, Xx. ............................ 60
58. Xxxxxx X. Schedxnider, Jr. ................. 60
59. Xxxxxx X. Xxxxxxx .......................... 60
60. Xxxxxxx Xxxxxx ............................. 60
61. D. Xxxxx Xxxxx ............................. 60
62. Xxxxxx Xxxxx Xxxxx ......................... 60
5
63. Xxx Xxxxx Xxxxxx ........................... 60
64. Xxxx Xxxxx ................................. 60
65. Xxxxx Xxxx Xxxxxxx ......................... 60
66. Xxxxxx X. Xxxxx ............................ 60
67. Xxxxx X. Xxxxxxxxxx ........................ 60
68. Xxxxx X. Xxxxxxxxxx ........................ 60
69. Xxxx Xxxxx Xxxxxxxxxx ...................... 60
70. Xxxx Xxxxxx Xxxxxxxxxx ..................... 60
71. Xxxxxxx X. Xxxxx ........................... 60
YARD EMPLOYEES/DRIVERS (10)
1. Xxxxx X. Xxxxx ............................. 60
2. Xxxxx X. Xxxxxxx ........................... 60
3. Xxx Xx Xxxxxx .............................. 60
4. Xxxxxxxx X. Xxxxxxx ........................ 200
5. Xxxxx X. Xxxxxxxx .......................... 60
6. Xxxxx X. Xxxxxxxx .......................... 60
7. Xxxxxx X. Xxxxxxxx ......................... 150
8. Xxxxxx X. Xxxxxxx .......................... 60
9. Xxxxxx Xxxxxxxxxxx, Jr. .................... 60
10. Xxxxx X. Xxxxxxxxxx ........................ 100
--------
TOTAL: 41,885
NOTE: IF, PRIOR TO THE TRUST ESTABLISHMENT DATE, ANY OF THE ABOVE LISTED
PARTICIPANTS CEASE TO BE EMPLOYED BY THE COMPANY, THIS EXHIBIT A WILL BE REVISED
PRIOR TO EXECUTION OF THE FOREGOING DEFERRED COMPENSATION PLAN TO DELETE SUCH
PARTICIPANT'S NAME AND TO MAKE APPROPRIATE CHANGES TO THE NUMBER OF PARTICIPANTS
AND TOTAL OF THE ALLOCATION FACTORS SHOWN HEREIN.
6
SCHEDULE 2.2
None.
SCHEDULE 2.4
1 Grey Wolf Drilling Company Financial Statements as of October 31, 1996,
together with auditors' report (attached).
2 Grey Wolf Drilling Company Balance Sheets (Unaudited) as of November 30,
1996 (attached).
3 Grey Wolf Drilling Company Income Statements (Unaudited) for November
1996 (attached).
4 Grey Wolf Drilling Company Balance Sheets (Unaudited) as of December 31,
1996 (attached).
5 Grey Wolf Drilling Company Income Statements (Unaudited) for December
1996 (attached).
6 Grey Wolf Drilling Company Balance Sheets (Unaudited) as of January 31,
1997 (attached).
7 Grey Wolf Drilling Company Income Statements (Unaudited) for January
1997 (attached).
SCHEDULE 2.6
1. Lease Agreement dated August 17, 1993, by and between Post Oak Central,
Ltd., as landlord, and the Company, as tenant.
Section 13.02(f) defines as an Event of Default the transfer of
ownership interests in the Company in one or more transactions, the
result of which is to change the majority ownership interest and/or
control of the Company from that which existed on August 17, 1993.
2. Master Lease Agreement dated April 27, 1994, by and between Banc One
Leasing Corporation, as lessor, and the Company, as lessee.
Section 14(f) provides that it shall be an event of default for the
Company to commence any act amounting to a business failure or winding
up of its affairs or to cease to do business as a going concern.
Section 14(h) provides that it shall be an event of default if, in
lessor's reasonable opinion, there shall occur any material adverse
change in the financial condition, business or operations of the
Company.
Section 18 provides that the Company shall not, INTER ALIA, (a)
liquidate, dissolve or suspend business, (b) sell, transfer or
otherwise dispose of all or a majority of its assets, (c) enter into
any merger, consolidation or similar reorganization unless it is the
surviving corporation, or (d) without 30 days' prior written notice to
lessor, change its name or chief place of business. Further, the
Company must at all times maintain a tangible net worth which is no
less than the greater of 75% of its tangible net worth as of April 27,
1994 or 75% of its highest tangible net worth thereafter.
SCHEDULE 2.8
1. Restricted Stock Agreement dated March 17, 1992, by and between the
Company and Xxxxx K. B. Xxxxxx, President of the Company, as employee.
2. Consulting Agreement dated August 27, 1996, by and between the Company
and M. W. "Cotton" Xxxxx, as consultant.
3. Consulting Agreement dated August 27, 1996, by and between the Company
and Luther Xxxxx Xxxxxx, as consultant.
4. Consulting Agreement (oral and subject to termination at will) with Xxxxxx
X. Xxxxxxx for consulting services payable on a per-diem basis for services
rendered at the request of the Company from time to time.
5. Consulting Agreement (oral and subject to termination at will) with L. O.
Xxxxx for consulting services payable on a per-diem basis for services
rendered at the request of the Company from time to time.
6. Indemnification agreement in favor of directors and officers of the Company
and former directors and officers of the Company and any person who may
have served at the Company's request as a director or officer or former
director or officer of another corporation in which the Company owns shares
of capital stock or of which the Company is a creditor, as set forth in the
ByLaws of the Company.
7. Indemnification Agreements in favor of the respective directors and
officers of the Company (Xxxxx K. B. Xxxxxx, officer and director; Xxxxx X.
Xxxxxx, officer; Xxxx Xxxxxxx, officer; Xxx X. Xxxxxxxx, officer; Xxxx X.
Xxxxxxxx, officer; Xxxxx X. Xxxxxxxx, officer; Xxxxx X. Xxxxxx, director;
Xxxxxxx X. Xxxxx, director; and Xxxxxx X. Xxxxxx, director) dated March 6,
1997.
SCHEDULE 2.11
As of the date of this Agreement, there is no action or proceeding pending or,
to the knowledge of the Company, threatened to which the Company is or would be
a party before any court or governmental authority acting in adjudicative
capacity or any arbitrator or arbitration tribunal with respect to which there
is a reasonable likelihood of a determination that would have a Material Adverse
Effect. Nevertheless, solely for purposes of providing full disclosure, the
following is a description of pending lawsuits in which the Company is named as
defendant or counterdefendant or cross-defendant, none of which lawsuits, either
individually or collectively, present a reasonable likelihood of a determination
that would have a Material Adverse Effect:
1. XXXXXX XXXXXXX VS. GREY WOLF DRILLING COMPANY
Xxxxxx Xxxxxxx brought suit against the Company claiming injuries relating
to an accident which occurred on February 8, 1996. Xx. Xxxxxxx claims that the
Company was negligent in maintaining a safe work environment, which allegedly
led to the accident. The amount of the alleged damages sought in the suit is
$12,000,000. The Company was not Xx. Xxxxxxx'x employer. Xx. Xxxxxxx'x employer
was on location at the request of the operator. The Company has asked for
indemnification by the operator. The Company intends to vigorously defend itself
in this action. The Company has adequate insurance to cover the claim.
2. XXXXXX XXXXX VS. GREY WOLF DRILLING COMPANY
Xxxxxx Xxxxx brought suit against the Company on August 30, 1996. Xxxxxx
Xxxxx, while employed by the Company, claims injuries as a result of being
attacked by Xxxx Xxxx, an employee of the Company, while on the rig. Xx. Xxxxx
alleges the attack resulted in severe and disabling injuries. Xx. Xxxxx alleges
this action falls outside of Workers' Compensation because it was allegedly an
intentional tort committed against an employee. The Company has adequate
insurance to cover this claim and intends to vigorously defend itself.
3. TEPCO, INC. VS. GREY WOLF DRILLING COMPANY
Cause No. 96-49194, in the 164th Judicial District Court of Xxxxxx County,
Texas. In its petition filed on September 30, 1996, the plaintiff alleges that
the Company breached contractual obligations it owed to TEPCO, Inc. by failing
to drill an oil and gas well or xxxxx for TEPCO in the Treasure Isle Field,
located in Galveston, Texas. The plaintiff also alleges that it lost rights
under an oil and gas lease it had under an alleged agreement with Mobil
Producing Texas and New Mexico, Inc., causing plaintiff to suffer money damages,
which it values in its
petition as "many tens of millions of dollars." The Company believes that
TEPCO's claim is entirely without merit and intends to vigorously defend this
action. The Company has filed a counterclaim in the lawsuit for approximately
$250,000 for recovery of unpaid statements, and interest, for services rendered
or materials provided by the Company in connection with drilling of two xxxxx
for TEPCO, Inc. which were completed prior to the time when the Company ceased
performing work for TEPCO, Inc.
4. XXXXXXXX AND XXXXXX XXXXX, XX. VS. XXXXXXXX XXXXXXX, GREY XXXX DRILLING
COMPANY AND OLD REPUBLIC INS. CO. #501-352, 24TH JUDICIAL DISTRICT, PARISH
OF ORLEANS, LOUISIANA.
Plaintiffs claims Xxxxxxx, while driving a Company vehicle in the course of
his employment, rear-ended plaintiffs vehicle, causing damages to plaintiffs.
This is a new suit filed November 13, 1996. The Company has adequate insurance
to cover this claim and intends to vigorously defend itself.
5. GREY WOLF DRILLING COMPANY VS. AVANTI SERVICES, INC.
The Company brought suit against Avanti Services, Inc. seeking recovery of
$97,702.03 for repair of drill pipe and replacement of collars, etc. damaged in
the drilling of a well for Avanti. Avanti answered and filed a reconventional
demand against the Company alleging the Company failed to use reasonable means
to control and prevent fires and/or blowout and to protect the hole, and
specifically alleges that the hole was lost because of negligence of the
Company. The reconventional demand claims that "[The Company] is liable to
Avanti for all damages as are reasonable in the premises or for reimbursement of
the contract amounts paid by Avanti to [the Company]." The Company believes that
Avanti's reconventional demand claim is entirely without merit and intends to
vigorously defend the claim if it is pursued.
6. XXXX X. XXXXXXXX VS. HORIZONTAL RENTALS, INC. VS. GREY WOLF DRILLING
COMPANY
Xx. Xxxxxxxx was injured during a flash fire on a Company well site
operated by Xxxxx Energy. The Company employed Xx. Xxxxxxxx and has paid him
Workers' Compensation, and Xx. Xxxxxxxx has not attempted to assert a claim
against the Company in the pending lawsuit.
H.B. Rentals placed a non-explosive proof sump pump motor in an area where
an overflow of the mud tanks caused the flash fire. H.B. Rentals was hired by
Horizontal Rentals, Inc. (HRI), the manufacturer of the mud/gas separator
system. Horizontal Rentals and Xxxxx Energy jointly determined where the mud/gas
separator was to be placed; and Xxxxx determined the placement of the mud
logging trailer.
On February 29, 1996 an Agreed Judgment was entered between the Plaintiff
and Xxxxx for a settlement amount of $4,000,000.00. HRI also settled with the
Plaintiff on or about November 6, 1996 for the amount of $700,000.00. The
remaining defendants, H.B. Rentals and A&A Flow Lines have not settled with the
Plaintiff, and the case is expected to be tried in the early months of 1997.
The Company was named a cross-defendant in this lawsuit by HRI, who is
claiming $650,000.00 in property damage to its mud/gas separator system. This
cross-action is expected to be tried at the same time as the personal injury
portion. The Company believes that the mud/gas separator was defective and that
HRI is liable as the manufacturer of a defective product, and the Company
intends to vigorously defend this cross-action. The Company has adequate
insurance to cover the claim.
Xxxxx Energy also filed a cross-action against the Company in this lawsuit
for contribution and indemnity based on the Drilling Contract between Xxxxx and
the Company. The trial court granted summary judgment holding that the Texas
Oilfield Anti-Indemnity Statute bars Xxxxx'x claim for contribution and
indemnity. That summary judgment has been appealed by Xxxxx and is expected to
be upheld. The claim by Xxxxx would be covered by insurance maintained by the
Company if it were allowed.
SCHEDULE 2.12
1. Grey Wolf Drilling Company Employees' 401(k) and Profit Sharing Plan (the
"Plan"), together with Grey Wolf Drilling Company Employees' 401(k) and
Profit Sharing Plan Trust.
NOTE: Section 11.6 of the Plan provides that if there is a partial or
total termination, each affected Member shall immediately become 100%
vested in his Account as of the end of the last Plan Year for which a
substantial Employer Contribution was made and in any amounts later
allocated to his Account. If the Employer then resumes making
substantial Contributions at any time, the appropriate vesting schedule
shall again apply to all amounts allocated to each affected Member's
Account beginning with the Plan Year for which they were resumed.
2. Group Life Insurance Policy for qualified officers and employees of the
Company provided under Group Policy No. 902451-B issued by GroupAmerica
Insurance Company; and sponsored Life Insurance Policies for certain
employees and officers of the Company provided by the Company and issued by
Philadelphia Life Insurance Company.
3. Worker's Compensation Insurance, together with related Deductible Loss
Reimbursement Indemnity Agreement (Adjustable) (the "Indemnity") executed
by the Company.
NOTE: Article VII of the Indemnity provides that the Indemnity shall
only terminate at such time that all reported claims arising out of the
issuance of the Policy(ies) are closed. In the event that the Indemnity
has terminated, and claims arising out of the issuance of the
Policy(ies) are made or reopened, then the Indemnity and any security
requirements of the Company shall be renewed and shall continue in full
force and effect until such claims are closed.
4. Grey Wolf Drilling Company Employee Health Plan and Trust as amended
and restated effective January 1, 1995.
5. Group Long Term Disability Insurance for qualified officers and employees
of the Company provided under Policy No. SR-83091498 issued by Continental
Casualty Company.
6. Grey Wolf Drilling Company Cafeteria Plan under section 125 of the Internal
Revenue Code.
7. Deferred Compensation Agreement dated August 19, 1996, by and among the
Company, Luther Xxxxx Xxxxxx, as employee, and wife, Xxxx X. Xxxxxx, as
employee's spouse, and the associated life insurance policy provided for
therein.
8. Deferred Compensation Agreement dated August 27, 1996, by and among the
Company, M. W. "Cotton" Xxxxx, as employee, and wife, Xxxxxx Xxxxx, as
employee's spouse, and the associated life insurance policy provided for
therein.
9. Split Dollar Life Insurance Agreement between the Company and Xxxxxxx Xxxxx
Xxxxxxxx, as Trustee of the Xxxxx K. B. Xxxxxx Family Trust dated effective
as of January 15, 1994, and related life insurance policies described
therein.
10. Club Memberships with the Houston Club, University Club and Plaza Club (all
Houston, TX) and the Petroleum Clubs (Houston, TX, San Antonio, TX and
Lafayette, LA) which are owned and maintained by the Company at its expense
and provided for the use of certain officers or employees of the Company.
11. Loans by the Company to Xxxxxx Xxxxxxxxxx, evidenced by those certain three
(3) Promissory Notes dated September 1, 1996, in the amount of $10,000.00,
$20,000.00 and $26,000.00, respectively. The $10,000.00 loan is secured by
a Security Agreement of even date therewith.
12. The Company leases, at Company expense, and provides vehicles for the use
of the Company's officers and certain employees (field supervisors and
above). At this date, a total of sixty-seven (67) vehicles are being leased
by the Company and provided to officers and employees for their use under
this program.
Note: The "Benefit Plans" described in this Schedule may not be subject to
termination by the Company within a period of thirty days without the payment of
additional compensation or the additional vesting or acceleration of benefits
under such "Benefit Plans."
SCHEDULE 3.1
Since December 31, 1995, a number of the Parent's immaterial direct and indirect
subsidiaries listed on Exhibit 22 to Parent's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 have been liquidated or merged out of
existence.
SCHEDULE 3.5
NONE
