INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT is effective as of March 6, 1997,
between GREY WOLF DRILLING COMPANY, a Texas corporation ("Grey Wolf"), and
XXXXXXX X. XXXXX ("Indemnitee").
WHEREAS, it is essential to Grey Wolf to retain and attract as
directors and officers the most capable persons available;
WHEREAS, Indemnitee is a director or officer of Grey Wolf;
WHEREAS, both Grey Wolf and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers;
WHEREAS, it is crucial to secure the continued service of competent and
experienced people in senior corporate positions and to assure that they will be
able to exercise judgment without fear of personal liability so long as they
fulfill the basic duties of honesty, care and good faith; and
WHEREAS, in order to enhance Indemnitee's continued service to Grey
Wolf in an effective manner, and due to the potential inadequacy of Grey Wolf's
directors' and officers' liability insurance coverage, Grey Wolf wishes to
provide in this Agreement for the indemnification of, and the advancing of
expenses to, Indemnitee to the fullest extent (whether partial or complete)
permitted by law and as set forth in this Agreement, and to the extent insurance
is maintained, for the continued coverage of Indemnitee under Grey Wolf's
directors' and officers' liability insurance policies;
NOW, THEREFORE, in consideration of the premises and of Indemnitee
continuing to serve Grey Wolf directly or, at its request, with another
enterprise, and intending to be legally bound thereby, the parties hereto agree
as follows:
1. CERTAIN DEFINITIONS.
(a) "Approved Law Firm" shall mean any law firm (i) located in
Houston, Texas, (ii) rated "av" by Xxxxxxxxxx-Xxxxxxx Law Directory; provided,
however, that such law firm shall not, for a five (5) year period prior to the
Indemnifiable Event (as hereinafter defined), have been engaged by Grey Wolf, an
Acquiring Person (as hereinafter defined) or Indemnitee.
(b) "Board of Directors" shall mean the Board of Directors of Grey
Wolf.
(c) "Change in Control" shall be deemed to have occurred if (i)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than a trustee or
other fiduciary holding securities under an employee benefit plan of Grey Wolf
in substantially the same proportions as their ownership of stock of Grey Wolf,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of securities of Grey Wolf representing
fifteen percent (15%) or more of the total voting power represented by Grey
Wolf's then outstanding Voting Securities (as hereinafter defined) (such person
being herein referred to as an "Acquiring Person"), or (ii) during any
twenty-four (24) consecutive month period, individuals who at the beginning of
such period constitute the Board of Directors of Grey Wolf and any new director
whose election by the Board of Directors or nomination for election by Grey
Wolf's shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (iii) the shareholders
of Grey Wolf approve a merger or consolidation of Grey Wolf with any other
entity, other than a merger or consolidation which would result in the Voting
Securities of Grey Wolf outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least eighty percent (80%) of the total
voting power represented by the Voting Securities of Grey Wolf or such surviving
entity outstanding immediately after such merger or consolidation, or (iv) the
shareholders of Grey Wolf approve a plan of complete liquidation of Grey Wolf or
an agreement for the sale or disposition by Grey Wolf of all or substantially
all Grey Wolf's assets.
(d) "Claim" shall mean any threatened, pending or completed
action, suit or proceeding, or any inquiry or investigation, whether conducted
by Grey Wolf or any other party, that Indemnitee reasonably believes might lead
to the institution of any such action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise.
(e) "Expenses" shall include attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in, any Claim relating to
any Indemnifiable Event, together with interest, computed at Grey Wolf's average
cost of funds for short-term borrowings, accrued from the date of incurrence of
such expense to that date Indemnitee receives reimbursement therefor.
(f) "Indemnifiable Event" shall mean any event or occurrence
related to the fact that Indemnitee is or was a director, officer, employee,
agent or fiduciary of Grey Wolf, or is or was serving at the request of Grey
Wolf as a director, officer, employee, trustee, agent or fiduciary of another
corporation of any type or kind, domestic or foreign, partnership, joint
venture, trust, employee benefit plan or other enterprise, or by reason of
anything done or not done by Indemnitee in such capacity. Without limiting any
indemnification provided hereunder, an Indemnitee serving (i) another
corporation, partnership, joint venture or trust of which twenty percent (20%)
or more of the voting power or residual economic interest is held, directly or
indirectly, by Grey Wolf, or (ii) any employee benefit plan of Grey Wolf or any
entity referred to in clause (i), in any capacity shall be deemed to be doing so
at the request of Grey Wolf.
(g) "Reviewing Party" shall be (i) the Board of Directors acting
by quorum consisting of directors who are not parties to the particular Claim
with respect to which Indemnitee is seeking indemnification, or (ii) if such a
quorum is not obtainable or, even if obtainable, if a quorum of disinterested
directors so directs, (A) the Board of Directors upon the opinion in writing of
independent legal counsel that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in Section 2 of this
Agreement and in Article 2.02-1 of the Texas Business Corporation Act (the
"TBCA") has been met by the Indemnitee or (B) the shareholders upon a finding
that
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the Indemnitee has met the applicable standard of conduct referred to in clause
(ii)(A) of this definition.
(h) "Voting Securities" shall mean any securities of Grey Wolf
which vote generally in the election of directors.
2. BASIC INDEMNIFICATION AGREEMENT. If Indemnitee was, is or becomes at
any time a party to, or witness or other participant in, or is threatened to be
made a party to, or witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, Grey Wolf shall indemnify
Indemnitee to the fullest extent permitted by law as soon as practicable but in
any event no later than thirty (30) days after written demand is presented to
Grey Wolf, against any and all Expenses, judgments, fines (including excise
taxes assessed on an Indemnitee with respect to an employee benefit plan),
penalties and amounts paid in settlement (including all interest, assessments
and other charges paid or payable in connection with, or in respect of, such
Expenses, judgments, fines, penalties or amounts paid in settlement) of such
Claim. If so requested by Indemnitee, Grey Wolf shall advance (within ten (10)
business days of such request) any and all Expenses to Indemnitee (an "Expense
Advance"). Notwithstanding anything in this Agreement to the contrary, (i)
Indemnitee shall not be entitled to indemnification pursuant to this Agreement
if a judgment or other final adjudication adverse to the Indemnitee establishes
that Indemnitee's acts were committed in bad faith or were the result of active
and deliberate dishonesty and, in either case, were material to the cause of
action so adjudicated, or that Indemnitee personally gained in fact a financial
profit or other advantage to which Indemnitee was not legally entitled, and (ii)
prior to a Change in Control Indemnitee shall not be entitled to indemnification
pursuant to this Agreement in connection with any Claim initiated by Indemnitee
against Grey Wolf or any director or officer of Grey Wolf unless Grey Wolf has
joined in or consented to the initiation of such Claim.
3. PAYMENT. Notwithstanding the provisions of Section 2, the
obligations of Grey Wolf under Section 2 (which shall in no event be deemed to
preclude any right to indemnification to which Indemnitee may be entitled under
Article 2.02-1 of the TBCA) shall be subject to the condition that the Reviewing
Party shall have authorized such indemnification in the specific case by having
determined that Indemnitee is permitted to be indemnified under the applicable
standard of conduct set forth in Section 2 and applicable law. Grey Wolf shall
promptly call a meeting of the Board of Directors with respect to a Claim and
agrees to use its best efforts to facilitate a prompt determination by the
Reviewing Party with respect to the Claim. Indemnitee shall be afforded the
opportunity to make submissions to the Reviewing Party with respect to the
Claim. The obligation of Grey Wolf to make an Expense Advance pursuant to
Section 2 shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under Section 2 and applicable law, Grey Wolf shall be entitled
to be reimbursed by Indemnitee (who hereby agrees and undertakes to the full
extent required by Section K of Article 2.02-1 of the TBCA to reimburse Grey
Wolf) for all such amounts therefore paid; provided, however, that if Indemnitee
has commenced legal proceedings in a court of competent jurisdiction to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Reviewing Party that Indemnitee would not be permitted
to be indemnified under applicable law shall not be binding and Indemnitee shall
not be required to reimburse Grey Wolf for any Expense Advance until a final
judicial determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted
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or lapsed). If there has been no determination by the Reviewing Party or if the
Reviewing Party determines that Indemnitee substantively would not be permitted
to be indemnified in whole or in part under applicable law, Indemnitee shall
have the right to commence litigation in any court in the State of Texas having
subject matter jurisdiction thereof and in which venue is proper seeking an
initial determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and Grey Wolf hereby consents to service
of process and to appear in any such proceeding. Any determination by the
Reviewing Party otherwise shall be conclusive and binding on Grey Wolf and
Indemnitee.
4. CHANGE IN CONTROL. If there is a Change in Control of Grey Wolf
(other than a Change in Control which has been approved by a majority of the
Board of Directors who were directors immediately prior to such Change in
Control) then (i) all determinations by Grey Wolf pursuant to the first sentence
of Section 3 hereof and Article 2.02-1 of the TBCA shall be made pursuant to
subparagraph (F)(1) or (F)(2) of such Article 2.02-1 of the TBCA and (ii) with
respect to all matters thereafter arising concerning the rights of Indemnitee to
indemnity payments and Expense Advances under this Agreement or any other
agreement, provision of the Articles of Incorporation ("Articles") or By-Laws
("Bylaws") of Grey Wolf now or hereinafter in effect relating to Claims for
Indemnifiable Events (including, but not limited to, any opinion to be rendered
pursuant to Article 2.02-1 of the TBCA) Grey Wolf (including the Board of
Directors) shall seek legal advice from (and only from) special, independent
counsel selected by Indemnitee and approved by Grey Wolf (which approval shall
not be unreasonably withheld), and who has not otherwise performed services for
Grey Wolf (or any subsidiary of Grey Wolf) or the Acquiring Person (or any
affiliate or associate of such Acquiring Person) within the last five (5) years
(other than in connection with such matters) or Indemnitee. Unless Indemnitee
has theretofore selected counsel pursuant to Section 4 and such counsel has been
approved by Grey Wolf, any Approved Law Firm shall be deemed to satisfy the
requirements set forth above. Such counsel, among other things, shall render its
written opinion to Grey Wolf, the Board of Directors and Indemnitee as to
whether and to what extent the Indemnitee would be permitted to be indemnified
under applicable law. Grey Wolf agrees to pay the reasonable fees of the
special, independent counsel referred to above and to fully indemnify such
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto. As used in this Section 4, the terms "affiliate" and
"associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Exchange Act and in effect
on the date of this Agreement.
5. INDEMNIFICATION FOR ADDITIONAL EXPENSES. Grey Wolf shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) that are
incurred by Indemnitee in connection with any claim asserted or action brought
by Indemnitee for (i) indemnification or advance payment of Expenses by Grey
Wolf under this Agreement or any other agreement, provision of the Articles or
Bylaws of Grey Wolf now or hereafter in effect relating to Claims for
Indemnifiable Events or (ii) recovery under any directors' and officers'
liability insurance policies maintained by Grey Wolf, but only if Indemnitee
ultimately is determined to be entitled to such indemnification, advance
expenses payment or insurance recovery, as the case may be.
6. PARTIAL INDEMNITY, ETC. If Indemnitee is entitled under any
provision of this Agreement to indemnification by Grey Wolf for some or a
portion of the Expenses, judgments, fines, penalties and amounts paid in
settlement of a Claim but not, however, for
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all of the total amount thereof, Grey Wolf shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all Claims relating in whole or in part to an Indemnifiable Event or in defense
of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified, to the extent permitted by law, against all
Expenses incurred in connection with such Indemnifiable Event.
7. NO PRESUMPTION. For purposes of this Agreement, the termination of
any claim, action, suit or proceeding, whether civil or criminal, by judgment,
order, settlement (whether with or without court approval) or conviction, or
upon a plea of nolo contendere or its equivalent, shall not create a presumption
that Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.
8. NONEXCLUSIVITY, ETC. The rights of the Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Articles, Bylaws,
the TBCA or otherwise. To the extent that a change in the TBCA (whether by
statute or judicial decision) permits greater indemnification by agreement than
would be afforded currently under the Articles or Bylaws of Grey Wolf and this
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by
this Agreement the greater benefits so afforded by such change.
9. INSURANCE. To the extent Grey Wolf maintains an insurance policy or
policies providing directors' and officers' liability insurance, Indemnitee
shall be covered by such policy or policies, in accordance with its or their
terms, to the maximum extent of the coverage available for any director or
officer of Grey Wolf.
10. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of Grey Wolf or any affiliate
of Grey Wolf against Indemnitee, Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of two (2) years from the
date of accrual of such cause of action, and any claim or cause of action of
Grey Wolf or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two (2) year period;
provided, however, that if any shorter period of limitations is otherwise
applicable to any such cause of action, such shorter period shall govern.
11. AMENDMENTS, ETC. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
12. SUBROGATION. In the event of payment under this Agreement, Grey
Wolf shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable Grey Wolf effectively to bring suit to
enforce such rights.
13. NO DUPLICATION OF PAYMENTS. Grey Wolf shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to
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the extent Indemnitee has otherwise actually received payment (under any
insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable
hereunder.
14. SPECIFIC PERFORMANCE. The parties recognize that if any provision
of this Agreement is violated by Grey Wolf, Indemnitee may be without an
adequate remedy at law. Accordingly, in the event of any such violation, the
Indemnitee shall be entitled, if Indemnitee so elects, to institute proceedings,
either in law or at equity, to obtain damages, to enforce specific performance,
to enjoin such violation, or to obtain any relief or any combination of the
foregoing as Indemnitee may elect to pursue.
15. BINDING EFFECT, ETC. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the parties hereto and their respective
successors (including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business and/or
assets of Grey Wolf), assigns spouses, heirs, and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of Grey Wolf or of any
other enterprise at Grey Wolf's request.
16. SEVERABILITY. The provisions of this Agreement shall be severable
if any of the provisions hereof (including any provision within a single
section, paragraph or sentence) are held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law.
17. GOVERNING LAW. This Agreement shall be governed by, and be
construed and enforced in accordance with, the laws of the State of Texas
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
EXECUTED as of the day first written above.
GREY WOLF DRILLING COMPANY
By J. K. B. Xxxxxx, President
XXXXXXX X. XXXXX
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