AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 11, 2003
REGISTRATION NUMBER 333-________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
GREY WOLF, INC.
CO-REGISTRANTS ARE LISTED ON THE FOLLOWING PAGE.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TEXAS 74-2144774
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042-4136
(713) 435-6100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID W. WEHLMANN
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
10370 RICHMOND AVENUE, SUITE 600
HOUSTON, TEXAS 77042-4136
(713) 435-6100
FAX (713) 435-6171
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
NICK D. NICHOLAS
PORTER & HEDGES, L.L.P.
700 LOUISIANA, 35TH FLOOR
HOUSTON, TEXAS 77002-2764
(713) 226-0600
FAX (713) 226-0237
Approximate date of commencement of proposed sale to the public: From time
to time as determined by the selling securityholders.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
3.75% Contingent Convertible Senior Notes Due 2023... $ 150,000,000(1) 100%(2)(3) $150,000,000(2)(3) $ 12,135
Subsidiary Guarantees of the 3.75% Contingent
Convertible Senior Notes Due 2023.................... - - - -(4)
Common stock, par value $.10 per share............... 23,255,820(5)(6) -(5) -(5) -(7)
(1) Represents the aggregate principal amount of 3.75% Contingent Convertible
Senior Notes Due 2023 that we issued in May 2003.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(i) under the Securities Act.
(3) Exclusive of accrued interest and distributions, if any.
(4) Pursuant to Rule 457(n) under the Securities Act, no separate fee is
payable for the Subsidiary Guarantees.
(5) This number represents the number of shares of common stock initially
issuable upon conversion of the notes registered hereby. For purposes of
estimating the number of shares of common stock to be included in this
registration statement upon conversion of the notes, we calculated the
number of shares of common stock issuable upon conversion of the notes at
an initial conversion rate of approximately 155.0388 shares per $1,000
principal amount of the notes. In addition to the shares of common stock
set forth in the table above, pursuant to Rule 416 under the Securities
Act, we are registering an indeterminate number of shares of common stock
issuable upon conversion of the notes in connection with stock splits,
stock dividends, recapitalizations or similar events.
(6) Also being registered are the rights to purchase shares of Series B Junior
Participating Preference Stock, which are attached to the shares of common
stock registered hereby. These rights, if issued, will be issued for no
additional consideration. Pursuant to Rule 457(g) under the Securities Act,
no additional registration fee is required in connection with the
registration of the rights.
(7) No additional consideration will be received for the common stock.
Therefore, no registration fee is required pursuant to Rule 457(i) under
the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES EXCHANGE COMMISSION, ACTING PURSUANT TO
SAID 8(a), MAY DETERMINE.
TABLE OF ADDITIONAL REGISTRANTS
The following subsidiaries of Grey Wolf, Inc. are co-registrants under
the Registration Statement for the purpose of providing guarantees of payments
on the 3.75% Contingent Convertible Senior Notes Due 2023 registered hereunder:
JURISDICTION OF
INCORPORATION OR I.R.S. EMPLOYER
NAME ORGANIZATION IDENTIFICATION NUMBER
---- ---------------- ---------------------
Grey Wolf Drilling Company L.P................................ Texas 76-0590999
Grey Wolf LLC................................................. Louisiana 72-1433406
Grey Wolf Holdings Company.................................... Nevada 74-1987143
Murco Drilling Corporation.................................... Delaware 72-0512163
Grey Wolf International, Inc.................................. Texas 76-0000351
DI/Perfensa, Inc.............................................. Texas 76-0378440
DI Energy, Inc................................................ Texas 74-2175411
SUBJECT TO COMPLETION, DATED JULY 11, 2003
PROSPECTUS
[GREY WOLF, INC. LOGO]
$150,000,000
3.75% Contingent Convertible Senior Notes Due 2023 and
Common Stock Issuable upon Conversion of the Notes
We sold $150,000,000 aggregate principal amount of our 3.75% Contingent
Convertible Senior Notes Due 2023 in a private placement on May 7, 2003. Selling
securityholders may use this prospectus to resell from time to time their notes
and shares of our common stock issuable upon conversion of the notes. We will
not receive any of the proceeds from this offering.
The notes are convertible, at your option, prior to the maturity date into
shares of our common stock initially at a conversion rate of approximately
155.0388 shares of common stock per $1,000 principal amount, which is equivalent
to an initial conversion price of $6.45 per share, subject to adjustment, in the
following circumstances:
- during any calendar quarter commencing after June 30, 2003, if
the closing sale price per share of our common stock over a
specified number of trading days during the previous quarter
is more than 110% of the conversion price per share on the
last trading day of the quarter;
- if we have called the notes for redemption;
- during any period after June 30, 2003, that the credit ratings
assigned to the notes by both Moody's Investors Service and
Standard & Poor's Ratings Group are reduced below B1 and B+,
respectively, or if after June 30, 2003 neither rating agency
is rating the notes;
- during the five trading day period immediately following any
nine consecutive trading day period in which the average
trading price per $1,000 principal amount of the notes for
each day of such period was less than 95% of the product of
the closing sale price per share of our common stock on that
day multiplied by the number of shares of common stock
issuable upon conversion of $1,000 principal amount of the
notes; or
- upon the occurrence of specified corporate transactions.
Our common stock is listed for trading on the American Stock Exchange under
the symbol "GW." On July 9, 2003, the closing sale price of our common stock was
$3.95 per share.
The notes bear interest at a rate of 3.75% per annum. We will pay interest
on the notes on May 7 and November 7 of each year, beginning November 7, 2003.
We also will pay contingent interest at a rate equal to 0.5% per annum during
any six-month period, with the initial six-month period commencing May 7, 2008,
if the average trading price of the notes per $1,000 principal amount for the
five day trading period ending on the third day immediately preceding the first
day of the applicable six-month period equals $1,200 or more. The notes will
mature on May 7, 2023.
We may redeem some or all of the notes at any time on or after May 14,
2008, at a redemption price, payable in cash, equal to a percentage of the
principal amount of the notes as described in the notes, plus accrued but unpaid
interest, including contingent interest, if any, to the date of redemption.
You may require us to repurchase all or a portion of your notes on May 7,
2013 or May 7, 2018, and upon a change of control, as defined in the Indenture
governing the notes, at 100% of the principal amount of the notes, plus accrued
but unpaid interest, including contingent interest, if any, to the date of
repurchase, payable in cash.
The notes are our senior unsecured obligations and are guaranteed by all of
our wholly-owned domestic subsidiaries and any other subsidiary that guarantees
any of our indebtedness or the indebtedness of our guarantors. The notes and the
guarantees rank equally with all of our and the guarantors' other senior
unsecured debt.
The notes issued in the private placement are eligible for trading in the
The PORTAL(SM) Market of the National Association of Securities Dealers, Inc.
The notes sold using this prospectus, however, will no longer be eligible for
trading in The PORTAL(SM) Market. We do not intend to list the notes on any
other national securities exchange or automated quoting system.
INVESTING IN THE NOTES AND OUR COMMON STOCK ISSUABLE UPON THEIR
CONVERSION INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES OR THE COMMON STOCK ISSUABLE
UPON CONVERSION OF THE NOTES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is __________ __, 2003
TABLE OF CONTENTS
Summary................................................................... 1
Risk Factors.............................................................. 5
Where You Can Find More Information....................................... 15
Forward-Looking Statements................................................ 16
Use of Proceeds........................................................... 18
Ratio of Earnings to Fixed Charges........................................ 18
Price Range of Common Stock............................................... 19
Dividend Policy........................................................... 19
Description of Notes...................................................... 20
Description of Capital Stock.............................................. 34
Certain U.S. Federal Income Tax Considerations............................ 36
Selling Securityholders................................................... 42
Plan of Distribution...................................................... 43
Legal Matters............................................................. 45
Independent Accountants................................................... 45
ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement that we filed
with the Securities and Exchange Commission, or SEC, using a "shelf"
registration or continuous offering process. Under this shelf registration
process, selling securityholders may from time to time sell the securities
described in this prospectus in one or more offerings.
This prospectus provides you with a general description of the
securities that selling securityholders may offer. A selling securityholder may
be required to provide you with a prospectus supplement containing specific
information about the selling securityholder and the terms of the securities
being offered. That prospectus may include additional risk factors or other
considerations applicable to that offering. A prospectus supplement may also
add, update or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus
supplement, you should rely on the information in the prospectus supplement. You
should read both this prospectus and any prospectus supplement together with the
additional information described under the heading "Where You Can Find More
Information."
You should rely only on the information contained in or incorporated by
reference in this prospectus or a prospectus supplement. We have not authorized
any person to give any information or to make any representations not contained
or incorporated by reference in this prospectus. This prospectus is neither an
offer to sell nor a solicitation of an offer to buy securities where an offer or
solicitation would be unlawful. You should not assume the information in this
prospectus or a prospectus supplement is accurate as of any date other than the
date on the front of the documents.
i
SUMMARY
The following summary should be read together with the information
contained in other parts of this prospectus and the documents we incorporate by
reference to fully understand the terms of the notes as well as the tax and
other considerations that are important to you in making a decision about
whether to invest in the notes and the common stock issuable upon their
conversion. As used in this prospectus, unless the context otherwise requires,
"we," "us," "our" or "Grey Wolf" refers to Grey Wolf, Inc. and its subsidiaries.
OUR COMPANY
We are a leading provider of contract land drilling services in the
United States with a domestic fleet of 117 rigs of which 79 rigs are currently
marketed. We currently have 23 cold-stacked rigs, which can be redeployed as
demand dictates, for an estimated $1.5 million to $2.0 million in the aggregate,
bringing our total marketed fleet to 102. In addition, we have 15 rigs that can
be refurbished out of inventory as demand dictates. We conduct substantially all
of our operations through our subsidiaries. Our customers are independent
producers and major oil and gas companies. We conduct our operations primarily
in the markets that we believe have historically had greater utilization rates
and dayrates than the average rates of all other domestic markets. Our customers
use our services principally in drilling for natural gas. Natural gas reserves
are typically found in deeper geological formations and generally require
premium equipment and quality crews, such as we offer, to drill the wells.
During 2002, approximately 98% of the wells we drilled for our customers were
drilled in search of natural gas.
Our principal office is located at 10370 Richmond Avenue, Suite 600,
Houston, Texas 77042-4136, and our telephone number is (713) 435-6100.
THE OFFERING
Notes Offered........................... $150,000,000 aggregate principal
amount of 3.75% Contingent
Convertible Senior Notes Due 2023.
Maturity................................ May 7, 2023.
Ranking................................. The notes are our senior unsecured
indebtedness. The notes rank
senior in right of payment to all
of our future subordinated
indebtedness and rank equal in
right of payment to all of our
existing and future senior
unsecured indebtedness, including
our 8 7/8% Senior Notes due 2007
and our 8 7/8% Senior Notes due
2007, Series B (together, the
"8 7/8% Senior Notes"). The notes
are effectively subordinated to
our secured indebtedness to the
extent of the security.
Substantially all of our assets
and the assets of our
subsidiaries, including our
drilling equipment and the equity
interests in our subsidiaries, are
collateral for first priority
liens securing our credit
facility.
At July 9, 2003, we had no
borrowings outstanding under our
credit facility. At that same
date, we had $10.9 million in
undrawn standby letters of credit
outstanding under the facility and
the ability to borrow up to $64.1
million under that facility. We
are not restricted by the notes
from incurring additional
indebtedness, and we and our
subsidiaries have significant
ability to incur liens.
The notes are effectively
subordinated to all existing and
future indebtedness of our
subsidiaries that are not
guarantors.
Guarantees.............................. The notes are unconditionally
guaranteed, on a joint and several
basis, by all of our wholly-owned
domestic subsidiaries and any
other subsidiary that guarantees
any of our indebtedness or the
indebtedness of the guarantors.
The guarantees are senior
unsecured obligations of the
guarantors and rank equal in right
of payment with the guarantees
1
of our 8 7/8% Senior Notes, made
by the guarantors and all existing
and future unsecured and
unsubordinated indebtedness of the
guarantors. The guarantees are
effectively subordinated to each
subsidiary's existing and future
secured indebtedness to the extent
of the security, including
indebtedness under our credit
facility, which also is secured by
substantially all of each
subsidiary's assets.
Interest Payment Dates.................. We will pay interest on the notes
semi-annually on May 7 and
November 7, beginning November 7,
2003.
Contingent Interest..................... We will pay contingent interest
during any six-month period from
May 7 to November 6 and from
November 7 to May 6, with the
initial six-month period
commencing May 7, 2008, if the
average trading price of the notes
per $1,000 principal amount for
the five trading day period ending
on the third trading day
immediately preceding the first
day of the applicable six-month
period equals $1,200 or more.
During any period when contingent
interest is payable, it will be
payable at a rate equal to 0.50%
per annum.
Conversion Rights....................... You may convert the notes into
shares of our common stock prior
to the maturity date in the
following circumstances:
- during any calendar
quarter commencing after
June 30, 2003, if the
closing sale price per
share of our common stock
for at least 20 trading
days in the period of 30
consecutive trading days
ending on the last
trading day of the
calendar quarter
preceding the quarter in
which the conversion
occurs, is more than 110%
of the conversion price
per share on that 30th
trading day;
- if we have called the
notes for redemption;
- during any period after
June 30, 2003 in which
the credit ratings
assigned to the notes by
both Moody's Investors
Service, Inc. ("Moody's")
and Standard & Poor's
Ratings Group ("S&P") are
reduced below B1 and B+,
respectively;
- if after June 30, 2003
neither Moody's nor S&P
is rating the notes;
- during the five trading
day period immediately
following any nine
consecutive trading day
period in which the
average trading price per
$1,000 principal amount
of the notes for each day
of such period was less
than 95% of the product
of the closing sale price
per share of our common
stock on that day
multiplied by the number
of shares of our common
stock issuable upon
conversion of $1,000
principal amount of the
notes; or
- upon the occurrence of
specified corporate
transactions described
under "Description of
Notes--Conversion
Rights."
You may convert any outstanding
notes into shares of our common
stock at the conversion price per
share of $6.45. This represents a
conversion rate of approximately
155.0388 shares of common stock
per $1,000 principal amount of
notes. The conversion price may be
adjusted for certain reasons, but
will not be adjusted for accrued
2
interest. Upon conversion, the
holder will not receive any cash
payment representing accrued and
unpaid interest, including
contingent interest, if any.
Optional Redemption..................... We may redeem some or all of the
notes at any time on or after May
14, 2008, at a price equal to
101.88% of the principal amount of
the notes (declining ratably to
100% of the principal amount on
May 7, 2013), plus accrued and
unpaid interest, including
contingent interest, if any, up
to, but not including, the date of
redemption, payable in cash.
Repurchase of Notes at the Option of the
Holder.................................. You may require us to repurchase
your notes on May 7, 2013 or May
7, 2018 for a purchase price equal
to 100% of the principal amount of
the notes, plus accrued and unpaid
interest, including contingent
interest, if any, up to, but not
including, the date of repurchase,
payable in cash. See "Description
of Notes--Repurchase of Notes at
the Option of the Holder."
Change in Control....................... When a change in control, as that
term is defined in "Description of
Notes--Right to Require Purchase
of Notes upon a Change in
Control," occurs, you will have
the right to require us to
repurchase your notes at a
purchase price equal to 100% of
the principal amount of the notes,
plus accrued and unpaid interest,
including contingent interest, if
any, up to, but not including, the
date of repurchase, payable in
cash.
Global Note; Book-entry
System.................................. The notes are represented by one
or more Global Notes in fully
registered form, without coupons,
deposited with a custodian for,
and registered in the name of a
nominee of, The Depository Trust
Company, or DTC. Beneficial
interests in the Global Notes will
be shown on, and transfers of the
Global Notes will be effected only
through, records maintained by DTC
and its participants. See
"Description of Notes--Book-Entry
System."
Trading................................. The notes issued in the private
placement are eligible for trading
in The PORTAL(SM) Market. The
notes sold using this prospectus,
however, will no longer be
eligible for trading in The
PORTAL(SM) Market. We do not
intend to list the notes on any
other national securities exchange
or automated quotation system. Our
common stock is traded on the
American Stock Exchange under the
symbol "GW."
Use of Proceeds......................... We will not receive any proceeds
from the sale by any selling
securityholder of the notes or our
common stock issuable upon
conversion of the notes.
Risk Factors............................ See "Risk Factors" and the other
information in this prospectus for
a discussion of factors you should
carefully consider before deciding
to invest in the notes and the
common stock issuable upon
conversion of the notes.
3
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of our earnings to our fixed charges for each of the periods
indicated is as follows:
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
---- ---- ---- ---- ---- ----
- - 5.62 0.60 - -
See "Ratio of Earnings to Fixed Charges" for more information regarding
calculation of the ratios above.
TAX SUMMARY
We intend to treat the notes as contingent payment debt instruments for
U.S. federal income tax purposes. Based on this treatment, in general,
beneficial owners of the notes will be required to accrue interest income on the
notes in the manner described in this prospectus, regardless of whether the
beneficial owner uses the cash or accrual method of tax accounting. Beneficial
owners will be required, in general, to accrue interest based on the rate at
which we would issue a fixed rate, which we have determined to be 9% per annum,
nonconvertible debt instrument with terms and conditions similar to the notes
rather than at a lower rate based on the accruals of stated interest on the
notes. Accordingly, beneficial owners of notes will be required to include in
taxable income in each year an amount of interest that is in excess of the
accruals of stated interest on the notes. Furthermore, upon a sale, purchase by
us at your opinion, exchange, conversion or redemption of the notes, you will
recognize gain or loss equal to the difference between your amount realized and
your adjusted tax basis in the notes. The amount realized by you will include,
in the case of a conversion, the fair market value of the stock you receive. Any
gain on a sale, purchase by us at your opinion, exchange, conversion or
redemption of the notes will be treated as ordinary interest income. You should
consult your tax advisors as to the U.S. federal, state, local or other tax
consequences of acquiring, owning and disposing of the notes, See "Certain U.S.
Federal Income Tax Considerations."
4
RISK FACTORS
In considering whether to purchase the notes and our common stock
issuable upon conversion of the notes, you should carefully consider all the
information we have included and incorporated by reference in this prospectus.
In particular, you should carefully consider the risk factors described below
and other information contained or incorporated by reference in this prospectus.
In addition, please read "Forward-Looking Statements," where we describe
additional uncertainties associated with our business. The risks and
uncertainties set forth below are not the only risks and uncertainties that we
face. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also impair our business and results of
operations.
RISKS RELATED TO OUR BUSINESS
OUR BUSINESS DEPENDS ON THE LEVEL OF ACTIVITY IN THE OIL AND GAS INDUSTRY IN THE
MARKETS WHERE WE OPERATE, WHICH CAN BE ADVERSELY AFFECTED BY LOW OIL AND NATURAL
GAS PRICES AND EXPECTATIONS OF LOW PRICES.
As a supplier of land drilling services, our business depends on the
level of drilling activity by oil and gas exploration and production companies
operating in the geographic markets where we operate. The number of wells they
choose to drill is strongly influenced by past trends in oil and natural gas
prices, current prices, and their outlook for future oil and natural gas prices.
Low oil and natural gas prices, or the perception among oil and gas companies
that future prices are likely to decline, can materially and adversely affect us
in many ways, including:
- our revenues, cash flows and earnings;
- the fair market value of our rig fleet, which in turn could
trigger a writedown of the carrying value of these assets for
accounting purposes;
- our ability to maintain or increase our borrowing capacity;
- our ability to obtain additional capital to finance our
business and make acquisitions, and the cost of that capital;
and
- our ability to retain skilled rig personnel who we would need
in the event of an increase in the demand for our services.
Depending on the market prices of oil and natural gas, oil and gas
exploration and production companies may cancel or curtail their drilling
programs, thereby reducing demand for our services. Oil and natural gas prices
have been volatile historically and, we believe, will continue to be so in the
future. Many factors beyond our control affect oil and natural gas prices,
including:
- weather conditions in the United States and elsewhere;
- economic conditions in the United States and elsewhere;
- actions by OPEC, the Organization of Petroleum Exporting
Countries;
- political instability in the Middle East, Venezuela and other
major producing regions;
- governmental regulations, both domestic and foreign;
- the pace adopted by foreign governments for exploration of
their national reserves; and
- the overall supply and demand for oil and natural gas.
5
AN ECONOMIC DOWNTURN MAY ADVERSELY AFFECT OUR BUSINESS.
An economic downturn may cause reduced demand for petroleum-based
products and natural gas. In addition, many oil and natural gas production
companies often reduce or delay expenditures to reduce costs, which in turn may
cause a reduction in the demand for our services during these periods. According
to the Baker Hughes Rotary Rig Count, in July 2001, there were approximately
1,114 active land drilling rigs in the United States, and as of July 3, 2003,
the number of active land drilling rigs had been reduced to 953. The number of
active land drilling rigs may be indicative of demand for services such as those
we provide. If the economic environment worsens, our business, financial
condition and results of operations may be further adversely impacted.
WE OPERATE IN A HIGHLY COMPETITIVE, FRAGMENTED INDUSTRY IN WHICH PRICE
COMPETITION IS INTENSE.
The drilling contracts we compete for are usually awarded on the basis
of competitive bids. We believe pricing and rig availability are the primary
factors considered by our potential customers in determining which drilling
contractor to select. We believe other factors are also important. Among those
factors are:
- the type and condition of drilling rigs;
- the quality of service and experience of rig crews;
- the safety record of the company and the particular drilling
rig;
- the offering of ancillary services; and
- the ability to provide drilling equipment adaptable to, and
personnel familiar with, new technologies and drilling
techniques.
While we must generally be competitive in our pricing, our competitive
strategy generally emphasizes the quality of our equipment, the safety record of
our rigs and the experience of our rig crews to differentiate us from our
competitors. This strategy is less effective during an industry downturn as
lower demand for drilling services intensifies price competition and makes it
more difficult for us to compete on the basis of factors other than price. In
all of the markets in which we compete, an over supply of rigs can cause greater
price competition.
Contract drilling companies compete primarily on a regional basis, and
the intensity of competition may vary significantly from region to region at any
particular time. If demand for drilling services improves in a region where we
operate, our competitors might respond by moving in suitable rigs from other
regions. An influx of rigs from other regions could rapidly intensify
competition and make any improvement in demand for drilling rigs short-lived.
WE FACE COMPETITION FROM COMPETITORS WITH GREATER RESOURCES.
Some of our competitors have greater financial and human resources than
do we. Their greater capabilities in these areas may enable them to:
- better withstand industry downturns;
- compete more effectively on the basis of price and technology;
- retain skilled rig personnel; and
- build new rigs or acquire and refurbish existing rigs to be
able to place rigs into service more quickly than we can in
periods of high drilling demand.
6
OUR DRILLING OPERATIONS INVOLVE OPERATING HAZARDS WHICH IF NOT INSURED OR
INDEMNIFIED AGAINST COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Our operations are subject to the usual hazards inherent in the land
drilling business including the risks of:
- blowouts;
- reservoir damage;
- loss of production;
- loss of well control;
- cratering;
- fires, pollution and explosions;
- collapse of the borehole;
- lost or stuck drill strings; and
- damage or loss from natural disasters.
If these drilling hazards occur they can produce substantial
liabilities to us which include:
- suspension of drilling operations;
- damage to the environment;
- damage to, or destruction of, our property and equipment and
that of others;
- personal injury and loss of life; and
- damage to producing or potentially productive oil and natural
gas formations through which we drill.
We attempt to obtain indemnification from our customers by contract for
certain of these risks under daywork contracts but are not always able to do so.
We also seek to protect ourselves from some but not all operating hazards
through insurance coverage. The indemnification we receive from our customers
and our own insurance coverage may not, however, be sufficient to protect us
against liability for all consequences of disasters, personal injury and
property damage. Additionally, our insurance coverage generally provides that we
bear a portion of the claim through substantial insurance coverage deductibles.
We can offer no assurance that our insurance or indemnification arrangements
will adequately protect us against liability from all of the hazards of our
business. If we were to incur a significant liability for which we were not
fully insured or indemnified it could have a material adverse effect on our
financial position and results of operations.
We believe that the cost of insurance has increased significantly for
most companies in our industry in 2002-2003 compared to prior years. When we
renew our current insurance policies, the premiums we pay may also increase
substantially, which will increase our operating costs. Additionally, we may be
unable to obtain or renew insurance coverage of the type and amount we desire at
reasonable rates.
7
OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL LAWS THAT MAY EXPOSE US TO
LIABILITIES FOR NONCOMPLIANCE, WHICH MAY ADVERSELY AFFECT US.
Many aspects of our operations are subject to domestic laws and
regulations. For example, our drilling operations are typically subject to
extensive and evolving laws and regulations governing:
- environmental quality;
- pollution control; and
- remediation of environmental contamination.
Our operations are often conducted in or near ecologically sensitive
areas, such as wetlands, which are subject to special protective measures and
which may expose us to additional operating costs and liabilities for
noncompliance with applicable laws. The handling of waste materials, some of
which are classified as hazardous substances, is a necessary part of our
operations. Consequently, our operations are subject to stringent regulations
relating to protection of the environment and waste handling which may impose
liability on us for our own noncompliance and, in addition, that of other
parties without regard to whether we were negligent or otherwise at fault.
Compliance with applicable laws and regulations may require us to incur
significant expenses and capital expenditures which could have a material and
adverse effect on our operations by increasing our expenses and limiting our
future contract drilling opportunities.
WE HAVE HAD ONLY TWO PROFITABLE YEARS SINCE 1991.
We have a history of losses with our only profitable years since 1991
being 1997 and 2001 in which we had net income of $10.2 million and $68.5
million, respectively. Whether we are able to be profitable in the future will
depend on many factors, but primarily on the utilization rates for our rigs and
the rates we charge for them.
UNEXPECTED COST OVERRUNS ON OUR TURNKEY AND FOOTAGE DRILLING JOBS COULD
ADVERSELY AFFECT US.
We have historically derived a significant portion of our revenues from
turnkey and footage drilling contracts and we expect that they will continue to
represent a significant component of our revenues. The occurrence of uninsured
or under-insured losses or operating cost overruns on our turnkey and footage
jobs could have a material adverse effect on our financial position and results
of operations. Under a typical turnkey or footage drilling contract, we agree to
drill a well for our customer to a specified depth and under specified
conditions for a fixed price. We typically provide technical expertise and
engineering services, as well as most of the equipment required for the drilling
of turnkey and footage wells. We often subcontract for related services. Under
typical turnkey drilling arrangements, we do not receive progress payments and
are entitled to be paid by our customer only after we have performed the terms
of the drilling contract in full. For these reasons, the risk to us under
turnkey and footage drilling contracts is substantially greater than for wells
drilled on a daywork basis because we must assume most of the risks associated
with drilling operations that are generally assumed by our customer under a
daywork contract. Although we attempt to obtain insurance coverage to reduce
certain of the risks inherent in our turnkey and footage drilling operations, we
can offer no assurance that adequate coverage will be obtained or will be
available in the future.
OUR INDENTURES AND CREDIT AGREEMENTS MAY PROHIBIT US FROM PARTICIPATION IN
CERTAIN TRANSACTIONS THAT WE MAY CONSIDER ADVANTAGEOUS.
The indentures under which we issued our 8 7/8% Senior Notes contain
restrictions on our ability and the ability of certain of our subsidiaries to
engage in certain types of transactions. These restrictive covenants may
adversely affect our ability to pursue business acquisitions. These include
covenants which may prohibit or limit our ability to:
- incur additional indebtedness;
8
- pay dividends or make other restricted payments;
- repurchase our equity securities;
- sell material assets;
- grant or permit liens to exist on our assets;
- enter into sale and lease-back transactions;
- make certain investments;
- enter into transactions with related persons; and
- engage in lines of business unrelated to our core land
drilling business.
Our credit facility also contains covenants restricting our ability and
our subsidiaries' ability to undertake many of the same types of transactions,
and when certain conditions are met, contains financial ratio covenants. They
may also limit our ability to respond to changes in market conditions. Our
ability to meet the financial ratio covenants of our credit agreement and
indentures can be affected by events and conditions beyond our control and we
may be unable to meet those tests.
Our credit facility contains default terms that effectively cross
default with the indentures covering our 8 7/8% Senior Notes. If we breach the
covenants in the indentures it could cause our default under our 8 7/8% Senior
Notes, and also under our credit agreement, and possibly under other then
outstanding debt obligations owed by us or our subsidiaries. If the indebtedness
under our credit facility or other indebtedness owed by us or our subsidiaries
is more that $10.0 million and is not paid when due, or is accelerated by the
holders of the debt, then an event of default under the indentures covering our
8 7/8% Senior Notes would occur. If circumstances arise in which we are in
default under our various credit agreements, our cash and other assets may be
insufficient to repay our indebtedness and that of our subsidiaries.
WE COULD BE ADVERSELY AFFECTED IF SHORTAGES OF EQUIPMENT, SUPPLIES OR PERSONNEL
OCCUR.
While we are not currently experiencing any shortages, from time to
time there have been shortages of drilling equipment and supplies which we
believe could reoccur. During periods of shortages, the cost and delivery times
of equipment and supplies are substantially greater. In the past, in response to
such shortages, we have entered into agreements with various suppliers and
manufacturers that enabled us to reduce our exposure to price increases and
supply shortages. Although we have formed many informal supply arrangements with
equipment manufacturers and suppliers, we cannot assure you that we will be able
to maintain existing arrangements. Shortages of drilling equipment or supplies
could delay and adversely affect our ability to return to service our rigs held
for future refurbishment and obtain contracts for our marketed rigs, which could
have a material adverse effect on our financial condition and results of
operations.
Although we have not encountered material difficulty in hiring and
retaining qualified rig crews, such shortages have occurred in the past in our
industry. We may experience shortages of qualified personnel to operate our
rigs, which could have a material adverse effect on our financial condition and
results of operations.
RISKS RELATED TO THE NOTES
WE HAVE A SIGNIFICANT AMOUNT OF INDEBTEDNESS AND COULD INCUR ADDITIONAL
INDEBTEDNESS, WHICH COULD MATERIALLY AND ADVERSELY AFFECT OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER THE NOTES AND OUR OTHER OUTSTANDING INDEBTEDNESS.
We have now and will continue to have a significant amount of
indebtedness. On March 31, 2003, after giving effect to the sale of the notes
and the use of proceeds therefrom, we would have had total indebtedness of
9
approximately $235.0 million in principal amount (of which $150.0 million in
principal amount would have consisted of the notes and $85.0 million of 8 7/8%
Senior Notes).
Our substantial indebtedness could have important consequences to you
and your investment in the notes and upon conversion, in our common stock. For
example, it could:
- make it more difficult for us to satisfy our obligations with
respect to the notes;
- increase our vulnerability to general adverse economic and
industry conditions;
- require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness thereby
reducing the availability of our cash flow to fund working
capital, capital expenditures and other general corporate
purposes;
- limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
- place us at a competitive disadvantage compared to our
competitors that have less debt; and
- limit our ability to borrow additional funds.
Neither the Indenture nor the terms of the notes limit our ability to
incur additional indebtedness, including senior indebtedness, or to grant liens
on our assets. We and our subsidiaries may incur substantial additional
indebtedness and liens on our assets in the future.
TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR
ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our operating activities provided net cash sufficient to pay our debt
service obligations for the year ended December 31, 2002. However, we cannot
assure you that we will be able to generate sufficient cash flow in the future.
Our ability to make payments on and to refinance our indebtedness, including the
notes, and to fund planned capital expenditures will depend on our ability to
generate cash in the future. This, to a certain extent, is subject to general
economic, financial, competitive, regulatory and other factors that are beyond
our control.
THE NOTES AND THE GUARANTEES ARE SENIOR UNSECURED OBLIGATIONS AND ARE
EFFECTIVELY SUBORDINATED TO ALL OUR AND OUR SUBSIDIARIES' EXISTING AND FUTURE
SECURED DEBT.
The notes and the guarantees constitute senior indebtedness and rank
equally with our 8 7/8% Senior Notes, the guarantees of the 8 7/8% Senior Notes
and all of our unsecured and unsubordinated indebtedness and rank senior to our
future subordinated indebtedness, if any. Substantially all of our assets and
the assets of our subsidiaries, including our drilling equipment and the equity
interests in our subsidiaries, are pledged as collateral under our credit
facility. Our credit facility is also secured by our guarantees and the
guarantees of our subsidiaries. The notes and the guarantees of the notes are
effectively subordinated to all of our and our subsidiaries' existing and future
secured indebtedness, including any future indebtedness incurred under our
credit facility. As of July 9, 2003, we had the ability to borrow approximately
$64.1 million under our credit facility (after reductions for undrawn
outstanding standby letters of credit of $10.9 million). We are permitted to
borrow substantial additional indebtedness, including senior debt, under the
terms of the Indenture.
In the event of any distribution or payment in any bankruptcy,
liquidation, reorganization, dissolution or winding up of us or any guarantor,
holders of our secured indebtedness and the secured indebtedness of our
subsidiaries will have claims with respect to the assets securing that
indebtedness that are prior to the claims of holders of the notes. Holders of
the notes will participate ratably with all holders of our and our subsidiaries'
unsecured indebtedness that is deemed to be of the same class as the notes and
the guarantees of the notes, respectively, and potentially with all of our and
our subsidiaries' general creditors, based upon the respective amounts owed to
each holder or creditor, in our and our subsidiaries' remaining assets. If any
of the foregoing
10
events occur, we cannot assure you that there will be sufficient assets to pay
amounts due on the notes. As a result, holders of notes may receive less,
ratably, than holders of our and our subsidiaries' secured indebtedness.
In addition, the notes are effectively subordinated to the claims of
all of the creditors, including trade creditors and tort claimants, of our
subsidiaries. In the event of an insolvency, bankruptcy, liquidation,
reorganization, dissolution or winding up of the business of any of our
subsidiaries that is not a subsidiary guarantor, creditors of such subsidiary
generally will have the right to be paid in full before any distribution will be
made to us or the holders of the notes. The capital stock of the subsidiary
guarantors has been pledged to secure indebtedness under the credit facility.
WE ARE A HOLDING COMPANY, AND WE MAY NOT HAVE ACCESS TO THE CASH FLOW AND OTHER
ASSETS OF OUR SUBSIDIARIES THAT MAY BE NEEDED TO MAKE PAYMENT ON THE NOTES.
We currently conduct substantially all of our operations through our
subsidiaries, and our operating income and cash flow are generated by our
subsidiaries. As a result, distributions, loans or advances from our
subsidiaries are the principal source of funds necessary to meet our debt
service obligations. Contractual provisions or laws, as well as our
subsidiaries' financial condition and operating requirements, may limit our
ability to obtain cash from our subsidiaries. If we are unable to obtain funds
from our subsidiaries, we may not be able to pay interest or principal on the
notes when due, or to redeem or repurchase the notes as required by the terms of
the Indenture, and we may not be able to obtain the necessary funds from other
sources.
THE SUBSIDIARY GUARANTEES COULD BE DEEMED FRAUDULENT CONVEYANCES UNDER CERTAIN
CIRCUMSTANCES, AND A COURT MAY SUBORDINATE OR VOID THE SUBSIDIARY GUARANTEES.
Under the federal bankruptcy laws and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that subsidiary guarantor
if, among other things, the subsidiary guarantor, at the time it incurred the
indebtedness evidenced by its guarantee:
- received less than reasonably equivalent value or fair
consideration for the incurrence of such guarantee; and
- was insolvent or rendered insolvent by reason of such
incurrence; or
- was engaged in a business or transaction for which
the subsidiary guarantor's remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they
mature.
Among other things, a legal challenge of a guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the subsidiary
guarantor as a result of our issuance of the notes. The Indenture contains a
savings clause, which generally will limit the obligations of each subsidiary
guarantor under its guarantee to the maximum amount as will, after giving effect
to all of the liabilities of that subsidiary guarantor, result in such
obligations not constituting a fraudulent conveyance. To the extent a guarantee
of any subsidiary guarantor was avoided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the notes would cease to have any
claim against that subsidiary guarantor (and could be required to return
payments received from that guarantor) and would be our creditors and the
creditor of any subsidiary guarantor whose guarantee was not avoided or held
unenforceable. In such event, the claims of the holders of the notes against the
issuer of an invalid guarantee would be subject to the prior payment of all
liabilities of such subsidiary guarantor. After providing for all prior claims,
there may not be available sufficient assets to satisfy the claims of the
holders of the notes relating to any avoided portions of any of the guarantees.
In addition, any payment by that subsidiary guarantor pursuant to its guarantee
could be voided and required to be returned to the subsidiary guarantor, or to a
fund for the benefit of the creditors of the subsidiary guarantor. The measures
of insolvency for purposes of these fraudulent transfer laws will
11
vary depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a subsidiary guarantor
would be considered insolvent if:
- the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its assets;
- the present fair saleable value of its assets were less than
the amount that would be required to pay its probable
liabilities, including contingent liabilities, on its existing
debts, as they become absolute and mature; or
- it could not pay its debts as they become due.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL PURCHASE OPTION OR THE PURCHASE AT THE OPTION OF THE HOLDER
PROVISIONS OF THE INDENTURE.
Upon the occurrence of a change in control or on May 7, 2013 and May 7,
2018, holders of the notes may require us to repurchase their notes. However, it
is possible that we may not have sufficient funds available at the time of any
such events to make the required repurchases.
The source of funds for any repurchase required as a result of any such
events will be our available cash or cash generated from operating activities or
other sources, including borrowings, sales of assets, sales of equity or funds
provided by a new controlling entity. Sufficient funds may not be available at
the time of any such events to make any required repurchases of the notes
tendered. Furthermore, the use of available cash to fund the repurchase of the
notes may impair our ability to obtain additional financing in the future.
OUR REPORTED EARNINGS PER SHARE MAY BE MORE VOLATILE BECAUSE OF THE CONVERSION
CONTINGENCY PROVISION OF THE NOTES.
Holders of the notes may convert the notes into our common stock:
- during any calendar quarter commencing after June 30, 2003, if
the closing sale price per share of our common stock for at
least 20 trading days in the period of 30 consecutive trading
days ending on the last trading day of the calendar quarter
preceding the quarter in which the conversion occurs, is more
than 110% of the conversion price per share on that 30th
trading day;
- if we have called the notes for redemption;
- during any period after June 30, 2003 in which the credit
ratings assigned to the notes by both Moody's and S&P are
reduced below B1 and B+, respectively;
- if after June 30, 2003 neither Moody's nor S&P is rating the
notes;
- during the five trading day period immediately following any
nine consecutive trading day period in which the average
trading price per $1,000 principal amount of the notes for
each day of such period was less than 95% of the product of
the closing sale price per share of our common stock on that
day multiplied by the number of shares of our common stock
issuable upon conversion of $1,000 principal amount of the
notes; or
- upon the occurrence of specified corporate transactions.
Until one of these contingencies is met, the shares underlying the notes are not
included in the calculation of basic or diluted earnings per share. Should one
of these contingencies be met, earnings per share could decrease, depending on
the level of net income, as a result of the inclusion of the underlying shares
in the earnings per share calculation. Volatility in our stock price could cause
this condition to be met in one quarter and not in a subsequent quarter,
increasing the volatility of diluted earnings per share.
12
YOU SHOULD CONSIDER THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING NOTES.
We intend to treat the notes as contingent payment debt instruments for
U.S. federal income tax purposes. As a result of such treatment, you will be
required to include amounts in income, as ordinary income, in advance of the
receipt of the cash or other property attributable thereto. The amount of
interest income required to be included by you for each year will be in excess
of the stated interest that accrues on the notes. You will recognize gain or
loss on the sale, purchase by us at your option, exchange, conversion or
redemption of a note in an amount equal to the difference between the amount
realized on the sale, purchase by us at your option, exchange, conversion or
redemption, including the fair market value of any of our common stock received
upon conversion, and your adjusted tax basis in the note. Any gain recognized by
you on the sale, purchase by us at your option, exchange, conversion or
redemption of a note generally will be ordinary interest income, any loss will
be ordinary loss to the extent of the interest previously included in income,
and thereafter, capital loss. Certain material U.S. federal income tax
consequences of ownership of the notes are summarized in this prospectus under
the heading "Certain U.S. Federal Income Tax Considerations."
WE EXPECT THAT THE TRADING VALUE OF THE NOTES WILL BE SIGNIFICANTLY AFFECTED BY
THE PRICE OF OUR COMMON STOCK AND OTHER FACTORS.
The market price of the notes is expected to be significantly affected
by the market price of our common stock. This may result in greater volatility
in the trading value of the notes than would be expected for nonconvertible debt
securities. In addition, the notes have a number of features, including
conditions to conversion, which, if not met, could result in a holder receiving
less than the value of our common stock into which a note would otherwise be
convertible. These features could adversely affect the value and the trading
prices for the notes.
AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP.
The notes issued in the private placement are eligible for trading in
the The PORTAL(SM) Market of the National Association of Securities Dealers,
Inc. The notes sold using this prospectus, however, will no longer be eligible
for trading in The PORTAL(SM) Market. We do not intend to list the notes on any
other national securities exchange or automated quoting system. We cannot assure
you that an active trading market for the notes will develop or be sustained. To
the extent that an active trading market does not develop, the liquidity and
trading prices for the notes may be harmed. The notes may trade at a discount
from their initial offering price, depending on prevailing interest rates, the
market for similar securities, the price of our shares of common stock, our
performance and other factors.
RISKS RELATED TO OUR COMMON STOCK
OUR INDENTURES AND CREDIT AGREEMENT RESTRICT OUR ABILITY TO PAY DIVIDENDS.
We have never declared a cash dividend on our common stock and do not
expect to pay cash dividends on our common stock for the foreseeable future. We
expect that all cash flow generated from our operations in the foreseeable
future will be retained and used to develop or expand our business, pay debt
service and reduce outstanding indebtedness. Furthermore, the terms of our
credit facility prohibit the payment of dividends without the prior written
consent of the lenders and the terms of the indentures under which our 8 7/8%
Senior Notes are issued also restrict our ability to pay dividends under certain
conditions.
CERTAIN PROVISIONS OF OUR ORGANIZATIONAL DOCUMENTS, SECURITIES, AND CREDIT
AGREEMENT HAVE ANTI-TAKEOVER EFFECTS WHICH MAY PREVENT OUR SHAREHOLDERS FROM
RECEIVING THE MAXIMUM VALUE FOR THEIR SHARES.
Our articles of incorporation, bylaws, securities, and credit agreement
contain certain provisions that may delay or prevent entirely a change of
control transaction not supported by our board of directors, or which may have
that general effect. These measures include:
- classification of our board of directors into three classes,
with each class serving a staggered three year term;
13
- giving our board of directors the exclusive authority to
adopt, amend or repeal our bylaws and thus prohibiting
shareholders from doing so;
- requiring our shareholders to give advance notice of their
intent to submit a proposal at the annual meeting; and
- limiting the ability of our shareholders to call a special
meeting and act by written consent.
Additionally, the indentures under which the notes and our 8 7/8%
Senior Notes are issued require us to offer to repurchase the notes and 8 7/8%
Senior Notes then outstanding at a purchase price equal to 100% and 101%,
respectively, of the principal amount plus accrued and unpaid interest to the
date of purchase in the event that we become subject to a change of control, as
defined in the indentures. This feature of the indentures could also have the
effect of discouraging potentially attractive change of control offers.
Furthermore, we have adopted a shareholder rights plan which may have
the effect of impeding a hostile attempt to acquire control of us.
LARGE AMOUNTS OF OUR COMMON STOCK MAY BE RESOLD INTO THE MARKET IN THE FUTURE
WHICH COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO DROP SIGNIFICANTLY,
EVEN IF OUR BUSINESS IS DOING WELL.
As of July 9, 2003, 181,222,031 shares of our common stock were issued
and outstanding. In addition, as of July 9, 2003, we had issued options to
purchase approximately 10.7 million shares of common stock, of which options to
acquire approximately 5.5 million shares of common stock are currently
exercisable. The market price of our common stock could drop significantly if
future sales of substantial amounts of our common stock occur, or if the
perception exists that substantial sales may occur.
14
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration statement on Form
S-3 that we filed with the SEC under the Securities Act. This prospectus, which
forms a part of the registration statement, does not contain all the information
set forth in the registration statement. You should refer to the registration
statement and its related exhibits and schedules for further information about
our company and the shares offered in this prospectus. Statements contained in
this prospectus concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of that document
filed as an exhibit to the registration statement or otherwise filed with the
SEC, and each such statement is qualified by this reference. The registration
statement and its exhibits and schedules are on file at the offices of the SEC
and may be inspected without charge.
We file annual, quarterly, and special reports, proxy statements and
other information with the Securities and Exchange Commission. You can read and
copy any materials we file with the SEC at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain information about
the operation of the SEC's public reference room by calling the SEC at
1-800-SEC-0330. The SEC also maintains a Web site that contains information we
file electronically with the SEC, which you can access over the Internet at
http://www.sec.gov.
We are incorporating by reference in this prospectus information we
file with the SEC, which means that we are disclosing important information to
you by referring you to those documents. The information we incorporate by
reference is an important part of this prospectus, and later information that we
file with the SEC automatically will update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we close this offering:
- our annual report on Form 10-K for the year ended December 31,
2002;
- our quarterly report on Form 10-Q for the quarter ended March
31, 2003;
- our current report on Form 8-K filed on May 2, 2003;
- our current report on Form 8-K filed on May 8, 2003;
- the description of our common stock contained in our current
report on Form 8-K dated October 6, 1997; and
- the description of our preferred stock purchase rights
contained in our registration statement on Form 8-A/A filed
with the SEC on October 9, 1998.
You may request a copy of these filings, which we will provide to you
at no cost, by writing or telephoning us at the following address and telephone
number:
Grey Wolf, Inc.
10370 Richmond Avenue, Suite 600
Houston, Texas 77042
(713) 435-6100
Attention: Investor Relations
15
FORWARD-LOOKING STATEMENTS
This prospectus, including the information we incorporate by reference,
contains "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. All statements other than statements of historical
facts included, or incorporated by reference, in this prospectus are
forward-looking statements, including statements regarding the following:
- business strategy;
- demand for our services;
- 2003 rig activity and financial results;
- reactivation and cost of reactivation of non-marketed rigs;
- projected dayrates and operating margins per rig day;
- rigs expected to be engaged in turnkey and footage operations;
- projected annual tax benefit rate;
- wage rates and retention of employees;
- sufficiency of our capital resources and liquidity; and
- depreciation and capital expenditures in 2003.
Although we believe the forward-looking statements are reasonable, we
cannot assure you that these statements will prove to be correct. We have based
these statements on assumptions and analyses in light of our experience and
perception of historical trends, current conditions, expected future development
and other factors we believe were appropriate when the statements were made. In
addition to those risks described under "Risk Factors" and in our SEC filings
incorporated by reference in this prospectus, other factors that could cause
actual results to differ materially from our expectations include:
- fluctuations in prices and demand for oil and natural gas;
- fluctuations in levels of oil and natural gas exploration and
development activities;
- fluctuations in the demand for contract land drilling
services;
- the existence and competitive responses of our competitors;
- uninsured or underinsured casualty losses;
- technological changes and developments in the industry;
- the existence of operating risks inherent in the contract land
drilling industry;
- U.S. and global economic conditions;
- the availability and terms of insurance coverage;
- the ability to attract and retain qualified personnel;
16
- unforeseen operating costs such as costs for environmental
remediation and turnkey and footage cost overruns; and
- weather conditions.
Our forward-looking statements speak only as of the date specified in
such statements or, if no date is stated, as of the date of this prospectus. We
expressly disclaim any obligation or undertaking to release publicly any updates
or revisions to any forward-looking statement contained in this prospectus to
reflect any change in our expectations or with regard to any change in events,
conditions or circumstances on which our forward-looking statements are based.
17
USE OF PROCEEDS
We will not receive any proceeds from the sale by any selling
securityholder of the notes or our common stock issuable upon conversion of the
notes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of our earnings to our fixed charges for each of the periods
indicated is as follows:
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------------------------------------------------------------------------------
2003 2002 2001 2000 1999 1998
- ------------ ---- ---- ---- ---- ----
- - 5.62 0.60 - -
For these ratios, earnings consist of income from continuing operations
before income taxes plus fixed charges. Fixed charges consist of interest
expense, amortization of debt issuance expense and the original issue discount.
For the three months ended March 31, 2003 and the years ending December 31,
2002, 1999 and 1998, earnings were insufficient to cover fixed charges by $8.1
million, $5.8 million, $32.8 million, and $89.5 million, respectively. There was
no preferred stock outstanding for any of the periods shown above.
18
PRICE RANGE OF COMMON STOCK
Our common stock is listed and traded on the American Stock Exchange
("AMEX") under the symbol "GW." The following table sets forth the high and low
closing prices of our common stock on the AMEX for the periods indicated.
HIGH LOW
---- ---
YEAR ENDED DECEMBER 31, 2003:
Quarter ended March 31, 2003............................................... $4.50 $3.50
Quarter ended June 30, 2003................................................ 4.96 3.88
Quarter ended September 30, 2003 (through July 9, 2003).................... 4.19 3.92
YEAR ENDED DECEMBER 31, 2002:
Quarter ended March 31, 2002............................................... 4.07 2.69
Quarter ended June 30, 2002................................................ 5.01 3.72
Quarter ended September 30, 2002........................................... 4.08 2.78
Quarter ended December 31, 2002............................................ 4.42 3.15
YEAR ENDED DECEMBER 31, 2001:
Quarter ended March 31, 2001............................................... 6.96 5.06
Quarter ended June 30, 2001................................................ 6.87 3.77
Quarter ended September 30, 2001........................................... 3.73 1.75
Quarter ended December 31, 2001............................................ 3.31 1.76
On July 9, 2003, the closing price of our common stock on the AMEX was
$3.95 per share.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock and
do not expect to pay cash dividends in 2003 or for the foreseeable future. We
anticipate that all cash flow generated from operations in the foreseeable
future will be retained and used to develop or expand our business, pay debt
service and reduce outstanding indebtedness. Any future payment of cash
dividends will depend upon our results of operations, financial condition, cash
requirements and other factors deemed relevant by our board of directors.
The terms of our credit facility prohibit the payment of dividends
without the prior written consent of the lenders. The terms of the indentures
under which our 8 7/8% Senior Notes are issued also restrict our ability to pay
dividends under certain conditions.
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DESCRIPTION OF NOTES
We issued the notes under an indenture between Grey Wolf, Inc., the
guarantors and JPMorgan Chase Bank, as Trustee, as supplemented by the
Supplemental Indenture dated as of May 22, 2003 (collectively, the "Indenture").
The following description is only a summary of the material provisions of the
notes, the related Indenture and the registration rights agreement. We urge you
to read the Indenture, the notes and the registration rights agreement in their
entirety because they, and not this description, define your rights as holders
of the notes. You may request copies of these documents at our address shown
under the caption "Where You Can Find More Information." For purposes of this
section, references to "we," "us," "our" and "Grey Wolf" include only Grey Wolf,
Inc. and not its subsidiaries.
GENERAL
We issued the notes in an aggregate principal amount of $150,000,000.
The notes are our unsecured senior obligations, guaranteed by all of our
wholly-owned domestic subsidiaries and any other subsidiaries that guarantee any
of our indebtedness or the indebtedness of the guarantors. The notes will mature
on May 7, 2023, unless earlier redeemed at our option as described under
"--Optional Redemption of the Notes," repurchased by us at a holder's option on
certain dates as described under "--Repurchase of Notes at the Option of the
Holder" or repurchased by us at a holder's option upon a change in control of
Grey Wolf as described under "--Right to Require Purchase of Notes upon a Change
in Control." The notes are convertible into shares of our common stock as
described under "--Conversion Rights."
Interest on the notes accrues at the rate of 3.75% per annum and is
payable semiannually in arrears on May 7 and November 7 of each year, commencing
on November 7, 2003. We will make each interest payment to the holders of record
of the notes on the immediately preceding April 22 and October 22, whether or
not this day is a business day. Interest payable upon redemption will be paid to
the person to whom principal is payable. Interest on the notes is computed on
the basis of a 360-day year comprised of twelve 30-day months. We will pay the
principal of, and interest (including contingent interest, if any) on, the notes
at the office or agency maintained by us in the Borough of Manhattan in New York
City. Holders may register the transfer of their notes at the same location. We
reserve the right to pay interest to holders of the notes by check mailed to the
holders at their registered addresses. However, a holder of notes with an
aggregate principal amount in excess of $1,000,000 will be paid by wire transfer
in immediately available funds. Except under the limited circumstances described
below, the notes will be issued only in fully registered book-entry form,
without coupons, and will be represented by one or more Global Notes. There will
be no service charge for any registration of transfer or exchange of notes. We
may, however, require holders to pay a sum sufficient to cover any tax or other
governmental charge payable in connection with any transfer or exchange.
The Indenture does not contain any restriction on the payment of
dividends, the incurrence of indebtedness or the repurchase of our securities,
and does not contain any financial covenants. Other than as described under
"--Right to Require Purchase of Notes upon a Change in Control," the Indenture
contains no covenants or other provisions that afford protection to holders of
notes in the event of a highly leveraged transaction.
We currently conduct our operations through our subsidiaries, and our
operating income and cash flow are generated by our subsidiaries. As a result,
distributions or advances from our subsidiaries are the principal source of
funds necessary to meet our debt service obligations. Contractual provisions or
laws, as well as our subsidiaries' financial condition and operating
requirements, may limit our ability to obtain cash from our subsidiaries that we
require to pay our debt service obligations, including payments on the notes.
GUARANTEES OF NOTES
Each guarantor unconditionally guarantees, jointly and severally (the
"Guarantees"), to each holder and the Trustee, the full and prompt performance
of our obligations under the Indenture and the notes, including the payment of
principal of, and premium, if any, and interest (including contingent interest)
on the notes pursuant to its guarantee. If any subsidiary of ours that is not an
initial guarantor guarantees any of our indebtedness or indebtedness of the
guarantors at any time in the future, then we will cause the notes to be equally
and ratably guaranteed by such subsidiary. In addition, we will cause each
subsidiary that is required to become a guarantor to
20
execute and deliver a supplement to the Indenture pursuant to which such
subsidiary will guarantee the payment of the notes on the same terms and
conditions as the Guarantees by the initial guarantors.
The obligations of each guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
guarantor and after giving effect to any collections from or payments made by or
on behalf of any other guarantor in respect of the obligations of such other
guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such guarantor under its Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law or otherwise not being void, voidable or unenforceable under any
bankruptcy, reorganization, receivership, insolvency, liquidation or other
similar legislation or legal principles under any applicable foreign law. Each
guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other guarantor in a pro rata amount based
on the adjusted net assets of each guarantor.
Each guarantor may consolidate with or merge into or sell or otherwise
dispose of all or substantially all of its property and assets to us or another
guarantor without limitation, except to the extent any such transaction is
subject to the "Consolidation, Merger and Sale of Assets" covenant of the
Indenture. Each guarantor may consolidate with or merge into or sell all or
substantially all of its property and assets to a person other than Grey Wolf or
another guarantor (whether or not affiliated with the guarantor), provided that
(a) if the surviving person is not the guarantor, the surviving person agrees to
assume such guarantor's Guarantee and all its obligations pursuant to the
Indenture (except to the extent the following paragraph would result in the
release of such guarantee) and (b) such transaction does not result in a default
or event of default under the Indenture being in existence or continuing
immediately thereafter.
Upon the sale or other disposition (by merger or otherwise) of a
guarantor (or all or substantially all of its property and assets) to a person
other than Grey Wolf or another guarantor and pursuant to a transaction that is
otherwise in compliance with the Indenture, or upon the dissolution of a
guarantor, such guarantor (unless it otherwise remains a subsidiary) will be
deemed released from its Guarantee and the related obligations set forth in the
Indenture; provided that any such termination will occur only to the extent that
all obligations of such guarantor under all of its guarantees of and under all
of its pledges of assets or other security interest which secure, other
indebtedness of Grey Wolf or any other subsidiary will also terminate or be
released upon such sale or other disposition.
RANKING OF NOTES AND GUARANTEES
The notes constitute our senior unsecured indebtedness and rank equally
in right of payment with all of our other unsubordinated indebtedness, including
our outstanding 8 7/8% Senior Notes, and rank senior in right of payment to all
of our future subordinated indebtedness. The notes and the Guarantees are
effectively subordinated to our and our subsidiaries' secured indebtedness with
respect to the assets securing that indebtedness.
The Guarantees are senior unsecured obligations of each guarantor and
rank equal in right of payment with such guarantor's guarantee of the 8 7/8%
Senior Notes and all other indebtedness and liabilities of such guarantor that
are unsecured and not subordinated by their terms to other indebtedness of that
guarantor, and senior in right of payment to all subordinated indebtedness of
that guarantor.
Substantially all of our assets and the assets of our subsidiaries,
including our drilling equipment and the equity interests in our subsidiaries,
are collateral for first priority liens securing our credit facility. The
holders of secured indebtedness of Grey Wolf and the guarantors (including
indebtedness under our credit facility), will have claims with respect to the
assets constituting collateral for such indebtedness that are prior to claims of
holders of the notes and the Trustee. In the event of a default on the notes or
the Guarantees, or a bankruptcy, liquidation or reorganization of Grey Wolf or
any guarantors, such assets will be available to satisfy obligations with
respect to the indebtedness secured by such assets before any payment from such
assets could be made on the notes or the Guarantees. To the extent that the
value of such collateral is not sufficient to satisfy the indebtedness secured
thereby, amounts remaining outstanding on such indebtedness would be entitled to
share with the holders of the notes and the Trustee and their claims with
respect to any other assets of Grey Wolf and the guarantors. At July 9, 2003, we
and the guarantors had no secured indebtedness outstanding. At that same date,
we and the guarantors had
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undrawn standby letters of credit for $10.9 million outstanding under our credit
facility and the ability to borrow up to $64.1 million under that facility.
The notes are effectively subordinated to claims of creditors (other
than Grey Wolf) of our subsidiaries other than the guarantors. Claims of
creditors (other than Grey Wolf) of such subsidiaries, including trade
creditors, tort claimants, secured creditors, taxing authorities and creditors
holding guarantees, will generally have priority as to assets of such
subsidiaries over the claims and equity interest of Grey Wolf and, thereby
indirectly, the holders of our indebtedness, including the notes and the
Guarantees.
CONTINGENT INTEREST
We will pay contingent interest during any six-month period, from May 7
to November 6 and from November 7 to May 6, with the initial six-month period
commencing May 7, 2008, if the average trading price of the notes per $1,000
principal amount for the five trading day period ending on the third trading day
immediately preceding the first day of the applicable six-month period equals
$1,200 or more. The average trading price of the notes shall be determined no
later than the second trading day immediately preceding the first day of the
applicable six-month period by the conversion agent acting as calculation agent
in the manner set forth in the definition of "trading price" under "--Conversion
Rights; Conversion Upon Satisfaction of Trading Price Condition." During any
period when contingent interest is payable, it will be payable at a rate equal
to 0.50% per annum. We will pay contingent interest, if any, in the same manner
as we will pay interest as described above under "--General."
CONVERSION RIGHTS
A holder may convert any outstanding notes into shares of our common
stock at an initial conversion price per share of $6.45. This represents a
conversion rate of approximately 155.0388 shares per $1,000 principal amount at
maturity of the notes. The conversion price (and resulting conversion rate) is,
however, subject to adjustment as described below. A holder may convert notes
only in denominations of $1,000 and integral multiples of $1,000.
General
Holders may surrender notes for conversion into shares of our common
stock prior to the maturity date in the following circumstances:
- during any calendar quarter commencing after June 30, 2003, if
the closing sale price per share of our common stock for at
least 20 trading days in the period of 30 consecutive trading
days ending on the last trading day of the calendar quarter
preceding the quarter in which the conversion occurs is more
than 110% of the conversion price per share on that 30th
trading day;
- if we have called the notes for redemption;
- during any period after June 30, 2003 in which the credit
ratings assigned to the notes by both Moody's and S&P are
reduced below B1 and B+, respectively;
- if after June 30, 2003 neither Moody's nor S&P is rating the
notes;
- during the five trading day period immediately following any
nine consecutive trading day period in which the trading price
per $1,000 principal amount of the notes for each day of such
period was less than 95% of the product of the closing sale
price per share of our common stock on that day multiplied by
the number of shares of our common stock issuable upon
conversion of $1,000 principal amount of the notes; or
- upon the occurrence of specified corporate transactions.
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Conversion Upon Satisfaction of Market Price Condition
A holder may surrender any of its notes for conversion into shares of
our common stock during any quarter commencing after June 30, 2003 if the
closing sale price of our common stock for at least 20 trading days in the
period of 30 consecutive trading days ending on the last trading day of the
preceding quarter, exceeds 110% of the conversion price per share on that 30th
trading day. The conversion agent, which will initially be the Trustee, will
determine on our behalf at the end of each quarter whether the notes are
convertible as a result of the market price of our common stock.
Conversion Upon Credit Rating Event
A holder may surrender any of its notes for conversion into shares of
our common stock during any period after June 30, 2003 in which the credit
ratings assigned to the notes by both Moody's and S&P are reduced below B1 and
B+, respectively, or if after June 30, 2003 neither rating agency is rating the
notes.
Conversion Upon Notice of Redemption
A holder may surrender for conversion any note called for redemption at
any time prior to the close of business on the day that is two business days
prior to the redemption date, even if the notes are not otherwise convertible at
such time.
Conversion Upon Satisfaction of Trading Price Condition
A holder may surrender any of its notes for conversion into shares of
our common stock during the five trading day period immediately following any
nine consecutive trading day period in which the trading price per $1,000
principal amount of the notes (as determined following a request by a holder of
the notes in accordance with the procedures described below) for each day of
such period was less than 95% of the product of the closing sale price per share
of our common stock on that day multiplied by the number of shares issuable upon
conversion of $1,000 principal amount of the notes; provided, however, that if,
on the date of any conversion pursuant to this 95% price condition, the closing
sale price per share of our common stock is greater than the conversion price,
then a holder surrendering notes for such conversion will receive, in lieu of a
number of shares of our common stock based on the conversion price, cash or
common stock or a combination of both, at our option, with a value equal to the
principal amount of such holder's notes so surrendered as of the conversion date
(which we refer to as a principal value conversion). If a holder surrenders its
notes for such conversion, we will notify such holder by the second trading day
following the date of conversion whether we will pay such holder in cash, our
common stock or a combination of cash and our common stock, and in what
percentage. Any shares of our common stock delivered will be valued at the
greater of (x) the conversion price on the conversion date and (y) the closing
sale price of our common stock on the third trading day after the conversion
date. We will pay such holder any portion of the principal amount of such
holder's notes so surrendered to be paid in cash on the third trading day after
the conversion date. With respect to any portion of the sum of the principal
amount of such holder's notes so surrendered to be paid in shares of our common
stock, we will deliver the shares to such holder on the fourth trading day
following the conversion date.
The "trading price" of the notes on any date of determination means the
average of the secondary market bid quotations per $1,000 principal amount of
notes obtained by the conversion agent for $5,000,000 principal amount of the
notes at approximately 3:30 p.m., New York City time, on such determination date
from three independent nationally recognized securities dealers we select,
provided that if at least three such bids cannot reasonably be obtained by the
conversion agent, but two such bids are obtained, then the average of the two
bids shall be used, and if only one such bid can reasonably be obtained by the
conversion agent, this one bid shall be used. If the conversion agent cannot
reasonably obtain at least one bid for $5,000,000 principal amount of the notes
from a nationally recognized securities dealer or, in our reasonable judgment,
the bid quotations are not indicative of the secondary market value of the
notes, then the trading price of the notes will be determined in good faith by
the conversion agent acting as calculation agent taking into account in such
determination such factors as it, in its sole discretion after consultation with
us, deems appropriate. Other than in connection with a determination of whether
contingent interest shall be payable, the conversion agent shall have no
obligation to determine the trading price of the notes unless we have requested
such determination; and we shall have no obligation to make such request unless
23
a holder provides us with reasonable evidence that the trading price of the
notes is less than 95% of the product of the closing sale price of our common
stock and the number of shares issuable upon conversion of $1,000 principal
amount of the notes; at which time, we shall instruct the conversion agent to
determine the trading price of the notes beginning on the next trading day and
on each successive trading day until the trading price is greater than or equal
to 95% of the product of the closing sale price of our common stock and the
number of shares of our common stock issuable upon conversion of $1,000
principal amount of the notes.
Conversion Upon Specified Corporate Transactions
If we elect to:
- distribute to all holders of our common stock any rights,
warrants or options entitling them to subscribe for or
purchase, for a period expiring within 60 days of the date of
distribution, shares of our common stock at less than the then
current market price; or
- distribute to all holders of shares of our common stock any
assets, debt securities or certain rights to purchase our
securities, which distribution has a per share value exceeding
10% of the closing price of our common stock on the day
preceding the declaration date for such distribution,
unless the holders of the notes may participate in the transaction on a basis
and with notice that our board of directors determines to be fair and
reasonable, we must notify the holders of notes at least 20 days prior to the
ex-dividend date for any such distribution. Once we have given such notice,
holders may surrender their notes for conversion until the earlier of the close
of business on the business day prior to the ex-dividend date or our
announcement that such distribution will not take place. This provision shall
not apply if the holder of a note otherwise participates in the distribution
without conversion.
In addition, if we are a party to a consolidation, merger, share
exchange, sale of all or substantially all of our assets or other similar
transaction, in each case pursuant to which the shares of our common stock would
be converted into cash, securities or other property, a holder may surrender its
notes for conversion at any time from and after the date which is 15 business
days prior to the anticipated effective date of such transaction until and
including the date which is two business days before the actual date of such
transaction. If we are a party to a consolidation, merger, share exchange, sale
of all or substantially all of our assets or other similar transaction, in each
case pursuant to which the shares of our common stock are converted into cash,
securities or other property, then at the effective time of the transaction, a
holder's right to convert its notes into shares of our common stock will be
changed into a right to convert such notes into the kind and amount of cash,
securities and other property that such holder would have received if such
holder had converted such notes immediately prior to the transaction. If the
transaction also constitutes a change in control, such holder can require us to
repurchase all or a portion of its notes as described under "--Right to Require
Purchase of Notes upon a Change in Control."
If a holder of a note has delivered notice of its election to have such
note repurchased at the option of such holder or as a result of a change in
control, such note may be converted only if the notice of election is withdrawn
as described, respectively, under "--Repurchase of Notes at the Option of the
Holder" or "--Right to Require Purchase of Notes upon a Change in Control."
We will adjust the conversion price if (without duplication):
(1) we issue to all holders of shares of our common stock
additional shares of common stock or other capital stock as a dividend
or distribution on our common stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to all holders of our common stock any rights,
warrants or options entitling them to subscribe for or purchase shares
of our common stock for a period expiring not later than 60 days after
the applicable record date for the distribution at a per share price
that is less than the then current market price; provided that no
adjustment will be made if holders of the notes may participate in the
transaction on a basis and with notice that our board of directors
determines to be fair and appropriate;
24
(4) we distribute to all holders of our common stock evidences
of our indebtedness, shares of capital stock (other than shares of our
common stock), securities, cash, property, rights, warrants or options,
excluding:
- those rights, warrants or options referred to in
clause (3) above;
- any dividend or distribution paid exclusively in cash
not referred to below; and
- any dividend or distribution referred to in clause
(1) above;
(5) we make a cash distribution to all holders of shares of
our common stock that together with all other all-cash distributions
and consideration payable in respect of any tender or exchange offer by
us or one of our subsidiaries for shares made within the preceding 12
months exceeds 5% of our aggregate market capitalization on the date of
the declaration of the distribution; or
(6) during any twelve-month period we complete a repurchase
(including by way of a tender offer (other than an odd lot tender)) of
shares of our common stock which involves an aggregate consideration
that, together with:
- any cash and other consideration payable in respect
of any tender or exchange offer by us or one of our
subsidiaries for shares of our common stock concluded
within the preceding 12 months; and
- the amount of any all-cash distributions to all
holders of our common stock made within the preceding
12 months;
exceeds 5% of our aggregate market capitalization on the expiration of
the tender or exchange offer.
If the rights provided for in our rights agreement dated as of
September 21, 1998, as amended, have separated from our common stock in
accordance with the provisions of the rights agreement so that the holders of
the notes would not be entitled to receive any rights in respect of our common
stock issuable upon conversion of the notes, the conversion price will be
adjusted as provided in clause (4) above, subject to readjustment in the event
of the expiration, termination or redemption of the rights. In lieu of any such
adjustment, we may amend our rights agreement to provide that upon conversion of
the notes the holders will receive, in addition to our common stock issuable
upon such conversion, the rights which would have attached to such shares of our
common stock if the rights had not become separated from our common stock under
our rights agreement. See "Description of Capital Stock--Anti-takeover Defenses;
Preferred Stock Purchase Rights." To the extent that we adopt any future rights
plan, upon conversion of the notes into our common stock, you will receive, in
addition to our common stock, the rights under the future rights plan whether or
not the rights have separated from our common stock at the time of conversion
and no adjustment to the conversion price will be made in accordance with clause
(4) above.
The applicable conversion price will not be adjusted:
- upon the issuance of any shares of our common stock pursuant
to any present or future plan providing for the reinvestment
of dividends or interest payable on our securities and the
investment of additional optional amounts in shares of our
common stock under any plan;
- upon the issuance of any shares of our common stock or options
or rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or
program of Grey Wolf; or
- upon the issuance of any shares of our common stock pursuant
to any option, warrant, right, or exercisable, exchangeable or
convertible security outstanding as of the date the notes were
first issued.
The conversion price will not be adjusted until adjustments amount to
1% or more of the conversion price as last adjusted. We will carry forward any
adjustment we do not make and will include it in any future adjustment.
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We will not issue fractional shares of common stock to a holder who
converts a note. In lieu of issuing fractional shares, we will pay cash based
upon the closing sale price of our common stock on the date of conversion.
Except as described in this paragraph, no holder of notes will be
entitled, upon conversion of the notes, to any actual payment or adjustment on
account of accrued and unpaid interest, including contingent interest, if any,
or on account of dividends on shares issued in connection with the conversion.
If any holder surrenders a note for conversion between the close of business on
any record date for the payment of an installment of interest (including any
contingent interest, if any) and the opening of business on the related interest
payment date the holder must deliver payment to us of an amount equal to the
interest payable on the interest payment date (including any contingent
interest, if any) on the principal amount to be converted together with the note
being surrendered. The foregoing sentence shall not apply to notes called for
redemption on a redemption date within the period between and including the
record date and the interest payment date.
If we make a distribution of property to our shareholders which would
be taxable to them as a dividend for federal income tax purposes and the
conversion price of the notes is decreased, this decrease may be deemed to be
the receipt of taxable income by holders of the notes.
We may from time to time reduce the conversion price if our board of
directors determines that this reduction would be in the best interests of Grey
Wolf. Any such determination by our board of directors will be conclusive. Any
such reduction in the conversion price must remain in effect for at least 20
trading days. In addition, we may from time to time reduce the conversion price
if our board of directors deems it advisable to avoid or diminish any income tax
to holders of our common stock resulting from any stock or rights distribution
on our common stock.
OPTIONAL REDEMPTION OF THE NOTES
Prior to May 14, 2008, we cannot redeem the notes. Beginning on May 14,
2008, we may redeem the notes, in whole at any time, or in part from time to
time, for cash at the redemption prices (expressed in percentages of principal
amount) opposite the redemption periods set forth below, plus accrued and unpaid
interest, including contingent interest, if any, up to but not including the
date of redemption:
REDEMPTION REDEMPTION
PERIOD PRICE
- -------------------- -------------------
May 14, 2008 through May 6, 2009.............................................................. 101.88%
May 7, 2009 through May 6, 2010............................................................... 101.50%
May 7, 2010 through May 6, 2011............................................................... 101.13%
May 7, 2011 through May 6, 2012............................................................... 100.75%
May 7, 2012 through May 6, 2013............................................................... 100.38%
May 7, 2013 and thereafter.................................................................... 100.00%
We will give not less than 20 days' nor more than 60 days' notice of
redemption by mail to holders of the notes. If we opt to redeem less than all of
the notes at any time, the Trustee will select or cause to be selected the notes
to be redeemed by any method that it deems fair and appropriate. In the event of
a partial redemption, the Trustee may provide for selection for redemption of
portions of the principal amount of any note of a denomination larger than
$1,000.
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER
You have the right to require us to repurchase all or a portion of the
notes on May 7 of 2013 and 2018. We will repurchase the notes for an amount of
cash equal to 100% of the principal amount of the notes on the date of
repurchase, plus accrued and unpaid interest (including contingent interest, if
any) up to, but not including, the date of repurchase. To exercise the
repurchase right, the holder of a note must deliver, during the period beginning
at any time from the opening of business on the date that is 20 business days
prior to the repurchase date until the close of business on the business day
before the repurchase date, a written notice to us and the Trustee of such
holder's exercise of the repurchase right. This notice must be accompanied by
certificates evidencing the note or notes with
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respect to which the right is being exercised, duly endorsed for transfer. This
notice of exercise may be withdrawn by the holder at any time on or before the
close of business on the business day preceding the repurchase date.
MANDATORY REDEMPTION
Except as set forth under "--Right to Require Purchase of Notes upon a
Change in Control" and "--Repurchase of Notes at the Option of the Holder," we
are not required to make mandatory redemption of, or sinking fund payments with
respect to, the notes.
RIGHT TO REQUIRE PURCHASE OF NOTES UPON A CHANGE IN CONTROL
If a change in control (as defined below) occurs, you may require that
we repurchase your notes on the date fixed by us that is not less than 45 days
nor more than 60 days after we give notice of the change in control. We will
repurchase the notes for an amount of cash equal to 100% of the principal amount
of the notes, plus accrued and unpaid interest, including contingent interest,
if any, up to, but not including the date of repurchase.
"Change in control" means the occurrence of one or more of the
following events:
- any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or
substantially all of our assets or our and our subsidiaries'
assets taken as a whole, to any person or group of related
persons, as defined in Section 13(d) of the Exchange Act (a
"Group") ;
- the approval by the holders of our capital stock of any plan
or proposal for our liquidation or dissolution, whether or not
otherwise in compliance with the provisions of the Indenture;
- any person or Group shall become the owner, directly or
indirectly, beneficially or of record, of shares representing
more than 50% of the aggregate ordinary voting power
represented by our issued and outstanding voting stock of, or
any successor to, all or substantially all of our assets; or
- the first day on which a majority of the members of our board
of directors are not continuing directors.
The definition of "change in control" includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of our assets. Although there is a developing body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. Accordingly, your ability to require us to
repurchase your notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of our assets to another person or Group may
be uncertain.
"Continuing director" means, as of any date of determination, any
member of our board of directors who
- was a member of such board of directors on the date of the
original issuance of the notes, or
- was nominated for election or elected to such board of
directors with the approval of a majority of the continuing
directors who were members of such board at the time of such
nomination or election.
On or prior to the date of repurchase, we will deposit with a paying
agent an amount of money sufficient to pay the aggregate repurchase price of the
notes which is to be paid on the date of repurchase.
On or before the 30th day after the change in control, we must mail to
the Trustee and all holders of the notes a notice of the occurrence of the
change in control offer, stating, among other things:
- the repurchase date;
- the date by which the repurchase right must be exercised;
- the repurchase price for the notes;
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- the conversion price and any adjustments thereto; and
- the procedures which a holder of notes must follow to exercise
the repurchase right.
To exercise the repurchase right, the holder of a note must deliver, on
or before the third business day before the repurchase date, a written notice to
us and the Trustee of the holder's exercise of the repurchase right. This notice
must be accompanied by certificates evidencing the note or notes with respect to
which the right is being exercised, duly endorsed for transfer. This notice of
exercise may be withdrawn by the holder at any time on or before the close of
business on the business day preceding the repurchase date.
The effect of these provisions granting the holders the right to
require us to repurchase the notes upon the occurrence of a change in control
may make it more difficult for any person or group to acquire control of us or
to effect a business combination with us. Our ability to pay cash to holders of
notes following the occurrence of a change in control may be limited by our then
existing financial resources. We cannot assure you that sufficient funds will be
available when necessary to make any required repurchases. See "Risk
Factors--Risks Related to the Notes--We may not have the ability to raise the
funds necessary to finance the change in control purchase option or the purchase
at the option of the holder provisions of the Indenture."
Our obligation to make a change in control offer will be satisfied if a
third party makes the change of control offer in the manner and at the times and
otherwise in compliance in all material respects with the requirements
applicable to a change in control offer made by us and purchases all notes
properly tendered and not withdrawn under the change in control offer.
If a change in control occurs and the holders exercise their rights to
require us to repurchase notes, we intend to comply with applicable tender offer
rules under the Exchange Act with respect to any repurchase.
The term "beneficial owner" will be determined in accordance with Rules
13d-3 and 13d-5 promulgated by the SEC under the Exchange Act or any successor
provision, except that a person shall be deemed to have "beneficial ownership"
of all shares of our common stock that the person has the right to acquire,
whether exercisable immediately or only after the passage of time.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of any of the notes,
consolidate with, or merge into any other person or convey, transfer or lease
our properties and assets substantially as an entirety to, any other person, if:
- we are the resulting or surviving corporation or the
successor, transferee or lessee, if other than us, is a
corporation organized under the laws of any U.S. jurisdiction
and expressly assumes our obligations under the Indenture and
the notes by means of a supplemental indenture entered into
with the Trustee; and
- after giving effect to the transaction, no event of default
and no event which, with notice or lapse of time, or both,
would constitute an event of default, shall have occurred and
be continuing.
Under any consolidation, merger or any conveyance, transfer or lease of
our properties and assets as described in the preceding paragraph, the successor
company will be our successor and shall succeed to, and be substituted for, and
may exercise every right and power of, Grey Wolf under the Indenture. If the
predecessor is still in existence after the transaction, it will be released
from its obligations and covenants under the Indenture and the notes.
MODIFICATION AND WAIVER
We and the Trustee may enter into one or more supplemental indentures
that add, change or eliminate provisions of the Indenture or modify the rights
of the holders of the notes with the consent of the holders of at least a
majority in principal amount of the notes then outstanding. However, without the
consent of each holder of an outstanding note, no supplemental indenture may,
among other things:
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- subordinate in right of payment the notes or the Guarantees to
any other indebtedness;
- change the stated maturity of the principal of, or payment
date of any installment of interest (including contingent
interest, if any) on, any note;
- reduce the principal amount of, or the rate of interest
(including contingent interest, if any) on, any note;
- change the currency in which the principal of any note or
interest is payable;
- impair the right to institute suit for the enforcement of any
payment on or with respect to any note when due;
- materially and adversely affect the right provided in the
Indenture to convert any note;
- modify the provisions of the Indenture relating to our
requirement to repurchase notes upon a change in control or on
specified dates in a manner adverse to the holders of the
note;
- reduce the percentage in principal amount of the outstanding
notes necessary to modify or amend the Indenture or to consent
to any waiver provided for in the Indenture; or
- waive a default in the payment of principal of, or interest,
including contingent interest, if any, on, any note.
The holders of a majority in principal amount of the outstanding notes
may, on behalf of the holders of all notes:
- waive compliance by us with restrictive provisions of the
Indenture other than as provided in the preceding paragraph;
and
- waive any past default under the Indenture and its
consequences, except a default in the payment of the principal
of or any interest, including contingent interest, if any, on
any note or in respect of a provision which under the
Indenture cannot be modified or amended without the consent of
the holder of each outstanding note affected.
Without the consent of any holders of notes, we and the Trustee may
enter into one or more supplemental Indentures for any of the following
purposes:
- to add covenants, including applicable defeasance provisions
relating thereto, and events of default or to surrender any
rights we have under the Indenture that do not adversely
affect the holders of the notes;
- to provide security for the notes;
- to cure any ambiguity, omission, defect or inconsistency in
the Indenture;
- to evidence a successor to us and the assumption by the
successor of our obligations under the Indenture and the
notes;
- to provide for the acceptance of a successor or another
trustee;
- to make any change that does not adversely affect the rights
of any holder of the notes;
- to add or release any guarantor pursuant to the terms of the
Indenture;
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- to release any guarantor pursuant to the terms of the
Indenture other than as contemplated under "--Guarantees of
Notes," provided it does not adversely affect the interests of
the holders of the notes in any material respect;
- to comply with any requirement in connection with the
qualification of the Indenture under the Trust Indenture Act;
or
- to complete or make provision for certain other matters
contemplated by the Indenture.
EVENTS OF DEFAULT
Each of the following is an "event of default:"
(1) a default in the payment of any interest, including
contingent interest, if any, upon any of the notes when due and
payable, which continues for 30 days;
(2) a default in the payment of the principal of the notes
when due, including on a redemption or repurchase date;
(3) failure to pay when due the principal of indebtedness for
money borrowed by us or our subsidiaries in excess of $10.0 million, or
the acceleration of that indebtedness that is not withdrawn within 30
days after the date of written notice to us by the Trustee or to us and
the Trustee by the holders of at least 25% in principal amount of the
outstanding notes;
(4) a default by us in the performance, or breach, of any of
our other covenants in the Indenture which are not remedied within 60
days after written notice to us by the Trustee or to us and the Trustee
by the holders of at least 25% in principal amount of the outstanding
notes;
(5) any Guarantee by a Guarantor that is a "significant
subsidiary," as defined in Item 1-02(w) of Regulation S-X, shall for
any reason cease to be, or be asserted by Grey Wolf or any guarantor,
as applicable, not to be, in full force and effect (except pursuant to
the release of any such Guarantee in accordance with the Indenture); or
(6) events of bankruptcy, insolvency or reorganization
involving Grey Wolf or any guarantor.
If an event of default described in clauses (1), (2), (3), (4) or (5)
occurs and is continuing, either the Trustee or the holders of at least 25% in
principal amount of the outstanding notes may declare the principal amount of
and accrued and unpaid interest on all notes to be immediately due and payable.
This declaration may be rescinded if the conditions described in the Indenture
are satisfied. If an event of default of the type referred to in clause (6)
occurs, the principal amount of and accrued and unpaid interest, (including
contingent interest, if any) on the outstanding notes will automatically become
immediately due and payable.
Within 90 days following a default, the Trustee must give to the
registered holders of notes notice of all uncured defaults known to it. The
Trustee will be protected in withholding the notice if it in good faith
determines that the withholding of the notice is in the best interests of the
registered holders, except in the case of a default in the payment of the
principal of, or interest, including contingent interest, if any, on, any of the
notes when due or in the payment of any redemption or repurchase obligation.
The holders of not less than a majority in principal amount of the
outstanding notes may direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee. Subject to the provisions of the Indenture
relating to the duties of the Trustee, if an event of default occurs and is
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any of the
holders of the notes unless the holders have offered to the Trustee reasonable
indemnity or security against any loss, liability or expense. Except to enforce
the right to receive payment of principal, or interest, including contingent
interest, if any, when due or the right to
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convert a note in accordance with the Indenture, no holder may institute a
proceeding or pursue any remedy with respect to the Indenture or the notes
unless the conditions provided in the Indenture have been satisfied, including:
- holders of at least 25% in principal amount of the outstanding
notes have requested the Trustee to pursue the remedy;
- the Trustee has not received from the holders of a majority in
aggregate principal amount of the outstanding notes a
direction inconsistent with the written request;
- the Trustee shall have failed to institute such proceeding
within 60 days; and
- holders have offered the Trustee security or indemnity
satisfactory to the Trustee against any loss, liability or
expense.
We are required to deliver to the Trustee annually a certificate
indicating whether the officers signing the certificate know of any default by
us in the performance or observance of any of the terms of the Indenture. If the
officers know of a default, the certificate must specify the status and nature
of all defaults.
BOOK-ENTRY SYSTEM
We originally issued the notes in the form of one global note. The
global securities were deposited with, or on behalf of, DTC and registered in
the name of its nominee. The notes sold under this prospectus will be
represented by a new unrestricted global security. Notes in definitive
certificated form will be issued only in limited circumstances described below.
Owners of beneficial interests in the notes represented by the global
securities will hold their interests pursuant to the procedures and practices of
DTC. As a result, beneficial interests in any such securities will be shown on,
and transfers will be effected only through, records maintained by DTC and its
direct and indirect participants. Any such interests may not be exchanged for
certificated securities, except in limited circumstances. Owners of beneficial
interests must exercise any rights in respect of their interests, including any
right to convert or require repurchase of their interests in the notes, in
accordance with the procedures and practices of DTC. Beneficial owners will not
be holders and will not be entitled to any rights under the global securities or
the Indenture. We and the Trustee, and any of our respective agents, may treat
DTC as the sole holder and registered owner of the global securities.
EXCHANGE OF GLOBAL SECURITIES
The notes, represented by one or more global securities, will be
exchangeable for certificated securities with the same terms only if:
- DTC is unwilling or unable to continue as depositary or if DTC
ceases to be a clearing agency registered under the Exchange
Act and we do not appoint a successor depositary within 90
days;
- we decide to discontinue use of the system of book-entry
transfer through DTC or any successor depositary; or
- a default under the Indenture occurs and is continuing.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" for
registered participants, and it facilitates the settlement of transactions among
its participants in those securities through electronic computerized book-entry
changes in participants' accounts, eliminating the need for physical movement of
securities certificates. DTC's participants include securities brokers and
dealers, including the agent, banks, trust companies, clearing corporation and
other organizations, some of whom and/or their representatives own DTC. Access
to DTC's book-entry system is also available to others, such as banks, brokers,
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dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
REGISTRATION RIGHTS
We and the guarantors entered into a registration rights agreement with
the initial purchaser of the notes for the benefit of the holders of the notes
and the shares of our common stock issuable on conversion of the notes. Under
this agreement, we will at our cost:
- on or prior to the 90th day after the first date of original
issuance of the notes, file a shelf registration statement
with the SEC covering resales of the notes and the shares of
our common stock issuable on conversion of the notes,
- use all reasonable efforts to cause the shelf registration
statement to be declared effective under the Securities Act no
later than 180 days after the first date of original issuance
of the notes; and
- use all reasonable efforts to keep the shelf registration
statement effective for two years from the first date of
original issuance of the notes or such shorter period ending
upon:
- the sale pursuant to the shelf registration statement
of all of the notes and any shares of our common
stock issued upon conversion of the notes;
- the expiration of the holding period applicable to
the notes and the shares of our common stock issuable
upon conversion of the notes held by non-affiliates
of Grey Wolf under Rule 144(k) under the Securities
Act, or any successor provision;
- the notes and any shares of our common stock issued
upon conversion of the notes ceasing to be
outstanding; and
- a subsequent shelf registration statement covering
the notes and shares of our common stock issuable
upon conversion of the notes being declared effective
under the Securities Act.
We have the right to suspend the effectiveness of the shelf
registration statement for any reason whatsoever for up to 30 consecutive days
in any 90-day period, for a total of not more than 90 days in any twelve-month
period, without paying liquidated damages described below. If we fail to file
the shelf registration statement on or prior to the 90th day after original
issuance of the notes, the shelf registration statement is not declared
effective on or prior to the 180th day after original issuance of the notes or,
after the shelf registration statement has been declared effective, we fail to
keep the shelf registration statement effective or usable in accordance with and
during the periods specified in the registration rights agreement, then, in each
case, we will pay liquidated damages to all holders of notes and all holders of
our common stock issued on conversion of the notes equal to (i) in respect of
each $1,000 principal amount of notes, at a rate per annum equal to 0.5% of such
principal amount, and (ii) in respect of any shares of common stock issued upon
conversion of notes, at a rate per year equal to 0.5% of the principal amount of
notes that would then be convertible into such shares. We will pay any
liquidated damages in cash on May 7 and November 7 of each year to the holders
of record of the notes on such date and to the holders of record of common stock
issued in respect of the notes on the immediately preceding April 22 or October
22.
A holder who elects to sell any securities pursuant to the shelf
registration statement:
- will be required to be named as selling security holder;
- will be required to deliver a prospectus to purchasers;
- will be subject to the civil liability provisions under the
Securities Act in connection with any sales; and
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- will be bound by the provisions of the registration rights
agreement, which are applicable, including indemnification
obligations.
We refer to the notes and the common stock issuable on conversion of
the notes as registrable securities. Promptly upon request from any holder of
registrable securities, we will provide a form of notice and questionnaire to be
completed and delivered by that holder to us at least three business days before
any intended distribution of registrable securities under the shelf registration
statement. To be named as a selling security holder in the shelf registration
statement, of which this prospectus is a part, when it first becomes effective,
holders must have completed and delivered the questionnaire in the form of
Appendix A to the offering memorandum for the private placement before the
effectiveness of the shelf registration statement. If we receive from a holder
of registrable securities a completed questionnaire, together with such other
information as we may reasonably request, after the effectiveness of the shelf
registration statement, we will file an amendment to the shelf registration
statement, or a supplement to this prospectus, to permit the holder to deliver a
prospectus to purchasers of registrable securities. Any holder that does not
complete and deliver a questionnaire or provide such other information will not
be named as a selling security holder in this prospectus and therefore will not
be permitted to sell any registrable securities under the shelf registration
statement.
TAXATION OF NOTES
See "Certain U.S. Federal Income Tax Considerations" for a discussion
of certain United States federal income tax aspects that may apply to you.
THE TRUSTEE
JPMorgan Chase Bank is the Trustee, security registrar, paying agent
and conversion agent under the Indenture for the notes. We maintain banking
relationships in the ordinary course of business with the Trustee and its
affiliates. JPMorgan Chase Bank also serves as trustee under the indentures for
our 8 7/8% Senior Notes.
If the Trustee becomes one of our creditors, it will be subject to
limitations in the Indenture on its rights to obtain payment of claims or to
realize on certain property received for any claim, as security or otherwise.
The Trustee is permitted to engage in other transactions with us. If, however,
it acquires any conflicting interest, it must eliminate that conflict or resign
within 90 days after ascertaining that it has a conflicting interest.
GOVERNING LAW
The Indenture and the notes are governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflict
of laws.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
As of July 9, 2003 our authorized capital stock consisted of
300,000,000 shares of common stock, par value $.10 per share, of which
181,222,031 shares were issued and outstanding, and 1,000,000 shares of
preferred stock, par value $1.00 per share, of which none are outstanding. The
following summary is not complete. You should refer to the applicable provisions
of our amended and restated Articles of Incorporation, and the documents we have
incorporated by reference for a complete statement of the terms and rights of
our capital stock.
COMMON STOCK
Voting Rights. Each share of common stock is entitled to one vote per
share. Holders of common stock are not entitled to cumulative voting rights,
which means that the holders of more than 50% of the shares voting for the
election of directors can elect 100% of the directors.
Dividends. Holders may receive dividends when declared by the board of
directors out of legally available funds. Dividends may be paid in cash, stock
or other form subject to the rights of holders of any preferred stock. If we
issue preferred stock, holders of common stock may not receive dividends until
we have satisfied our obligations to the holders of outstanding preferred stock.
Rights Upon Liquidation. If we liquidate, dissolve or wind-up our
business, either voluntarily or not, the holders of common stock will be
entitled to share equally in any remaining assets after we pay our creditors.
Miscellaneous. The issued and outstanding shares of common stock are
fully paid and nonassessable. Holders of shares of common stock are not entitled
to preemptive rights. Shares of common stock are not convertible into shares of
any other class of our capital stock. American Stock Transfer and Trust Company
is the transfer agent and registrar for the common stock.
PREFERRED STOCK
The following description sets forth certain general terms and
provisions of our authorized preferred stock. Our board of directors can,
without shareholder approval, issue from time to time one or more series of
preferred stock. The board of directors can also determine the voting powers,
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of any series and the
number of shares constituting any series of preferred stock.
Because our company is a holding company, its rights and the rights of
holders of our securities, including the holders of preferred stock, to
participate in the distribution of the assets of any subsidiary of our company
upon the subsidiary's liquidation or recapitalization will be subject to the
prior claims of the creditors and preferred shareholders of the subsidiary.
ANTI-TAKEOVER DEFENSES
Preferred Stock Purchase Rights. Our company has a shareholder rights
plan which was adopted in 1998. Under this plan, one right is attached to each
outstanding share of common stock. The rights are exercisable only if a person
or group of affiliated or associated persons acquires beneficial ownership of
15% or more of the outstanding common stock or the commencement of or the
announcement to make a tender offer which would result in ownership by a person
or group of 15% or more of the outstanding common stock. Each right entitles the
registered holder to purchase from our company one-thousandth of a share of
Series B Junior Participating Preferred Stock, par value $1.00 per share, at an
exercise price of $11.00 per one one-thousandth of a share. The rights expire
September 18, 2008, unless the expiration date is extended. The existence of the
rights may, under certain circumstances, make it more difficult, or discourage,
attempts to acquire us.
Certain Provisions of our Amended and Restated Articles of
Incorporation and Bylaws. Certain provisions in our amended and restated
Articles of Incorporation and amended and restated Bylaws could have the effect
of
34
delaying, deferring or preventing a change in control or the removal of our
existing management or deterring potential acquirors from making an offer to our
shareholders. These provisions provide that:
- action by written consent of our shareholders must be
unanimous;
- special meetings of shareholders may be called by shareholders
only upon request of holders of at least 50% of the shares
entitled to vote at the meeting;
- the board of directors has the exclusive authority to adopt,
amend or repeal our Bylaws and shareholders may not do so;
- the board of directors is divided into three classes, with
each class serving a staggered three year term; and
- shareholders must give us advance notice of their intent to
submit a proposal for action at an annual meeting.
Additionally, the board of directors' ability to issue shares of
preferred stock without shareholder approval may be used to discourage an
unsolicited acquisition proposal. For instance, the issuance of a series of
preferred stock might impede a business combination by including voting rights
that would require the approval of a percentage of the preferred shareholders.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This is a summary of the material United States federal income tax
consequences to you of purchasing, owning and disposing of the notes. This
summary is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change (including retroactive changes) or possible
differing interpretations. The discussion below deals only with notes held as
capital assets and does not purport to deal with persons in special tax
situations, such as:
- a dealer in securities or currencies;
- a trader in securities that elects to use a mark-to-market
method of accounting for its securities holdings;
- a bank, an insurance company or other financial institution;
- a tax-exempt organization;
- a person treated as a partnership for U.S. federal income tax
purposes or a partner thereof;
- a person that owns notes that are a hedge or that are hedged
against interest rate risks;
- a person that owns notes as part of a straddle, conversion or
other risk reduction transaction for U.S. federal income tax
purposes; or
- a person whose functional currency for U.S. federal income tax
purposes is not the U.S. dollar.
We do not address all of the tax consequences that may be relevant to
you. In particular, we do not address:
- the United States federal income tax consequences to
shareholders in, or partners or beneficiaries of, an entity
that is a holder of the notes;
- the United States federal estate, gift or alternative minimum
tax consequences of the purchase, ownership or disposition of
the notes;
- any state, local or foreign tax consequences of the purchase,
ownership or disposition of the notes; or
- any United States federal, state, local or foreign tax
consequences of owning or disposing of our common stock,
including any payment of dividends on same.
This discussion is based on the Internal Revenue Code of 1986, as
amended, (the "Code"), the Treasury Regulations promulgated under the Code and
administrative and judicial interpretation of the Code and the Treasury
Regulations, all as of the date of this prospectus, and all of which are subject
to differing interpretations and to change, possibly on a retroactive basis.
For purposes of the discussion that follows, a U.S. holder is a
beneficial owner of a note that for U.S. federal income tax purposes is:
- an individual citizen or resident of the United States;
- a corporation, including any entity treated as a corporation
for United States federal income tax purposes, created or
organized in or under the laws of the United States, or any
political subdivision thereof;
36
- an estate if its income is subject to United States federal
income taxation regardless of its source; or
- a trust (1) that is subject to the primary supervision of a
U.S. court and the control of one or more U.S. persons or (2)
that has a valid election in effect under applicable Treasury
regulations to be treated as a U.S. person.
Except in the case of a partnership, a Non-U.S. holder is a beneficial
owner of a note other than a U.S. holder. If a partnership (including for this
purpose any entity treated as a partnership for United States federal income tax
purposes) is a beneficial owner of the notes, the United States federal income
tax treatment of a partner in the partnership will generally depend on the
status of the partner and the activities of the partnership. A holder of notes
that is a partnership and the partners in such partnership should consult their
own tax advisor about the United States federal income tax consequences of
holding and disposing of the notes.
No statutory or judicial authority directly addresses the treatment of
the notes or instruments similar to the notes for United States federal income
tax purposes. The Internal Revenue Service (the "IRS") issued Revenue Ruling
2002-31 with respect to instruments similar to the notes. To the extent it
addresses the issues, this ruling supports certain aspects of the treatment
described below. No ruling has been or is expected to be sought from the IRS
with respect to the United States federal income tax consequences to the holders
of notes. Since the IRS would not be precluded from taking contrary positions,
no assurance can be given that the IRS will agree with all of the tax
characterizations and the tax consequences described below.
WE URGE YOU TO CONSULT YOUR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF NOTES AND
SHARES OF OUR COMMON STOCK IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN U.S. FEDERAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE NOTES
We intend to treat the notes as indebtedness for United States federal
income tax purposes and intend to take the position that the notes will be
subject to the special regulations governing contingent payment debt instruments
(which we refer to as the CPDI regulations). The notes will be subject to the
CPDI regulations if the contingency represented by the provision for contingent
interest on the notes is neither remote nor incidental within the meaning of
section 1.1275-4(a)(5) of the CPDI regulations. Pursuant to the terms of the
Indenture, we and each holder of notes agree, for United States federal income
tax purposes, to treat the notes as debt instruments that are subject to the
CPDI regulations, and the remainder of this discussion assumes that the notes
will be so treated.
In addition, under the Indenture, you will be deemed to have agreed to
treat the fair market value of our common stock received by you upon conversion
as a contingent payment and to accrue interest with respect to the notes as
original issue discount for United States federal income tax purposes according
to the "noncontingent bond method," set forth in section 1.1275-4(b) of the CPDI
regulations, using the comparable yield (as defined below) compounded
semiannually and the projected payment schedule (as defined below) determined by
us. Notwithstanding the issuance of the revenue ruling, the application of the
CPDI regulations to instruments such as the notes is uncertain in several
respects, and, as a result, no assurance can be given that the IRS or a court
will agree with the treatment described herein. Any differing treatment could
affect the amount, timing and character of income, gain or loss with respect to
your investment in the notes. In particular, it might be determined that you
should have accrued interest income at a lower rate, should not have recognized
ordinary income upon the conversion of your notes, or should have recognized
capital gain or loss upon a taxable disposition of your notes. Again, you should
consult your tax advisor concerning the tax treatment of holding and disposing
of notes.
ACCRUAL OF INTEREST ON THE NOTES
Under the CPDI regulations, a U.S. holder generally will be required to
accrue interest income on the notes, in the amounts described below, regardless
of whether the U.S. holder uses the cash or accrual method of tax accounting.
Accordingly, U.S. holders will likely be required to include interest in taxable
income in each year in excess of both the stated interest that accrues on the
notes and any contingent interest payments actually payable in that year.
Pursuant to the CPDI regulations, a U.S. holder must accrue an amount of
interest as ordinary income for
37
U.S. federal income tax purposes, for each accrual period prior to and including
the maturity date of the notes that equals:
- the product of (i) the adjusted issue price (as defined below)
of the notes as of the beginning of the accrual period, and
(ii) the comparable yield (as defined below) of the notes,
adjusted for the length of the accrual period;
- divided by the number of days in the accrual period; and
- multiplied by the number of days during the accrual period
that the U.S. holder held the notes.
The issue price of a note is the first price at which a substantial
amount of the notes was sold to the public, excluding bond houses, brokers or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. The adjusted issue price of a note is its issue
price increased by any interest income previously accrued, determined without
regard to any adjustments to interest accruals described below, and decreased by
the amount of any projected payments actually made with respect to the notes.
Under the CPDI regulations, we are required to establish the
"comparable yield" for the notes. We determined that the comparable yield for
the notes is the annual yield we would incur, as of the initial issue date, on a
fixed rate nonconvertible debt security with no contingent payments, but with
terms and conditions otherwise comparable to those of the notes, including the
rank, term and general market conditions, but excluding any adjustment for
liquidity or the riskiness of the contingencies with respect to the notes.
Accordingly, we have determined the comparable yield to be nine percent (9%)
compounded semi-annually.
The CPDI regulations require us to provide to U.S. holders of the
notes, solely for U.S. federal income tax purposes, a schedule of the projected
amounts of payments on the notes. This schedule must produce the comparable
yield. Our determination of the projected payment schedule for the notes
includes estimates for payments of contingent interest and an estimate for a
payment at maturity taking into account the conversion feature. U.S. holders of
notes may obtain the projected payment schedule by submitting a written request
to Grey Wolf, Inc., 10370 Richmond Avenue, Suite 600, Houston, Texas 77042,
Attn: Chief Financial Officer.
For U.S. federal income tax purposes, holders must use the comparable
yield and projected payment schedule determined by us in calculating interest
accruals, and the adjustments thereto described below, in respect of the notes
unless the holder timely discloses and justifies the use of other estimates to
the IRS. This requirement for holders to use the comparable yield and projected
payment schedule determined by us is imposed by Treasury Regulations issued by
the IRS, and is in addition to your agreement to treat the notes consistently
with our treatment pursuant to the Indenture.
THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED
FOR ANY PURPOSE OTHER THAN FOR THE DETERMINATION OF INTEREST ACCRUALS AND
ADJUSTMENTS THEREOF IN RESPECT OF THE NOTES OF A U.S. HOLDER OF NOTES FOR U.S.
FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION
REGARDING THE ACTUAL AMOUNTS PAYABLE TO U.S. HOLDERS OF NOTES.
Amounts treated as interest under the CPDI regulations are treated as
original issue discount for all purposes of the Code.
ADJUSTMENTS TO INTEREST ACCRUALS ON THE NOTES
As noted above, the projected payment schedule includes amounts
attributable to the stated semi-annual cash interest payable on the notes.
Accordingly, the receipt of the stated semi-annual cash interest payments will
not be separately taxable to the U.S. holders. If a U.S. holder receives actual
payments with respect to the notes in a taxable year that in the aggregate
exceed the total amount of projected payments for that taxable year, the U.S.
holder would incur a "net positive adjustment" equal to the amount of such
excess. The U.S. holder would treat the "net positive adjustment" as additional
interest income for the taxable year. For this purpose, the payments in a
38
taxable year include the fair market value of property received (including any
of our common stock received on conversion of the notes) in that year.
If a U.S. holder receives actual payments with respect to the notes in
a taxable year that in the aggregate are less than the amount of the projected
payments for that taxable year, the U.S. holder would incur a "net negative
adjustment" under the CPDI regulations equal to the amount of such deficit. This
adjustment would (a) reduce the interest income on the notes of the U.S. holder
for that taxable year, and (b) to the extent of any excess after the application
of (a), give rise to an ordinary loss, limited to the amount by which the U.S.
holder's total interest inclusions on the notes exceed the total amount of the
U.S. holder's net negative adjustments treated as ordinary loss in prior taxable
years. A net negative adjustment is not subject to the two percent floor
limitation imposed on miscellaneous itemized deductions under Section 67 of the
Code. Any excess net negative adjustment would be carried forward to the next
taxable year as a net negative adjustment or would reduce the amount realized
upon sale, purchase by us at your option, exchange, conversion or redemption of
the notes.
DISCOUNT OR PREMIUM
A U.S. holder that acquires a note after its initial issuance is
required to accrue interest for U.S. federal income tax purposes based upon the
original projected payment schedule as if the note had been acquired directly
from us. However, except to the extent described in the third paragraph below as
to notes that are deemed to be "exchange listed," a U.S. holder of notes must
allocate any difference between the holder's cost basis and the then adjusted
issue price of the note to daily portions of interest or the projected payments
over the remaining term of the note on some reasonable basis, taking into
account then applicable interest rates and changes in the projected value of our
common stock.
Thus, if a U.S. holder acquired a note after its initial issuance at an
amount that was less than the note's adjusted issue price, such U.S. holder
would be required to allocate this "discount" among the daily portions of
interest or projected payments to be made on the note. The portion of the
discount allocated to a daily portion of interest would be treated as a positive
adjustment on the date the daily portion accrues, and the portion allocated to a
projected payment would be treated as a positive adjustment on the date the
projected payment was scheduled to be made. A U.S. holder's adjusted basis in
the note would be increased by the amount of any such positive adjustment.
On the other hand, if a U.S. holder acquired a note after its initial
issuance at an amount that exceeded the note's adjusted issue price, the amount
of this "premium" allocated to a daily portion of interest is treated as a
negative adjustment on the date it accrues and the amount allocated to a
projected payment is treated as a negative adjustment on the date the payment
was scheduled to be made and, correspondingly, such U.S. holder's adjusted basis
in the note is reduced by the amount of the negative adjustment.
Finally, if the note at the time of a U.S. holder's acquisition is
deemed to be "exchange listed" property then, instead of allocating any discount
or premium to projected payments, a U.S. holder of notes generally would be
permitted, but not required, unless any other method was unreasonable, to
allocate the discount or premium pro rata to the accrual interest on the notes.
notes will be considered "exchange listed" if they are listed on either a
national securities exchange or an interdealer quotation system sponsored by a
national securities association, which we do not expect to occur.
SALE, EXCHANGE, CONVERSION OR REDEMPTION
Generally, the sale or exchange of a note, the purchase of a note by us
at the holder's option, or the redemption or retirement of a note for cash, will
result in taxable gain or loss to a U.S. holder. As described above, our
calculation of the comparable yield and the schedule of projected payments for
the notes includes the receipt of common stock upon conversion as a contingent
payment with respect to the notes. Accordingly, we intend to treat the receipt
of our common stock by a U.S. holder upon the conversion of a note as a
contingent payment under the CPDI Regulations. Under this treatment, conversion
also would result in taxable gain or loss to the U.S. holder. As described
above, holders will be deemed to have agreed to be bound by our determination of
the comparable yield and the schedule of projected payments.
39
The amount of gain or loss on a taxable sale, exchange, purchase by us
at the holder's option, conversion, redemption or retirement of a note would be
equal to the difference between (a) the amount of cash plus the fair market
value of any other property received by the U.S. holder, including the fair
market value of any of our common stock received, and (b) the U.S. holder's
adjusted tax basis in the note. A U.S. holder's adjusted tax basis in a note
will generally be equal to the U.S. holder's original purchase price for the
note, increased by any interest income previously accrued by the U.S. holder
(determined without regard to any adjustments to interest accruals described
above, other than adjustments to reflect a discount or premium to the adjusted
issue price, if any), and decreased by the amount of any projected payments that
have been previously made in respect of the notes to the U.S. holder (without
regard to the actual amount paid). Gain recognized upon a sale, exchange,
purchase by us at the holder's option, conversion, redemption or retirement of a
note will generally be treated as ordinary interest income; any loss will be
ordinary loss to the extent of interest previously included in income, and
thereafter, capital loss (which will be long-term if the note is held for more
than one year). The deductibility of net capital losses is subject to
limitations.
A U.S. holder's tax basis in our common stock received upon a
conversion of a note will equal the then current fair market value of such
common stock. The U.S. holder's holding period for the common stock received
will commence on the day immediately following the date of conversion.
CONSTRUCTIVE DIVIDENDS
If at any time we were to make a distribution of property to our
shareholders that would be taxable to the shareholders as a dividend for United
States federal income tax purposes and, in accordance with the antidilution
provisions of the notes, the conversion rate of the notes is increased, such
increase might be deemed to be the payment of a taxable dividend to holders of
the notes.
For example, an increase in the conversion rate in the event of
distributions of our evidences of indebtedness, or assets, or an increase in the
event of an extraordinary cash dividend may result in deemed dividend treatment
to holders of the notes, but generally an increase in the event of stock
dividends or the distribution of rights to subscribe for common stock would not
be so treated.
LIQUIDATED DAMAGES
We may be required to make payments of liquidated damages if the shelf
registration statement is not timely filed or made effective or if the
prospectus is unavailable for periods in excess of those permitted by the
registration rights agreement, as described under "Description of
Notes--Registration Rights." We intend to take the position for United States
federal income tax purposes that any payments of liquidated damages should be
taxable to U.S. holders as additional ordinary income when received or accrued,
in accordance with their method of tax accounting. Our determination is binding
on you, unless you explicitly disclose to the IRS that you are taking a
different position on your tax return for the year during which you acquire the
note. Further, the IRS could take a contrary position from our determination,
which could affect the timing and character of your income from the notes with
respect to the payments of liquidated damages.
U.S. holders should consult their tax advisers concerning the
appropriate tax treatment of the payment of liquidated damages, if any, with
respect to the notes.
TREATMENT OF NON-U.S. HOLDERS
Payments of interest on the notes made to a Non-U.S. holder will be
exempt from United States income or withholding tax provided that: (i) such
Non-U.S. holder does not own, actually, indirectly or constructively, 10% or
more of the total combined voting power of all classes of our stock entitled to
vote, and is not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership; (ii) the statement requirement
described below has been fulfilled with respect to the beneficial owner, as
discussed below; (iii) such payments are not effectively connected with the
conduct by such Non-U.S. holder of a trade or business in the United States;
(iv) our common stock continues to be actively traded within the meaning of
section 871(h)(4)(C)(v)(I) of the Code (which, for these purposes and subject to
certain exceptions, includes trading on the American Stock Exchange); and (v) we
40
are not a "United States real property holding corporation." We believe that we
are not and do not anticipate becoming a "United States real property holding
corporation."
Interest or liquidated damages on the notes not excluded from U.S.
federal income tax or U.S. withholding tax as described above will generally be
subject to U.S. withholding tax at a 30% rate, except where an applicable U.S.
income tax treaty provides for the reduction or elimination of such withholding
tax. Further, if a Non-U.S. holder receives dividends on common stock after
conversion, or is deemed to have received a constructive dividend (see
"--Constructive Dividends" above), the Non-U.S. holder will generally be subject
to United States federal withholding tax at a 30% rate, subject to a reduction
by an applicable treaty, on the taxable amount of such dividend.
The statement requirement referred to in the preceding paragraph will
be fulfilled if the beneficial owner of a note certifies on IRS Form W-8BEN (or
successor form), under penalties of perjury, that it is not a United States
person and provides its name and address or otherwise satisfies applicable
documentation requirements. If a Non-U.S. holder of the notes is engaged in a
trade or business in the United States, and if interest on the notes is
effectively connected with the conduct of such trade or business, the Non-U.S.
holder, although exempt from the withholding tax discussed in the preceding
paragraph, will generally be subject to regular United States federal income tax
on interest and on any gain realized on the sale, exchange, purchase by us at
the holder's option, conversion, redemption or retirement of the notes in the
same manner as if it were a U.S. holder. In lieu of the certificate described
above, such a Non-U.S. holder would be required to provide to the withholding
agent a properly executed IRS Form W-8ECI (or successor form) in order to claim
an exemption from withholding tax. In addition, if such a Non-U.S. holder is a
foreign corporation, such holder may be subject to a branch profits tax equal to
30% (or such lower rate provided by an applicable treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of interest (including interest accrued under the rules
described above) on the notes, or dividends made by us on our common stock, or
the proceeds of the sale or other disposition of the notes (including upon
maturity or conversion) or shares of our common stock, may be subject to
information reporting and U.S. federal backup withholding taxes if the recipient
of such payment fails to supply an accurate taxpayer identification number or
otherwise fails to comply with applicable U.S. information reporting or
certification requirements. Any amount withheld from a payment to a U.S. holder
of notes under the backup withholding rules is allowable as a credit against the
holder's U.S. federal income tax, provided that the required information is
furnished to the IRS.
Non-exempt U.S. holders of notes may be subject to information
reporting with respect to certain reportable payments, including payments of
principal and interest on the notes and the proceeds of the sale or other
disposition of the notes. We will report to the U.S. holders of notes and to the
IRS the amount of any reportable payments for each calendar year.
41
SELLING SECURITYHOLDERS
On May 7, 2003, we issued and sold $150,000,000 in aggregate principal
amount of the notes to Deutsche Bank Securities Inc. to whom we refer to as the
initial purchaser in a transaction exempt from the registration requirements of
the federal securities laws. The initial purchaser resold the notes to persons
it represented to us that it reasonably believed to be qualified institutional
buyers, as defined by Rule 144A under the Securities Act.
The selling securityholders, which term includes their transferees,
pledgees, donees and successors, may from time to time offer and sell pursuant
to this prospectus any and all of the notes and the shares of common stock
issuable upon conversion of the notes. Only those notes and shares of common
stock issuable upon conversion of the notes listed below or in any supplement
hereto may be offered for resale by the selling securityholders pursuant to this
prospectus.
The following table sets forth recent information about the principal
amount of notes and the number of shares of common stock issuable upon
conversion of the notes that may be offered for each selling securityholder's
account pursuant to this prospectus, in each case to the extent known to us as
of the date of this prospectus. The number of shares of common stock shown in
the table below assumes conversion of the full amount of notes held by such
holder at the initial conversion rate of 155.0388 shares per $1,000 principal
amount of notes. This conversion rate is subject to adjustment as described
under "Description of Notes - Conversion Rights." Accordingly, the number of
shares of common stock issuable upon conversion of the notes may increase or
decrease from time to time. Unless set forth below, to our knowledge none of the
selling securityholders has had a material relationship with us or any of our
predecessors or affiliates within the past three years.
PRINCIPAL AMOUNT OF SHARES OF COMMON
NOTES BENEFICIALLY PERCENTAGE OF STOCK BENEFICIALLY SHARES OF
OWNED THAT MY BE NOTES OWNED PRIOR TO COMMON STOCK
NAME SOLD OUTSTANDING(1) CONVERSION REGISTERED HEREBY
---- ------------------- -------------- ------------------ -----------------
Akela Capital Master Fund, Ltd........... $ 12,500,000 8.3% - 1,937,985
Arbitex Master Fund, L.P................. 11,000,000 7.3% - 1,705,427
BBT Fund, L.P............................ 8,350,000 5.6% - 1,294,574
Concentrated Alpha Partners, L.P......... 4,150,000 2.7% - 643,411
Grace Convertible Arbitrage Fund LTD..... 3,000,000 2.0% - 465,116
Highbridge International LLC............. 7,000,000 4.7% - 1,085,272
Onyx Fund Holdings, LDC.................. 7,500,000 5.0% - 1,162,791
Oppenheimer Convertible Securities Fund.. 5,500,000 3.7% - 852,713
S.A.C. Capital Associates, LLC........... 4,000,000 2.7% - 620,155
Sturgeon Limited......................... 660,000 * - 102,326
All other holders of notes or future
transferees, pledgees, donees or successors
of any holder(2)(3)......................... 86,340,000 57.6% - 13,386,050
- -----------------
* Less than 1%.
(1) The percentage of notes outstanding is based on the $150,000,000 principal
amount of notes originally outstanding. Beneficial ownership is determined
in accordance with SEC rules and includes voting or investment power with
respect to the securities.
(2) Information concerning other selling securityholders of the notes will be
set forth in prospectus supplements from time to time, if and when
necessary.
(3) Assumes that any other holders of notes or any future transferee from any
holder does not beneficially own any common stock other than common stock
into which the notes are convertible at the conversion price of 155.0388
shares per $1,000 principal amount of the notes.
The above table has been prepared based upon information furnished to
us by the selling securityholders. The selling securityholders identified above
may have sold, transferred or otherwise disposed of some or all of their notes
in transactions exempt from the registration requirements of the Securities Act
since the dates on which they
42
provided us information. Information concerning the selling securityholders may
change from time to time and, if necessary, we will supplement this prospectus
accordingly. The selling securityholders may offer some or all of their notes or
common stock pursuant to the offering contemplated by this prospectus.
Additionally, the conversion ratio of the notes is subject to adjustment and
therefore the number of shares of common stock issuable upon conversion of the
notes may increase or decrease. Accordingly, we cannot give an estimate as to
the amount of the notes or common stock issuable upon conversion of the notes
that will be held by the selling securityholders upon the termination of this
offering.
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the notes and
the common stock issuable upon conversion of the notes offered by this
prospectus. The aggregate proceeds to the selling securityholders from the sale
of the notes or common stock issuable upon conversion of the notes will be the
purchase price of the notes or common stock issuable upon conversion of the
notes less any discounts and commissions. A selling securityholder reserves the
right to accept and, together with its agents, to reject, any proposed purchased
of notes or common stock to be made directly or through agents.
The notes and the common stock issuable upon conversion of the notes
may be sold from time to time to purchasers:
- directly by the selling securityholders and their successors,
which includes their transferees, pledgees or donees or their
successors; or
- through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchasers
of the notes and the common stock issuable upon conversion of
the notes. These discounts, concessions or commissions may be
in excess of those customary in the types of transactions
involved.
The selling securityholders and any underwriters, broker-dealers or
agents who participate in the distribution of the notes and the common stock
issuable upon conversion of the notes may be deemed to be "underwriters" within
the meaning of the Securities Act. As a result, any profits on the sale of the
notes and the common stock issuable upon the conversion of the notes by selling
securityholders and any discounts, commissions or concessions received by any
such broker-dealers or agents may be deemed to be underwriting discounts and
"underwriters" within the meaning of the Securities Act will be subject to
prospectus deliver requirements of the Securities Act. If the selling
securityholders are deemed to be underwriters, the selling securityholders may
be subject to certain statutory liabilities, including, without limitation,
liabilities under Sections 11, 12 and 17 of the Securities Act and Rule 10b-5
under the Exchange Act. If the notes and the common stock issuable upon
conversion of the notes are sold through underwriters, broker-dealers or agents
the selling securityholders will be responsible for underwriting discounts or
commissions or agent's commissions.
The notes and the common stock issuable upon conversion of the notes
may be sold in one or more transactions at:
- fixed prices;
- prevailing market prices at the time of sale;
- prices related to such prevailing market prices;
- varying prices determined at the time of sale; or
- negotiated prices.
43
These sales may be effected in transactions:
- on any national securities exchange or quotation service on
which the notes and common stock issuable upon conversion of
the notes may be listed or quoted at the time of the sale;
- in the over-the-counter market;
- otherwise than on such exchanges or services or in the
over-the-counter market;
- through the writing and exercise of options, whether such
options are listed on an options exchange or otherwise; or
- through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses
are transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with the sales of notes and the common stock issuable
upon conversion of the notes or otherwise, the selling securityholders may enter
into hedging transactions with broker-dealers or other financial institutions.
These broker-dealers or other financial institutions may in turn engage in short
sales of notes or the common stock issuable upon conversion of the notes in the
course of hedging their positions. The selling securityholders may also sell the
notes and common stock issuable upon conversion of the notes short and deliver
notes and the common stock issuable upon conversion of the notes to close out
short positions, or loan or pledge notes or the common stock issuable upon
conversion of the notes to broker-dealers that in turn may sell the notes and
the common stock issuable upon conversion of the notes.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the common stock
issuable upon conversion of the notes.
At the time a particular offering is made, if required, a prospectus
supplement will be distributed, which will set forth the names of the selling
securityholders, the aggregate amount and type of securities being offered, the
price at which the securities are being sold and other material terms of the
offering, including the name or names of any underwriters, broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the selling securityholders and any discounts, commissions or concessions
allowed or reallowed to paid broker-dealers.
Our common stock trades on the American Stock Exchange under the symbol
"GW." We do not intend to apply for listing of the notes on any securities
exchange or for inclusion of the notes in any automated quotations system.
Accordingly, no assurances can be given as to the development of liquidity or
any trading market for the notes. See "Risk Factors--Risk Related to the
Notes--An active trading market for the notes may not develop."
We cannot be certain that any selling securityholder will sell any or
all of the notes or the common stock issuable upon conversion of the notes
pursuant to this prospectus. Further, we cannot assure you that any such selling
securityholder will not transfer, devise or gift the notes and the common stock
issuable upon conversion of the notes by other means not described in this
prospectus. In addition, any note or common stock issuable upon conversion of
the notes covered by this prospectus that qualify for sale pursuant to Rule 144
or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than under this prospectus. The notes and the common stock issuable upon
conversion of the notes may be sold in some states only through registered or
licensed brokers or dealers. In addition, in some states the notes and common
stock issuable upon conversion of the notes may not be sold unless they have
been registered or qualified for sale or an exemption from registration or
qualification is available and complied with.
The selling securityholders and any other person participating in the
sale of notes or the common stock issuable upon conversion of the notes will be
subject to the Exchange Act. The Exchange Act rules include, without limitations
Regulation M, which may limit the timing of purchases and sales of any of the
notes and the common
44
stock issuable upon conversion of the notes by the selling securityholders and
any other such person. In addition, Regulation M may restrict the ability of any
person engaged in the distribution of the notes and the common stock issuable
upon conversion of the notes and the ability of any person or entity to engage
in market-making activities with respect to the notes and the common stock
issuable upon conversion of the notes.
We have agreed to indemnify the selling securityholders against certain
liabilities, including liabilities under the Securities Act.
We have agreed to pay substantially all of the expenses incidental to
the registration, offering and sale of the notes and common stock issuable upon
conversion of the notes to the public, other than commissions, fees and
discounts of underwriters, brokers, dealers and agents.
LEGAL MATTERS
The validity of the notes offered by this prospectus and our common
stock issuable upon conversion of the notes have been passed upon for us by
Porter & Hedges, L.L.P., Houston, Texas.
INDEPENDENT ACCOUNTANTS
Our financial statements incorporated by reference in this prospectus
for the fiscal years ended December 31, 2002 and 2001 and for each of the three
years in the period ended December 31, 2002 have been audited by KPMG LLP,
independent auditors, as stated in their reports incorporated into this
prospectus.
45
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION.
IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD
NOT RELY ON IT. THE SELLING SECURITYHOLDERS ARE NOT MAKING AN OFFER TO SELL
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE
AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS ONLY. OUR BUSINESS,
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE
THAT DATE.
[GREY WOLF, INC. LOGO]
$150,000,000
3.75% Contingent Convertible
Senior Notes Due 2023 and
Common Stock Issuable upon Conversion
of the Notes
PROSPECTUS
__________ __, 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following tables sets forth the expenses in connection with the
offering described in this registration statement, all of which shall be paid by
us. All of such amounts (except the SEC Registration Fee) are estimated.
SEC Registration Fee.......................................... $12,135
Printing Costs................................................ 25,000
Legal Fees and Expenses....................................... 15,000
Accounting Fees and Expenses.................................. 15,000
Miscellaneous................................................. 5,000
-------
Total.................................................... $72,135
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Article 1302-7.06 of the Texas Miscellaneous Corporation Laws
Act, the articles of incorporation of a Texas corporation may provide that a
director of that corporation shall not be liable, or shall be liable only to the
extent provided in the articles of incorporation, to the corporation or its
shareholders for monetary damages for acts or omissions in the director's
capacity as a director, except that the articles of incorporation cannot provide
for the elimination or limitation of liability of a director to the extent that
the director is found liable for:
- a breach of the director's duty of loyalty to the corporation
or its shareholders;
- acts or omissions not in good faith that constitute a breach
of duty of the director to the corporation or an act or
omission that involves intentional misconduct or a knowing
violation of the law;
- any transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office; or
- an act or omission for which the liability of a director is
expressly provided by an applicable statute.
Article 10 of our amended and restated Articles of Incorporation states
that no director shall be liable to us or our shareholders for monetary damages
for an act or omission in the director's capacity as a director, provided,
however, that such Article shall not eliminate or limit the liability of a
director to the extent the director is found liable for the actions, omissions
or conduct listed above.
In addition, Article 2.02-1 of the Texas Business Corporation Act (the
"TBCA") authorizes a Texas corporation to indemnify a person who was, is, or is
threatened to be made a named defendant or respondent in a proceeding, including
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative because the person is or
was a director.
The TBCA provides that unless a court of competent jurisdiction
determines otherwise, indemnification is permitted only if it is determined that
the person:
- conducted himself in good faith;
- reasonably believed (a) in the case of conduct in his official
capacity as a director of the corporation, that his conduct
was in the corporation's best interests; and (b) in all other
cases, that his conduct was at least not opposed to the
corporation's best interests; and
II-1
- in the case of any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful.
A person may be indemnified under Article 2.02-1 of the TBCA against
- judgments,
- penalties (including excise and similar taxes),
- fines,
- settlements, and
- reasonable expenses actually incurred by the person (including
court costs and attorneys' fees).
However, if the person is found liable to the corporation or is found
liable on the basis that personal benefit was improperly received by him, the
indemnification is limited to reasonable expenses actually incurred and shall
not be made in respect of any proceeding in which the person has been found
liable for willful or intentional misconduct in the performance of his duty to
the corporation. A corporation is obligated under Article 2.02-1 of the TBCA to
indemnify a director or officer against reasonable expenses incurred by him in
connection with a proceeding in which he is named defendant or respondent
because he is or was a director or officer if he has been wholly successful, on
the merits or otherwise, in the defense of the proceeding.
Under Article 2.02-1 of the TBCA a corporation may:
- indemnify and advance expenses to an officer, employee, agent
or other persons who are or were serving at the request of the
corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of
another entity to the same extent that it may indemnify and
advance expenses to its directors;
- indemnify and advance expenses to directors and such other
persons set forth above to such further extent, consistent
with law, as may be provided in the corporation's articles of
incorporation, bylaws, action of its board of directors, or
contract or as permitted by common law;
- purchase and maintain insurance or another arrangement on
behalf of directors and such other persons set forth above
against any liability asserted against him and incurred by him
in such a capacity or arising out of his status as such a
person.
Our Bylaws substantively provide that directors and officers of the
company will be indemnified to the fullest extent permitted by the TBCA.
The company maintains directors' and officers' insurance. The company
has entered into agreements to indemnify its executive officers regarding
liabilities that may result from such officer's service as an officer or
director of the company.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 -- Articles of Incorporation of Grey Wolf, Inc., as amended (incorporated herein by reference to Exhibit 3.1 to Form
10-Q dated May 12, 1999).
3.2 -- By-Laws of Grey Wolf, Inc., as amended (incorporated herein by reference to Exhibit 99.1 to Form 8-K dated March 23,
1999).
II-2
EXHIBIT
NUMBER DESCRIPTION
------ -----------
4.1 -- Rights Agreement dated as of September 21, 1998 by and between the Company and American Stock Transfer and Trust
Company as Rights Agent (incorporated herein by reference to Exhibit 4.1 to Form 8-K filed September 22, 1998).
*4.2 -- Indenture dated as of May 7, 2003, relating to the 3.75% Contingent Convertible Senior Notes Due 2023, between the
Company, the Guarantors and JPMorgan Chase Bank, a New York Banking Corporation, as Trustee.
*4.3 -- Supplemental Indenture dated as of May 23, 2003, relating to the 3.75% Contingent Convertible Senior Notes Due 2023,
between the Company, the Guarantors and JPMorgan Chase Bank, a New York Banking Corporation, as Trustee.
*4.4 -- Registration Rights Agreement dated as of May 7, 2003, by and between the Company, the Guarantors and Deutsche Bank
Securities Inc.
*5.1 -- Opinion of Porter & Hedges, L.L.P.
*8.1 -- Tax Opinion of Porter & Hedges, L.L.P.
*10.1 -- Purchase Agreement dated May 1, 2003, between Grey Wolf, Inc., the Guarantors, and Deutsche Bank Securities Inc.,
as Initial Purchaser.
*12.1 -- Computation of Ratios of Earnings to Fixed Charges.
*23.1 -- Consent of KPMG LLP.
*23.2 -- Consent of Porter & Hedges, L.L.P. (contained in Exhibit 5.1).
*23.3 -- Consent of Porter & Hedges, L.L.P. (contained in Exhibit 8.1).
*24.1 -- Powers of Attorney (included on signature pages).
*25.1 -- Statement of Eligibility and Qualification of the Trustee under the Trust Indenture Act of 1939, as amended, on
Form T-1.
- ------------------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effect amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) Include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
Registration Statement.
II-3
provided, however, that paragraphs (1)(i) and (1)(ii) above do not
apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed with
or furnished to the Securities and Exchange Commission by the
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference into this Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
GREY WOLF, INC.
By: /s/ DAVID W. WEHLMANN
-----------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and Merrie S. Costley and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable Grey Wolf, Inc. to comply with the Securities Act
of 1933, as amended (the "Securities Act") and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing with the Securities and Exchange Commission of the Registration Statement
on Form S-3 under the Securities Act, including specifically but without
limitation, power and authority to sign the name of the undersigned to such
Registration Statement, and any amendments to such Registration Statement
(including post-effective amendments and additional registration statements
filed pursuant to Rule 462 of the Securities Act), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
Registration Statements, notices or other documents necessary or advisable to
comply with applicable state securities laws, and to file the same, together
with other documents in connection therewith with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to perform each and every act
and thing requisite or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
II-5
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at Grey Wolf, Inc. in the
capacities and on the dates indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS Chairman of the Board, President and Chief July 11, 2003
- -------------------------------------------- Executive Officer (Principal Executive Officer)
Thomas P. Richards
/s/ FRANK M. BROWN Director July 11, 2003
- --------------------------------------------
Frank M. Brown
/s/ WILLIAM T. DONOVAN Director July 11, 2003
- --------------------------------------------
William T. Donovan
/s/ JAMES K. B. NELSON Director July 11, 2003
- --------------------------------------------
James K. B. Nelson
/s/ STEVEN A. WEBSTER Director July 11, 2003
- --------------------------------------------
Steven A. Webster
/s/ DAVID W. WEHLMANN Executive Vice President and Chief Financial July 11, 2003
- -------------------------------------------- Officer (Principal Financial Officer)
David W. Wehlmann
/s/ MERRIE S. COSTLEY Vice President and Controller (Principal July 11, 2003
- -------------------------------------------- Accounting Officer)
Merrie S. Costley
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
GREY WOLF DRILLING COMPANY L.P.
By: Grey Wolf Holdings Company,
its sole general partner
By: /s/ DAVID W. WEHLMANN
---------------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and Merrie S. Costley and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable Grey Wolf Drilling Company L.P. to comply with the
Securities Act of 1933, as amended (the "Securities Act") and any requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the filing with the Securities and Exchange Commission of the Registration
Statement on Form S-3 under the Securities Act, including specifically but
without limitation, power and authority to sign the name of the undersigned to
such Registration Statement, and any amendments to such Registration Statement
(including post-effective amendments and additional registration statements
filed pursuant to Rule 462 of the Securities Act), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
Registration Statements, notices or other documents necessary or advisable to
comply with applicable state securities laws, and to file the same, together
with other documents in connection therewith with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to perform each and every act
and thing requisite or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
II-7
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at Grey Wolf Holdings
Company, the sole general partner of Grey Wolf Drilling Company, L.P., in the
capacities and on the dates indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS President, Chief Executive Officer and July 11, 2003
- -------------------------------------------- Director (Principal Executive Officer)
Thomas P. Richards
/S/ WILLIAM E. CHILES Director July 11, 2003
- --------------------------------------------
William E. Chiles
/s/ EDWARD S. JACOB, III Director July 11, 2003
- --------------------------------------------
Edward S. Jacob, III
/s/ DAVID W. WEHLMANN Executive Vice President, Chief Financial July 11, 2003
- -------------------------------------------- Officer and Director (Principal Financial
David W. Wehlmann Officer)
/s/ MERRIE S. COSTLEY Vice President and Controller (Principal July 11, 2003
- -------------------------------------------- Accounting Officer)
Merrie S. Costley
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
GREY WOLF LLC
By: Grey Wolf Holdings Company,
its sole member
By: /s/ DAVID W. WEHLMANN
---------------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and Merrie S. Costley and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable Grey Wolf LLC to comply with the Securities Act of
1933, as amended (the "Securities Act") and any requirements of the Securities
and Exchange Commission in respect thereof, in connection with the filing with
the Securities and Exchange Commission of the Registration Statement on Form S-3
under the Securities Act, including specifically but without limitation, power
and authority to sign the name of the undersigned to such Registration
Statement, and any amendments to such Registration Statement (including
post-effective amendments and additional registration statements filed pursuant
to Rule 462 of the Securities Act), and to file the same with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, to sign any and all applications, Registration Statements,
notices or other documents necessary or advisable to comply with applicable
state securities laws, and to file the same, together with other documents in
connection therewith with the appropriate state securities authorities, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and to perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
II-9
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at Grey Wolf Holdings
Company, the sole member of Grey Wolf LLC, in the capacities and on the dates
indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS President, Chief Executive Officer and July 11, 2003
- -------------------------------------------- Director (Principal Executive Officer)
Thomas P. Richards
/s/ WILLIAM E. CHILES Director July 11, 2003
- --------------------------------------------
William E. Chiles
/s/ EDWARD S. JACOB, III Director July 11, 2003
- --------------------------------------------
Edward S. Jacob, III
/s/ DAVID W. WEHLMANN Executive Vice President, Chief Financial July 11, 2003
- -------------------------------------------- Officer and Director (Principal Financial
David W. Wehlmann Officer)
/s/ MERRIE S. COSTLEY Vice President and Controller (Principal July 11, 2003
- -------------------------------------------- Accounting Officer)
Merrie S. Costley
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
GREY WOLF HOLDINGS COMPANY
By: /s/ DAVID W. WEHLMANN
---------------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and Merrie S. Costley and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable Grey Wolf Holdings Company to comply with the
Securities Act of 1933, as amended (the "Securities Act") and any requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the filing with the Securities and Exchange Commission of the Registration
Statement on Form S-3 under the Securities Act, including specifically but
without limitation, power and authority to sign the name of the undersigned to
such Registration Statement, and any amendments to such Registration Statement
(including post-effective amendments and additional registration statements
filed pursuant to Rule 462 of the Securities Act), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
Registration Statements, notices or other documents necessary or advisable to
comply with applicable state securities laws, and to file the same, together
with other documents in connection therewith with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to perform each and every act
and thing requisite or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
II-11
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at Grey Wolf Holdings Company
in the capacities and on the dates indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS President, Chief Executive Officer and July 11, 2003
- -------------------------------------------- Director (Principal Executive Officer)
Thomas P. Richards
/s/ WILLIAM E. CHILES Director July 11, 2003
- --------------------------------------------
William E. Chiles
/s/ EDWARD S. JACOB, III Director July 11, 2003
- --------------------------------------------
Edward S. Jacob, III
/s/ DAVID W. WEHLMANN Executive Vice President, Chief Financial July 11, 2003
- -------------------------------------------- Officer and Director (Principal Financial
David W. Wehlmann Officer)
/s/ MERRIE S. COSTLEY Vice President and Controller (Principal July 11, 2003
- -------------------------------------------- Accounting Officer)
Merrie S. Costley
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
MURCO DRILLING CORPORATION
By: /s/ DAVID W. WEHLMANN
---------------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and William E. Chiles and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable Murco Drilling Corporation to comply with the
Securities Act of 1933, as amended (the "Securities Act") and any requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the filing with the Securities and Exchange Commission of the Registration
Statement on Form S-3 under the Securities Act, including specifically but
without limitation, power and authority to sign the name of the undersigned to
such Registration Statement, and any amendments to such Registration Statement
(including post-effective amendments and additional registration statements
filed pursuant to Rule 462 of the Securities Act), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
Registration Statements, notices or other documents necessary or advisable to
comply with applicable state securities laws, and to file the same, together
with other documents in connection therewith with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to perform each and every act
and thing requisite or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
II-13
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at Murco Drilling Corporation
in the capacities and on the dates indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS President, Chief Executive Officer and July 11, 2003
- -------------------------------------------- Director (Principal Executive Officer)
Thomas P. Richards
/s/ WILLIAM E. CHILES Director July 11, 2003
- --------------------------------------------
William E. Chiles
/s/ EDWARD S. JACOB, III Director July 11, 2003
- --------------------------------------------
Edward S. Jacob, III
/s/ DAVID W. WEHLMANN Executive Vice President, Chief Financial July 11, 2003
- -------------------------------------------- Officer and Director (Principal Financial and
David W. Wehlmann Accounting Officer)
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
GREY WOLF INTERNATIONAL, INC.
By: /s/ DAVID W. WEHLMANN
---------------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and Merrie S. Costley and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable Grey Wolf International, Inc. to comply with the
Securities Act of 1933, as amended (the "Securities Act") and any requirements
of the Securities and Exchange Commission in respect thereof, in connection with
the filing with the Securities and Exchange Commission of the Registration
Statement on Form S-3 under the Securities Act, including specifically but
without limitation, power and authority to sign the name of the undersigned to
such Registration Statement, and any amendments to such Registration Statement
(including post-effective amendments and additional registration statements
filed pursuant to Rule 462 of the Securities Act), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
Registration Statements, notices or other documents necessary or advisable to
comply with applicable state securities laws, and to file the same, together
with other documents in connection therewith with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to perform each and every act
and thing requisite or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
II-15
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at Grey Wolf International,
Inc. in the capacities and on the dates indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS President, Chief Executive Officer and July 11, 2003
- -------------------------------------------- Director (Principal Executive Officer)
Thomas P. Richards
/s/ WILLIAM E. CHILES Director July 11, 2003
- --------------------------------------------
William E. Chiles
/s/ RONALD G. HALE Director July 11, 2003
- --------------------------------------------
Ronald G. Hale
/s/ DAVID W. WEHLMANN Executive Vice President, Chief Financial July 11, 2003
- -------------------------------------------- Officer and Director (Principal Financial
David W. Wehlmann Officer)
/s/ MERRIE S. COSTLEY Vice President and Controller (Principal July 11, 2003
- -------------------------------------------- Accounting Officer)
Merrie S. Costley
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
DI/PERFENSA, INC.
By: /s/ DAVID W. WEHLMANN
---------------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and William E. Chiles and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable DI/Perfensa, Inc. to comply with the Securities Act
of 1933, as amended (the "Securities Act") and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing with the Securities and Exchange Commission of the Registration Statement
on Form S-3 under the Securities Act, including specifically but without
limitation, power and authority to sign the name of the undersigned to such
Registration Statement, and any amendments to such Registration Statement
(including post-effective amendments and additional registration statements
filed pursuant to Rule 462 of the Securities Act), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
Registration Statements, notices or other documents necessary or advisable to
comply with applicable state securities laws, and to file the same, together
with other documents in connection therewith with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to perform each and every act
and thing requisite or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
II-17
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at DI/Perfensa, Inc. in the
capacities and on the dates indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS President, Chief Executive Officer and July 11, 2003
- -------------------------------------------- Director (Principal Executive Officer)
Thomas P. Richards
/s/ WILLIAM E. CHILES Director July 11, 2003
- --------------------------------------------
William E. Chiles
/s/ RONALD G. HALE Director July 11, 2003
- --------------------------------------------
Ronald G. Hale
/s/ DAVID W. WEHLMANN Executive Vice President, Chief Financial July 11, 2003
- -------------------------------------------- Officer and Director (Principal Financial and
David W. Wehlmann Accounting Officer)
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on July 11, 2003.
DI ENERGY, INC.
By: /s/ DAVID W. WEHLMANN
---------------------------------
David W. Wehlmann,
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature
appears below, constitutes and appoints Thomas P. Richards, David W. Wehlmann
and Merrie S. Costley and each of them, our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, to do any and
all acts and things and execute, in the name of the undersigned, any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable in order to enable DI Energy, Inc. to comply with the Securities Act
of 1933, as amended (the "Securities Act") and any requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing with the Securities and Exchange Commission of the Registration Statement
on Form S-3 under the Securities Act, including specifically but without
limitation, power and authority to sign the name of the undersigned to such
Registration Statement, and any amendments to such Registration Statement
(including post-effective amendments and additional registration statements
filed pursuant to Rule 462 of the Securities Act), and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to sign any and all applications,
Registration Statements, notices or other documents necessary or advisable to
comply with applicable state securities laws, and to file the same, together
with other documents in connection therewith with the appropriate state
securities authorities, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and to perform each and every act
and thing requisite or necessary to be done in and about the premises, as fully
and to all intents and purposes as the undersigned might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, and
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
II-19
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons at DI Energy, Inc. in the
capacities and on the dates indicated
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS P. RICHARDS President, Chief Executive Officer and July 11, 2003
- -------------------------------------------- Director (Principal Executive Officer)
Thomas P. Richards
/s/ WILLIAM E. CHILES Director July 11, 2003
- --------------------------------------------
William E. Chiles
/s/ EDWARD S. JACOB, III Director July 11, 2003
- --------------------------------------------
Edward S. Jacob, III
/s/ DAVID W. WEHLMANN Executive Vice President, Chief Financial July 11, 2003
- -------------------------------------------- Officer and Director (Principal Financial
David W. Wehlmann Officer)
/s/ MERRIE S. COSTLEY Vice President and Controller (Principal July 11, 2003
- -------------------------------------------- Accounting Officer)
Merrie S. Costley
II-20
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
3.1 -- Articles of Incorporation of Grey Wolf, Inc., as amended (incorporated herein by reference to Exhibit 3.1 to
Form 10-Q dated May 12, 1999).
3.2 -- By-Laws of Grey Wolf, Inc., as amended (incorporated herein by reference to Exhibit 99.1 to Form 8-K dated March 23,
1999).
4.1 -- Rights Agreement dated as of September 21, 1998 by and between the Company and American Stock Transfer and Trust
Company as Rights Agent (incorporated herein by reference to Exhibit 4.1 to Form 8-K filed September 22, 1998).
*4.2 -- Indenture dated as of May 7, 2003, relating to the 3.75% Contingent Convertible Senior Notes Due 2023, between the
Company, the Guarantors and JPMorgan Chase Bank, a New York Banking Corporation, as Trustee.
*4.3 -- Supplemental Indenture dated as of May 22, 2003, relating to the 3.75% Contingent Convertible Senior Notes Due 2023,
between the Company, the Guarantors and JPMorgan Chase Bank, a New York Banking Corporation, as Trustee.
*4.4 -- Registration Rights Agreement dated as of May 7, 2003, by and between the Company, the Guarantors and Deutsche Bank
Securities Inc.
*5.1 -- Opinion of Porter & Hedges, L.L.P.
*8.1 -- Tax Opinion of Porter & Hedges, L.L.P.
*10.1 -- Purchase Agreement dated May 1, 2003, between Grey Wolf, Inc., the Guarantors, and Deutsche Bank Securities Inc., as
Initial Purchaser.
*12.1 -- Computation of Ratios of Earnings to Fixed Charges.
*23.1 -- Consent of KPMG LLP.
*23.2 -- Consent of Porter & Hedges, L.L.P. (contained in Exhibit 5.1).
*23.3 -- Consent of Porter & Hedges, L.L.P. (contained in Exhibit 8.1).
*24.1 -- Powers of Attorney (included on signature pages).
*25.1 -- Statement of Eligibility and Qualification of the Trustee under the Trust Indenture Act of 1939, as amended, on Form
T-1.
- ----------------------------
* Filed herewith.