Execution Copy
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AGREEMENT AND PLAN OF MERGER
among
TRANSOCEAN SEDCO FOREX INC.,
TRANSOCEAN HOLDINGS INC.,
TSF DELAWARE INC.
and
R&B FALCON CORPORATION
Dated as of August 19, 2000
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TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER................................................. 1
Section 1.1 The Merger............................................. 1
Section 1.2 The Closing............................................ 2
Section 1.3 Effective Time......................................... 2
ARTICLE 2 ARTICLES OF ASSOCIATION OF PARENT AND CERTIFICATE OF
INCORPORATION AND BYLAWS OF THE SURVIVING ENTITY........... 2
Section 2.1 Articles of Association of Parent...................... 2
Section 2.2 Certificate of Incorporation of the Surviving Entity... 2
Section 2.3 Bylaws of the Surviving Entity......................... 3
ARTICLE 3 DIRECTORS AND OFFICERS OF THE SURVIVING ENTITY AND
DIRECTORS OF PARENT........................................ 3
Section 3.1 Directors of Surviving Entity.......................... 3
Section 3.2 Officers of Surviving Entity........................... 3
Section 3.3 Board of Directors of Parent........................... 3
ARTICLE 4 CONVERSION OF COMPANY COMMON STOCK......................... 4
Section 4.1 Merger Ratio........................................... 4
Section 4.2 Conversion of Capital Stock of the Company and Merger
Sub.................................................. 4
Section 4.3 Exchange of Certificates Representing Company Common
Stock................................................ 6
Section 4.4 Adjustment of Merger Ratios............................ 8
Section 4.5 Rule 16b-3 Approval.................................... 9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF COMPANY.................. 9
Section 5.1 Existence; Good Standing; Corporate Authority.......... 9
Section 5.2 Authorization, Validity and Effect of Agreements....... 9
Section 5.3 Capitalization......................................... 10
Section 5.4 Significant Subsidiaries............................... 10
Section 5.5 Compliance with Laws; Permits.......................... 11
Section 5.6 No Conflict............................................ 12
Section 5.7 SEC Documents.......................................... 12
Section 5.8 Litigation............................................. 13
Section 5.9 Absence of Certain Changes............................. 13
Section 5.10 Taxes.................................................. 14
Section 5.11 Employee Benefit Plans................................. 15
Section 5.12 Labor Matters.......................................... 17
Section 5.13 Environmental Matters.................................. 17
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Section 5.14 Intellectual Property.................................. 18
Section 5.15 Decrees, Etc........................................... 18
Section 5.16 Insurance.............................................. 19
Section 5.17 No Brokers............................................. 19
Section 5.18 Opinion of Financial Advisor........................... 19
Section 5.19 Parent Share Ownership................................. 19
Section 5.20 Vote Required.......................................... 20
Section 5.21 Ownership of Drilling Rigs and Drillships.............. 20
Section 5.22 Undisclosed Liabilities................................ 20
Section 5.23 Certain Contracts...................................... 20
Section 5.24 Capital Expenditure Program............................ 21
Section 5.25 Improper Payments...................................... 21
Section 5.26 Amendment to the Company Rights Agreement.............. 22
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT, SUB AND
MERGER SUB................................................. 22
Section 6.1 Existence; Good Standing; Corporate Authority.......... 22
Section 6.2 Authorization, Validity and Effect of Agreements....... 23
Section 6.3 Capitalization......................................... 23
Section 6.4 Significant Subsidiaries............................... 23
Section 6.5 Compliance with Laws; Permits.......................... 24
Section 6.6 No Conflict............................................ 25
Section 6.7 SEC Documents.......................................... 25
Section 6.8 Litigation............................................. 26
Section 6.9 Absence of Certain Changes............................. 26
Section 6.10 Taxes.................................................. 27
Section 6.11 Employee Benefit Plans................................. 28
Section 6.12 Labor Matters.......................................... 29
Section 6.13 Environmental Matters.................................. 30
Section 6.14 Intellectual Property.................................. 30
Section 6.15 Decrees, Etc........................................... 31
Section 6.16 Insurance.............................................. 31
Section 6.17 No Brokers............................................. 31
Section 6.18 Opinion of Financial Advisor........................... 32
Section 6.19 Company Stock Ownership................................ 32
Section 6.20 Vote Required.......................................... 32
Section 6.21 Ownership of Drilling Rigs and Drillships.............. 32
Section 6.22 Undisclosed Liabilities................................ 33
Section 6.23 Certain Contracts...................................... 33
Section 6.24 Capital Expenditure Program............................ 34
Section 6.25 Improper Payments...................................... 34
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ARTICLE 7 COVENANTS.................................................. 34
Section 7.1 Conduct of Company Business............................ 34
Section 7.1A Conduct of Parent Business............................. 38
Section 7.2 No Solicitation by the Company......................... 39
Section 7.3 No Solicitation by Parent.............................. 41
Section 7.4 Meetings of Stockholders............................... 42
Section 7.5 Filings; Commercially Reasonable Best Efforts, Etc..... 43
Section 7.6 Inspection............................................. 46
Section 7.7 Publicity.............................................. 46
Section 7.8 Registration Statement on Form S-4..................... 46
Section 7.9 Listing Applications................................... 47
Section 7.10 Letters of Accountants................................. 48
Section 7.11 Agreements of Rule 145 Affiliates...................... 48
Section 7.12 Expenses............................................... 48
Section 7.13 Indemnification and Insurance.......................... 48
Section 7.14 Employee Matters....................................... 50
Section 7.15 Rights Agreement....................................... 54
Section 7.16 Delivery of Parent Ordinary Shares..................... 54
Section 7.17 Consulting Agreements.................................. 54
Section 7.18 Assets in the Coastwise Trade.......................... 54
Section 7.19 Obtaining Investment Grade Rating...................... 54
Section 7.20 Agreement Regarding Company Redeemable Preferred Stock. 55
ARTICLE 8 CONDITIONS................................................. 57
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger............................................... 57
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger............................................... 58
Section 8.3 Conditions to Obligation of Parent, Sub and Merger Sub
to Effect the Merger................................. 59
ARTICLE 9 TERMINATION................................................ 60
Section 9.1 Termination by Mutual Consent.......................... 60
Section 9.2 Termination by Parent or the Company................... 60
Section 9.3 Termination by the Company............................. 61
Section 9.4 Termination by Parent.................................. 62
Section 9.5 Effect of Termination.................................. 63
Section 9.6 Extension; Waiver...................................... 64
ARTICLE 10 GENERAL PROVISIONS......................................... 64
Section 10.1 Nonsurvival of Representations, Warranties and
Agreements........................................... 64
Section 10.2 Notices................................................ 65
Section 10.3 Assignment; Binding Effect; Benefit.................... 65
Section 10.4 Entire Agreement....................................... 66
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Section 10.5 Amendments............................................ 66
Section 10.6 Governing Law......................................... 66
Section 10.7 Counterparts.......................................... 66
Section 10.8 Headings.............................................. 66
Section 10.9 Interpretation........................................ 66
Section 10.10 Waivers............................................... 67
Section 10.11 Incorporation of Exhibits............................. 67
Section 10.12 Severability.......................................... 67
Section 10.13 Enforcement of Agreement.............................. 67
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GLOSSARY OF DEFINED TERMS
Defined Terms Where Defined
Action.....................................................Section 7.13(a)
Affected Employee..........................................Section 7.14(b)
Agreement..................................................Preamble
Antitrust Laws.............................................Section 7.5(c)
Applicable Laws............................................Section 5.5(a)
Cause......................................................Section 7.14(c)
Certificate of Merger......................................Section 1.3
Certificates...............................................Section 4.3(b)
CIC Agreements.............................................Section 7.14(f)
Closing....................................................Section 1.2
Closing Date...............................................Section 1.2
Code.......................................................Recitals
Common Stock Merger Ratio..................................Section 4.1(a)
Company....................................................Preamble
Company Acquisition Proposal...............................Section 7.2(a)
Company Benefit Plans......................................Section 5.11(a)
Company Charter Amendment..................................Section 5.20
Company Common Stock.......................................Section 4.2(b)
Company Disclosure Letter..................................Article 5 Preface
Company High Yield Debt....................................Section 7.19(a)
Company Material Adverse Effect............................Section 10.9(c)
Company Material Contract..................................Section 5.23(a)
Company Option.............................................Section 4.2(e)(i)
Company Permits............................................Section 5.5(b)
Company Permitted Liens....................................Section 5.21
Company Real Property......................................Section 5.5(d)
Company Redeemable Preferred Stock.........................Section 4.2(c)
Company Reports............................................Section 5.7
Company Right..............................................Section 5.3
Company Rights Agreement...................................Section 5.3
Company Stock Plans........................................Section 4.1(e)(i)
Company Superior Proposal..................................Section 7.2(a)
Confidentiality and Standstill Agreement...................Section 7.2(a)
Cutoff Date................................................Section 7.2(d),
7.3(d)
DGCL.......................................................Section 1.1
Effective Time.............................................Section 1.3
Eligible Company Shareholders..............................Recitals
Employees..................................................Section 7.14(d)
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Environmental Laws.........................................Section 5.13(a)
ERISA......................................................Section 5.11(a)
ERISA Affiliate............................................Section 5.11(b)
Exchange Act...............................................Section 4.5
Exchange Agent.............................................Section 4.3(a)
Exchange Fund..............................................Section 4.3(a)
Form S-4...................................................Section 7.8(a)
Hazardous Materials........................................Section 5.13(b)
HSR Act....................................................Section 5.6(b)
Indemnified Parties........................................Section 7.13(a)
Irrevocable Deposit........................................Section 7.20(c)
Letter of Transmittal......................................Section 4.3(b)
Liens......................................................Section 5.4
Material Adverse Effect....................................Section 10.9(c)
Merger.....................................................Recitals
Merger Sub.................................................Preamble
Moody's....................................................Section 7.19(a)
Nasdaq National Market System..............................Section 5.6(b)
Non-U.S. Antitrust Laws....................................Section 7.5(a)(i)
NYSE.......................................................Section 4.1(c)
Parent.....................................................Preamble
Parent Acquisition Proposal................................Section 7.3(a)
Parent Benefit Plans.......................................Section 6.11
Parent Disclosure Letter...................................Article 6 Preface
Parent Guarantee...........................................Section 7.19(b)
Parent Material Adverse Effect.............................Section 10.9(c)
Parent Material Contract...................................Section 6.23(a)
Parent Ordinary Shares.....................................Section 2.1
Parent Ordinary Share Price................................Section 4.1(e)
Parent Permits.............................................Section 6.5(b)
Parent Permitted Liens.....................................Section 6.21
Parent Preference Shares...................................Section 6.3
Parent Real Property.......................................Section 6.5(d)
Parent Reports.............................................Section 6.7
Parent Superior Proposal...................................Section 7.3(a)
Proxy Statement/Prospectus.................................Section 7.8(a)
Public Offering............................................Section 7.20(b)
RBF Finance Co.............................................Section 7.19(a)
Regulatory Filings.........................................Section 5.6(b)
Returns....................................................Section 5.10(a)
Rule 145 Affiliates........................................Section 7.11
Rule 16b-3.................................................Section 4.5
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S&P........................................................Section 7.19(a)
SEC........................................................Section 4.2(e)(ii)
Securities Act.............................................Section 4.3(d)
Series A Junior Preferred Stock............................Section 5.3
Severance Plan.............................................Section 7.14(c)
Shelf Registration Statement...............................Section 7.20(a)
Significant Subsidiary.....................................Section 5.4
Sub........................................................Preamble
Subsidiary.................................................Section 10.9(d)
Surviving Entity...........................................Section 1.1
Taxes......................................................Section 5.10(e)
Third-Party Provisions.....................................Section 10.3
Warrant Agreement..........................................Section 4.2(f)
Warrants...................................................Section 4.2(f)
Year 2000 Bonuses..........................................Section 7.14(e)
Year 2001 Bonuses..........................................Section 7.14(e)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
August 19, 2000, is by and among Transocean Sedco Forex Inc., a company
incorporated under the laws of the Cayman Islands ("Parent"), Transocean
Holdings Inc., a company organized under the laws of Delaware and a direct
wholly owned subsidiary of Parent ("Sub"), TSF Delaware Inc., a company
organized under the laws of Delaware and a direct wholly owned subsidiary of
Sub ("Merger Sub"), and R&B Falcon Corporation, a company organized under the
laws of Delaware (the "Company").
RECITALS
A. The Merger. At the Effective Time (as defined herein), the
parties intend to effect a merger of Merger Sub with and into the Company,
with the Company being the surviving entity (the "Merger"), thus enabling Sub
to acquire all of the stock of the Company solely in exchange for voting
shares of Parent.
B. Intended U.S. Tax Consequences. The parties to this Agreement
intend that, for U.S. federal income tax purposes, the Merger qualify as a
reorganization under Section 368(a)(1)(B) of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), and that the holders of stock of the Company
who will not be "five percent transferee shareholders" as defined in Treasury
Regulation Section 1.367(a)-3(c)(5)(ii) or who enter into five-year gain
recognition agreements in the form provided in Treasury Regulation Section
1.367(a)-8(b) ("Eligible Company Shareholders") and who exchange Company
Common Stock (as defined herein) solely for Parent Ordinary Shares (as defined
herein) pursuant to the Merger not recognize taxable gain with respect to the
Merger pursuant to Section 367(a) of the Code (except with respect to cash
received in lieu of fractional shares).
C. Intended U.S. Accounting Treatment. The parties to this Agreement
intend that the Merger be treated as the purchase of the Company by Parent for
U.S. generally accepted accounting principles.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Sub shall be merged with and into the
Company in accordance with this Agreement, and the separate corporate
existence of Merger Sub shall thereupon cease. The Company shall be the
surviving entity in the Merger (sometimes hereinafter referred to as the
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"Surviving Entity"). The Merger shall have the effects specified herein and in
the General Corporation Law of the State of Delaware (the "DGCL").
Section 1.2 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at
the offices of Baker Botts L.L.P., One Shell Plaza, 910 Louisiana, Houston,
Texas, at 9:00 a.m., local time, on the first business day immediately
following the day on which the last to be fulfilled or waived of the
conditions set forth in Section 8.1, or, if on such day any condition set
forth in Section 8.2 or 8.3 has not been fulfilled or waived, as soon as
practicable after all the conditions set forth in Article 8 have been
fulfilled or waived in accordance herewith or (b) at such other time, date or
place as Parent and the Company may agree. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date."
Section 1.3 Effective Time. Prior to the Closing, Parent, the
Company and Merger Sub shall prepare, and on the Closing Date shall cause a
certificate of merger (the "Certificate of Merger") meeting the requirements
of Section 251 of the DGCL to be properly executed and filed in accordance
with such section. The Merger shall become effective at the time of filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL or at such later time that Parent and the Company
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
ARTICLE 2
ARTICLES OF ASSOCIATION OF PARENT AND CERTIFICATE OF
INCORPORATION AND BYLAWS OF THE SURVIVING ENTITY
Section 2.1 Articles of Association of Parent. Subject to the
approval by the holders of the issued ordinary shares, par value $.01 per
share, of Parent ("Parent Ordinary Shares") as and to the extent required by
Cayman Islands law and Parent's memorandum of association and articles of
association, as of the Effective Time:
(a) The authorized ordinary share capital of Parent shall be
increased to 800,000,000 Parent Ordinary Shares.
(b) The maximum number of directors constituting the Board of
Directors of Parent shall be increased to 13.
Section 2.2 Certificate of Incorporation of the Surviving Entity. As
of the Effective Time, the certificate of incorporation of the Company in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Entity; provided, however, that at the
Effective Time, the certificate of incorporation of the Company shall be
amended to delete Articles Eighth, Ninth and Tenth thereof in their entirety.
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Section 2.3 Bylaws of the Surviving Entity. The bylaws of the
Company in effect immediately prior to the Effective Time shall be the bylaws
of the Surviving Entity, until duly amended in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING ENTITY
AND DIRECTORS OF PARENT
Section 3.1 Directors of Surviving Entity. The directors of Merger
Sub immediately prior to the Effective Time shall be the directors of the
Surviving Entity as of the Effective Time, until their successors shall be
elected and qualified or their earlier death, resignation or removal in
accordance with the certificate of incorporation and bylaws of the Surviving
Entity.
Section 3.2 Officers of Surviving Entity. The officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Entity as of the Effective Time, until their successors shall be
appointed or their earlier death, resignation or removal in accordance with
the certificate of incorporation and bylaws of the Surviving Entity.
Section 3.3 Board of Directors of Parent. The number of directors
constituting the Board of Directors of Parent as of the Effective Time shall
(a) in the event that the maximum number of directors constituting the Board
of Directors of Parent is not increased pursuant to Section 2.1(b), be
increased from 10 to 12 or (b) in the event that the maximum number of
directors constituting the Board of Directors of Parent is increased pursuant
to Section 2.1(b), be increased from 10 to 13, and the Board of Directors of
the Company in consultation with Parent shall designate the persons to fill
the two or three, as applicable, vacancies created by such increase, with such
persons being allocated by Parent as nearly as practicable on a proportionate
basis to each of the three classes into which the Board of Directors is
divided in accordance with Parent's articles of association. Such designations
shall be made no later than promptly after the meeting of Parent's
shareholders held in accordance with Section 7.4. Prior to the Effective Time,
the Board of Directors of Parent shall take such action as may be necessary to
cause the Company designees to be elected to the Board of Directors of Parent
immediately following the Effective Time.
ARTICLE 4
CONVERSION OF COMPANY COMMON STOCK
Section 4.1 Merger Ratio. For purposes of this Agreement,
(a) the "Common Stock Merger Ratio" shall equal 0.5; and
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(b) the "Parent Ordinary Share Price" shall mean the average of the
per share closing prices of the Parent Ordinary Shares as reported on the
consolidated transaction reporting system for securities traded on the New
York Stock Exchange, Inc. ("NYSE") (as reported in the New York City edition
of The Wall Street Journal or, if not reported thereby, another authoritative
source) for the 20 consecutive trading days ending on the fifth trading day
prior to the Closing Date, appropriately adjusted for any stock splits,
reverse stock splits, stock dividends, recapitalizations or other similar
transactions.
Section 4.2 Conversion of Capital Stock of the Company and Merger
Sub.
(a) At the Effective Time, each share of common stock, par value
$.01 per share, of Merger Sub outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and non-assessable
share of common stock, par value $.01 per share, of the Surviving Entity.
(b) At the Effective Time, each share of common stock, par value
$.01 per share, of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock to be canceled without payment of any consideration therefor pursuant to
Section 4.2(d)), shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive a number of
Parent Ordinary Shares equal to the Common Stock Merger Ratio to be
transferred by Sub pursuant to the Merger, and each such share of Company
Common Stock shall cease to be outstanding and shall be canceled and retired
and shall cease to exist, and each holder of such shares of Company Common
Stock shall thereafter cease to have any rights with respect to such shares of
Company Common Stock, except the right to receive, without interest, a
certificate for Parent Ordinary Shares and cash for fractional shares in
accordance with Sections 4.3(b) and 4.3(e) upon the surrender of such
Certificate.
(c) At the Effective Time, each share of 13.875% Cumulative
Redeemable Preferred Stock of the Company (the "Company Redeemable Preferred
Stock") issued and outstanding immediately prior to the Effective Time shall
remain outstanding and unaffected by the Merger.
(d) Each share of Company Common Stock issued and held in the
Company's treasury and each share of Company Common Stock owned by any wholly
owned Subsidiary of the Company or by Parent, Sub or Merger Sub, shall, at the
Effective Time and by virtue of the Merger, cease to be outstanding and shall
be canceled and retired without payment of any consideration therefor, and no
capital shares of Parent or other consideration shall be delivered in exchange
therefor.
(e) (i) At the Effective Time, all options to acquire shares of
Company Common Stock (individually, a "Company Option" and collectively, the
"Company Options") outstanding at
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the Effective Time under the Company's stock plans (collectively, the "Company
Stock Plans") identified in Section 4.2(e) of the Company Disclosure Letter
(as hereinafter defined) shall remain outstanding following the Effective
Time, subject to the modifications described in this Section 4.2(e) and in
Section 7.14(h). Prior to the Effective Time, the Company and Parent shall
take all actions (if any) as may be required to permit the assumption of such
Company Options by Parent pursuant to this Section 4.2(e)(i). At the Effective
Time, the Company Options shall be assumed by Parent in such manner that
Parent (i) is a corporation "assuming a stock option in a transaction to which
Section 424(a) applies" within the meaning of Section 424 of the Code, or (ii)
to the extent that the Company Option is not or ceases to qualify as an
"incentive stock option" within the meaning of Section 422 of the Code, would
be such a corporation were Section 424 of the Code applicable to such option.
Each Company Option assumed by Parent shall, to the extent provided by the
Company Stock Plans, the option agreements entered into pursuant thereto, and
Section 7.14(h), be fully vested and exercisable as of the Effective Time and
shall otherwise be subject to the same terms and conditions as under the
applicable Company Stock Option Plan and the applicable option agreement
entered into pursuant thereto, except that (i) immediately following the
Effective Time (A) each Company Option shall be exercisable for that whole
number of Parent Ordinary Shares equal to the product (rounded to the nearest
whole share) of the number of shares of Company Common Stock subject to such
Company Option immediately prior to the Effective Time multiplied by the
Common Stock Merger Ratio, and (B) the exercise price per Parent Ordinary
Share shall be an amount equal to the exercise price per share of Company
Common Stock subject to such Company Option in effect immediately prior to the
Effective Time divided by the Common Stock Merger Ratio (the price per share,
as so determined, being rounded down to the nearest whole cent), and (ii) as
of the Effective Time, each Company Option identified in Section 4.2(e) of the
Company Disclosure Letter shall be deemed modified to remain exercisable for
the full scheduled term of such Company Option in the event the holder of such
Company Option is involuntarily terminated, for any reason other than Cause
(as defined in Section 7.14(c)), within twelve months after the Effective
Time.
(ii) At or prior to the Effective Time, Parent shall take all
corporate action necessary to reserve for issuance a number of Parent Ordinary
Shares equal to the number of Parent Ordinary Shares issuable upon the
exercise of Company Options assumed by Parent pursuant to this Section 4.2(e).
From and after the date of this Agreement, no action shall be taken by the
Company or its Subsidiaries to provide for the acceleration of the
exercisability of any Company Options in connection with the Merger (except to
the extent such acceleration is required under the terms of such Company
Options or as set forth in Section 7.14(h)). On the Closing Date, Parent shall
file with the U.S. Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-8 (or a post-effective amendment on Form S-8
with respect to the Form S-4 (as defined in Section 7.8) or such other
appropriate form) covering all such Parent Ordinary Shares and shall cause
such registration statement to remain effective (and shall cause the
prospectus or prospectuses relating thereto to remain compliant with
applicable securities laws) for as long as there are outstanding any such
Company Options.
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(iii) Except as otherwise specifically provided by this Section
4.2(e) and Section 7.14(h), the terms of the Company Options and the relevant
Company Stock Plans, as in effect on the Effective Time, shall remain in full
force and effect with respect to the Company Options after giving effect to
the Merger and the assumptions by Parent as set forth above. As soon as
practicable following the Effective Time, Parent shall deliver to the holders
of Company Options appropriate notices setting forth such holders' rights
pursuant to the respective Company Stock Plans and the agreements evidencing
the grants of such Company Options, and that such Company Options and such
agreements shall be assumed by Parent and shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section
4.2(e) and Section 7.14(h)).
(f) At the Effective Time, all warrants (the "Warrants") to purchase
shares of Company Common Stock issued pursuant to the Warrant Agreement dated
April 22, 1999 between the Company and American Stock Transfer and Trust
Company (the "Warrant Agreement") shall be assumed by Parent in accordance
with the terms of the Warrant Agreement and the Warrant shall be adjusted as
provided therein. At the Effective Time, Parent and the Surviving Entity shall
enter into a supplemental Warrant Agreement and a supplement to the Warrant
Registration Rights Agreement as contemplated by Section 17(l) of the Warrant
Agreement.
Section 4.3 Exchange of Certificates Representing Company Common
Stock.
(a) As of the Effective Time, Sub shall deposit, or shall cause to
be deposited, with an exchange agent selected by Sub, which shall be Parent's
transfer agent for Parent Ordinary Shares or such other party reasonably
satisfactory to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock for exchange in accordance with this
Article 4, certificates representing the Parent Ordinary Shares to be issued
pursuant to Section 4.2 and delivered pursuant to this Section 4.3 in exchange
for outstanding shares of Company Common Stock. The Surviving Entity shall
provide the Exchange Agent immediately following the Effective Time cash
sufficient to pay cash in lieu of fractional shares in accordance with
Sections 4.3(b) and 4.3(e) (such cash and certificates for Parent Ordinary
Shares together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund").
(b) Promptly after the Effective Time, Sub shall cause the Exchange
Agent to mail to each holder of record of one or more certificates
("Certificates") that immediately prior to the Effective Time represented
shares of Company Common Stock (other than to holders of shares of Company
Common Stock that, pursuant to Section 4.2(d), are canceled without payment of
any consideration therefor): (A) a letter of transmittal (the "Letter of
Transmittal") which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify and (B) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing Parent Ordinary Shares and cash in lieu of fractional shares.
Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such Letter of Transmittal, duly executed and completed in
accordance with the instructions
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thereto, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole Parent
Ordinary Shares and (y) a check representing the amount of cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any,
which such holder has the right to receive pursuant to the provisions of this
Article 4, after giving effect to any required withholding tax, and the
Certificate so surrendered shall forthwith be canceled. No interest will be
paid or accrued on the cash in lieu of fractional shares and unpaid dividends
and distributions, if any, payable to holders of Certificates. In the event of
a transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the proper number
of Parent Ordinary Shares together with a check for the cash to be paid in
lieu of fractional shares, may be issued to such a transferee if the
Certificate representing such Company Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have
been paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared or made after the Effective Time
with respect to Parent Ordinary Shares with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the Parent Ordinary Shares represented by such Certificate as a result of
the conversion provided in Section 4.2(b) or 4.2(c) until such Certificate is
surrendered as provided herein. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
of the Certificates so surrendered, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable and not paid with respect to the
number of whole Parent Ordinary Shares issued pursuant to Section 4.2, less
the amount of any withholding taxes, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Parent Ordinary Shares, less the
amount of any withholding taxes.
(d) At or after the Effective Time, the Surviving Entity shall pay
from funds on hand at the Effective Time any dividends or make other
distributions with a record date prior to the Effective Time that may have
been declared or made by the Company on shares of Company Common Stock which
remain unpaid at the Effective Time, and after the Effective Time, there shall
be no transfers on the stock transfer books of the Surviving Entity of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Entity, the presented Certificates shall be canceled and
exchanged for certificates representing Parent Ordinary Shares and cash in
lieu of fractional shares, if any, deliverable in respect thereof pursuant to
this Agreement in accordance with the procedures set forth in this Article 4.
Certificates surrendered for exchange by any person constituting an
"affiliate" of the Company for purposes of Rule 145(c) under the Securities
Act of 1933, as amended (the "Securities Act"), shall not be exchanged until
the Company has received a written agreement from such person as provided in
Section 7.11.
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(e) No fractional Parent Ordinary Shares shall be issued pursuant
hereto. In lieu of the issuance of any fractional Parent Ordinary Shares
pursuant to Section 4.2(b), cash adjustments provided by Sub will be paid to
holders in respect of any fractional Parent Ordinary Shares that would
otherwise be issuable, and the amount of such cash adjustment shall be equal
to such fractional proportion of the Parent Ordinary Share Price.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any certificates for Parent Ordinary Shares) that
remains undistributed to the former stockholders of the Company one year after
the Effective Time shall be delivered to Sub. Any former stockholders of the
Company who have not theretofore complied with this Article 4 shall thereafter
look only to Sub for delivery of certificates representing their Parent
Ordinary Shares and cash in lieu of fractional shares and to Parent for any
unpaid dividends and distributions on the Parent Ordinary Shares deliverable
to such former stockholder pursuant to this Agreement.
(g) None of Parent, Sub, the Company, the Surviving Entity, the
Exchange Agent or any other person shall be liable to any person for any
portion of the Exchange Fund properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Entity, the posting by such person of a bond in such reasonable
amount as the Surviving Entity may direct as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate
certificates representing the Parent Ordinary Shares, cash in lieu of
fractional shares and unpaid dividends and distributions on Parent Ordinary
Shares, as provided in Section 4.3(c), deliverable in respect thereof pursuant
to this Agreement.
Section 4.4 Adjustment of Merger Ratios. In the event that,
subsequent to the date of this Agreement but prior to the Effective Time,
Parent changes the number of Parent Ordinary Shares, or the Company changes
the number of shares of Company Common Stock issued and outstanding as a
result of a stock split, reverse stock split, stock dividend, recapitalization
or other similar transaction, the Common Stock Merger Ratio and other items
dependent thereon shall be appropriately adjusted.
Section 4.5 Rule 16b-3 Approval. Parent agrees that the Parent Board
of Directors or the Executive Compensation Committee of the Parent Board of
Directors shall, at or prior to the Effective Time, adopt resolutions
specifically approving, for purposes of Rule 16b-3 ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the receipt,
pursuant to Section 4.2, of Parent Ordinary Shares, and of options to acquire
Parent Ordinary Shares, by executive officers or directors of the Company who
become executive officers or directors of Parent subject to Rule 16b-3.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure letter delivered to Parent by
the Company at or prior to the execution hereof (the "Company Disclosure
Letter"), the Company represents and warrants to Parent and Merger Sub that:
Section 5.1 Existence; Good Standing; Corporate Authority. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Company is
duly qualified to do business and, to the extent such concept or similar
concept exists in the relevant jurisdiction, is in good standing under the
laws of any jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified does not
and is not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect (as defined in Section 10.9). The Company has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted. The copies of the
Company's certificate of incorporation and bylaws previously made available to
Parent are true and correct and contain all amendments as of the date hereof.
Section 5.2 Authorization, Validity and Effect of Agreements. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and all other agreements and documents contemplated hereby to
which it is a party. The consummation by the Company of the transactions
contemplated hereby have been duly authorized by all requisite corporate
action on behalf of the Company, other than the approvals referred to in
Section 5.20. This Agreement constitutes the valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable
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bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights and general principles of equity. The Company
has taken all action necessary to render the restrictions set forth in Section
203 of the DGCL inapplicable to this Agreement and the transactions
contemplated hereby.
Section 5.3 Capitalization. As of the date of this Agreement, the
authorized capital stock of the Company consists of 550,000,000 shares of
Common Stock and 50,000,000 shares of preferred stock, par value $.01 per
share, of which 1,200,000 shares have been designated Company Redeemable
Preferred Stock and 1,688,000 shares have been designated Series A Junior
Participating Preferred Stock ("Series A Junior Preferred Stock"). As of the
date of this Agreement, there were outstanding 293,000 Warrants, each
representing the right to purchase 35 shares of Company Common Stock at an
exercise price of $9.50 per share. As of August 17, 2000, there were
193,990,737 outstanding shares of Company Common Stock, 16,411,563 shares of
Company Common Stock reserved for issuance upon exercise of outstanding
Company Options, 10,255,000 shares of Company Common Stock reserved for
issuance upon exercise of the outstanding Warrants, 356,961.01 outstanding
shares of Company Redeemable Preferred Stock and no outstanding shares of
Series A Junior Preferred Stock. All such issued and outstanding shares of
Company Common Stock and Company Redeemable Preferred Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. One right to purchase Series A Junior Preferred Stock (each, a
"Company Right") issued pursuant to the Rights Agreement, dated as of December
23, 1997 (the "Company Rights Agreement"), as amended, between the Company and
American Stock Transfer and Trust Company is associated with and attached to
each outstanding share of Company Common Stock. As of the date of this
Agreement, except as set forth in this Section 5.3, there are no outstanding
shares of capital stock and there are no options, warrants, calls,
subscriptions, convertible securities or other rights, agreements or
commitments which obligate the Company or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock or other voting securities of the
Company or any of its Subsidiaries. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter.
Section 5.4 Significant Subsidiaries. For purposes of this
Agreement, "Significant Subsidiary" shall mean significant subsidiary as
defined in Rule 1-02 of Regulation S-X of the Exchange Act. Each of the
Company's Significant Subsidiaries is a corporation or other legal entity duly
organized, validly existing and, to the extent such concept or similar concept
exists in the relevant jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or other
entity power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing (where applicable) in each jurisdiction in
which the ownership, operation or lease of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in
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good standing does not and is not reasonably likely to have a Company Material
Adverse Effect. As of the date of this Agreement, all of the outstanding
shares of capital stock of, or other ownership interests in, each of the
Company's Significant Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable and are owned, directly or indirectly, by the Company
free and clear of all mortgages, deeds of trust, liens, security interests,
pledges, leases, conditional sale contracts, charges, privileges, easements,
rights of way, reservations, options, rights of first refusal and other
encumbrances ("Liens").
Section 5.5 Compliance with Laws; Permits. Except for such matters
as, individually or in the aggregate, do not or are not reasonably likely to
have a Company Material Adverse Effect and except for matters arising under
Environmental Laws (as defined herein) which are treated exclusively in
Section 5.13:
(a) Neither the Company nor any Subsidiary of the Company is in
violation of any applicable law, rule, regulation, code, governmental
determination, order, treaty, convention, governmental certification
requirement or other public limitation, U.S. or non-U.S. (collectively,
"Applicable Laws"), relating to the ownership or operation of any of their
respective assets, and no claim is pending or, to the knowledge of the
Company, threatened with respect to any such matters. No condition exists that
is not disclosed in the Company Disclosure Letter and which does or is
reasonably likely to constitute a violation of or deficiency under any
Applicable Law relating to the ownership or operation of the assets of the
Company or any Subsidiary of the Company.
(b) The Company and each Subsidiary of the Company hold all permits,
licenses, certifications, variations, exemptions, orders, franchises and
approvals of all governmental or regulatory authorities necessary for the
conduct of their respective businesses (the "Company Permits"). All Company
Permits are in full force and effect and there exists no default thereunder or
breach thereof, and the Company has no notice or actual knowledge that such
Company Permits will not be renewed in the ordinary course after the Effective
Time. No governmental authority has given, or to the knowledge of the Company
threatened to give, any action to terminate, cancel or reform any Company
Permit.
(c) Each drilling rig, drillship or other drilling unit owned by the
Company or a subsidiary of the Company which is subject to classification is
in class according to the rules and regulations of the applicable classifying
body and is duly and lawfully documented under the laws of its flag
jurisdiction.
(d) The Company and each Subsidiary of the Company possess all
permits, licenses, operating authorities, orders, exemptions, franchises,
variances, consents, approvals or other authorizations required for the
present ownership and operation of all its real property or leaseholds
("Company Real Property") except where the failure to possess any of the same
does not and is not reasonably likely to have a Company Material Adverse
Effect. There exists no
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material default or breach with respect to, and no party or governmental
authority has taken or, to the knowledge of the Company, threatened to take,
any action to terminate, cancel or reform any such permit, license, operating
authority, order, exemption, franchise, variance, consent, approval or other
authorization pertaining to the Company Real Property.
Section 5.6 No Conflict. (a) Neither the execution and delivery by
the Company of this Agreement nor the consummation by the Company of the
transactions contemplated hereby in accordance with the terms hereof will (i)
subject to the approvals referred to in Section 5.20, conflict with or result
in a breach of any provisions of the certificate of incorporation or bylaws of
the Company, (ii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or give rise to a
right of purchase under, or accelerate the performance required by, or result
in the creation of any Lien upon any of the properties of the Company or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, or otherwise result in a detriment to the Company or
any of its Subsidiaries under, any of the terms, conditions or provisions of,
any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, lease, contract, agreement, joint venture or other instrument or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their properties is
bound or affected or (iii) subject to the filings and other matters referred
to in Section 5.6(b), contravene or conflict with or constitute a violation of
any provision of any law, rule, regulation, judgment, order or decree binding
upon or applicable to the Company or any of its Subsidiaries, except, for such
matters described in clause (ii) or (iii) as do not and are not reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect.
(b) Neither the execution and delivery by the Company of this
Agreement nor the consummation by the Company of the transactions contemplated
hereby in accordance with the terms hereof will require any consent, approval
or authorization of, or filing or registration with, any governmental or
regulatory authority, other than (i) the filing of the Certificate of Merger
provided for in Section 1.3, (ii) the filing of the Company Charter Amendment,
(iii) the filing of a listing application with the NYSE, another national
securities exchange or the national market system of the interdealer quotation
system of the National Association of Securities Dealers, Inc. ("Nasdaq
National Market System") pursuant to Section 7.9(b) and (iv) filings required
under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the Exchange Act, the Securities Act or applicable
state securities and "Blue Sky" laws, applicable non-U.S. competition,
antitrust or premerger notification laws ((i), (ii), (iii) and (iv)
collectively, the "Regulatory Filings"), except for any consent, approval or
authorization the failure of which to obtain and for any filing or
registration the failure of which to make does not and is not reasonably
likely to have a Company Material Adverse Effect.
Section 5.7 SEC Documents. The Company has filed with the SEC all
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documents required to be so filed by it since January 1, 2000 pursuant to
Sections 13(a), 14(a) and 15(d) of the Exchange Act, and has made available to
Parent each registration statement, report, proxy statement or information
statement (other than preliminary materials) it has so filed, each in the form
(including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). As of its respective date, each Company
Report (i) complied in all material respects in accordance with the applicable
requirements of the Exchange Act and the rules and regulations thereunder and
(ii) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading except for such statements, if any, as have been
modified by subsequent filings with the SEC prior to the date hereof. Each of
the consolidated balance sheets included in or incorporated by reference into
the Company Reports (including the related notes and schedules) fairly
presents in all material respects the consolidated financial position of the
Company and its Subsidiaries as of its date, and each of the consolidated
statements of operations, cash flows and changes in stockholders' equity
included in or incorporated by reference into the Company Reports (including
any related notes and schedules) fairly presents in all material respects the
results of operations, cash flows or changes in stockholders' equity, as the
case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to (x) such exceptions
as may be permitted by Form 10-Q of the SEC and (y) normal year-end audit
adjustments), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. Except as and to the extent set forth on the consolidated
balance sheet of the Company and its Subsidiaries included in the Company
Reports, including all notes thereto, as of the date of such balance sheet,
neither the Company nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a balance
sheet of the Company or in the notes thereto prepared in accordance with
generally accepted accounting principles consistently applied, other than
liabilities or obligations which do not and are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
Section 5.8 Litigation. Except as described in the Company Reports
filed on or prior to the date of this Agreement, there are no actions, suits
or proceedings pending against the Company or any of its Subsidiaries or, to
the Company's knowledge, threatened against the Company or any of its
Subsidiaries, at law or in equity, before or by any U.S. federal, state or
non-U.S. court, commission, board, bureau, agency or instrumentality, that are
reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
Section 5.9 Absence of Certain Changes. From December 31, 1999 to
the date of this Agreement, there has not been (i) any event or occurrence
that has had or is reasonably likely to have a Company Material Adverse
Effect, (ii) any material change by the Company or any of its Subsidiaries,
when taken as a whole, in any of its accounting methods, principles or
practices or any of its tax methods, practices or elections, (iii) any
declaration, setting aside or
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payment of any dividend or distribution in respect of any capital stock of the
Company or any redemption, purchase or other acquisition of any of its
securities or (iv) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option, stock purchase or other employee benefit plan, except in the ordinary
course of business.
Section 5.10 Taxes. (a) Each of the Company, its Subsidiaries and
each affiliated, consolidated, combined, unitary or similar group of which any
such corporation is or was a member has (i) duly filed (or there has been
filed on its behalf) on a timely basis with appropriate governmental
authorities all tax returns, statements, reports, declarations, estimates and
forms ("Returns") required to be filed by or with respect to it on or prior to
the date hereof, except to the extent that any failure to file does not and is
not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect, and (ii) duly paid, or deposited in full on a timely
basis or made adequate provision in accordance with generally accepted
accounting principles (or there has been paid or deposited or adequate
provision has been made on its behalf) for the payment of, all taxes required
to be paid by it, except to the extent that any failure to pay or deposit or
make adequate provision for the payment of such taxes does not and is not
reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. Representations made in this Section 5.10 are made to
the knowledge of the Company to the extent that the representations relate to
a corporation which was, but is not currently, a part of the Company's or any
Subsidiary's affiliated, consolidated, combined unitary or similar group.
(b) (i) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any taxes or Returns of the
Company or any of its Subsidiaries as to which any taxing authority has
asserted in writing any claim which, if adversely determined, is reasonably
likely to have a Company Material Adverse Effect; (ii) no governmental
authority is now asserting in writing any deficiency or claim for taxes or any
adjustment to taxes with respect to which the Company or any of its
Subsidiaries may be liable with respect to income and other material taxes
which have not been fully paid or finally settled, which, if adversely
determined, is reasonably likely to have a Company Material Adverse Effect;
(iii) as of the date of this Agreement, neither the Company nor any of its
Subsidiaries has granted any requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the assessment of any
taxes with respect to any Returns of the Company or any of its Subsidiaries;
(iv) to the knowledge of the Company, neither the Company nor any of its
Subsidiaries is a party to any closing agreement described in Section 7121 of
the Code or any predecessor provision thereof or any similar agreement under
state, local, or non-U.S. tax law; (v) to the knowledge of the Company,
neither the Company nor any of its Subsidiaries is a party to, is bound by or
has any obligation under any tax sharing, allocation or indemnity agreement or
any similar agreement or arrangement; (vi) neither the Company nor any of its
Subsidiaries is a party to an agreement that provides for the payment of any
amount in connection with the Merger that would be reasonably likely to
constitute an "excess parachute
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payment" within the meaning of Section 280G of the Code; (vii) to the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
made an election under Section 341(f) of the Code; (viii) to the knowledge of
the Company, neither the Company nor any of its Subsidiaries has any liability
for taxes under Treas. Reg. ss. 1.1502-6 or any similar provision of state,
local, or non-U.S. tax law, except for taxes of the affiliated group of which
the Company is the common parent, within the meaning of Section 1504(a)(1) of
the Code or any similar provision of state, local, or non-U.S. tax law; and
(ix) to the knowledge of the Company, the Company has not been a United States
real property holding corporation within the meaning of Section 897(c)(2) of
the Code at any time within the past five years.
(c) To the knowledge of the Company, Section 5.10 of the Company
Disclosure Letter lists the net operating loss carryovers, within the meaning
of Section 172 of the Code, of the Company and its Subsidiaries, together with
the year of expiration and any restrictions thereon.
(d) Neither the Company nor any of the Company Subsidiaries knows of
any fact, or has taken any action or has failed to take any action, that is
reasonably likely to (i) prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (ii) cause
the Eligible Company Shareholders who exchange Company Common Stock solely for
Parent Ordinary Shares pursuant to the Merger to recognize taxable gain with
respect to the Merger pursuant to Section 367(a) of the Code (except with
respect to cash received in lieu of fractional shares).
(e) For purposes of this Agreement, "tax" or "taxes" means all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
accumulated earnings, personal holding company, excess profits, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, disability, capital stock, or windfall profits
taxes, customs duties or other taxes, fees, assessments or governmental
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (U.S.
or non-U.S.).
Section 5.11 Employee Benefit Plans. (a) Section 5.11 of the Company
Disclosure Letter contains a list of all the Company Benefit Plans. The term
"Company Benefit Plans" means all material employee benefit plans and other
material benefit arrangements, including all "employee benefit plans" as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not U.S.-based plans, and all other
employee benefit, bonus, incentive, deferred compensation, stock option (or
other equity-based), severance, employment, change in control, welfare
(including post-retirement medical and life insurance) and fringe benefit
plans, practices or agreements, whether or not subject to ERISA or U.S.-based
and whether written or oral, sponsored, maintained or contributed to or
required to be contributed to by the Company or any of its Subsidiaries, to
which the Company or any of its Subsidiaries is a party or is required to
provide benefits under applicable law or in
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which any person who is currently, has been or, prior to the Effective Time,
is expected to become an employee of the Company is a participant. The Company
will provide Parent, within 30 days after the date hereof, with true and
complete copies of the Company Benefit Plans and, if applicable, the most
recent trust agreements, Forms 5500, summary plan descriptions, funding
statements, annual reports and actuarial reports, if applicable, for each such
plan.
(b) Except as for such matters as, individually or in the aggregate,
do not or are not reasonably likely to have a Company Material Adverse Effect:
all applicable reporting and disclosure requirements have been met with
respect to the Company Benefit Plans; there has been no "reportable event," as
that term is defined in Section 4043 of ERISA, with respect to the Company
Benefit Plans subject to Title IV of ERISA for which the 30-day reporting
requirement has not been waived; to the extent applicable, the Company Benefit
Plans comply with the requirements of ERISA and the Code or with the
regulations of any applicable jurisdiction, and any Company Benefit Plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS; the Company Benefit Plans have
been maintained and operated in accordance with their terms, and, to the
Company's knowledge, there are no breaches of fiduciary duty in connection
with the Company Benefit Plans; there are no pending or, to the Company's
knowledge, threatened claims against or otherwise involving any Company
Benefit Plan, and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of the Company Benefit Plan
activities) has been brought against or with respect to any such Company
Benefit Plan; all material contributions required to be made as of the date
hereof to the Company Benefit Plans have been made or provided for; with
respect to the Company Benefit Plans or any "employee pension benefit plans,"
as defined in Section 3(2) of ERISA, that are subject to Title IV of ERISA and
have been maintained or contributed to within six years prior to the Effective
Time by the Company, its Subsidiaries or any trade or business (whether or not
incorporated) which is under common control, or which is treated as a single
employer, with the Company or any of its Subsidiaries under Section 414(b),
(c), (m) or (o) of the Code (an "ERISA Affiliate"), (i) neither the Company
nor any of its Subsidiaries has incurred any direct or indirect liability
under Title IV of ERISA in connection with any termination thereof or
withdrawal therefrom; and (ii) there does not exist any accumulated funding
deficiency within the meaning of Section 412 of the Code or Section 302 of
ERISA, whether or not waived.
(c) Neither the Company nor any of its Subsidiaries nor any of its
ERISA Affiliates contributes to, or has an obligation to contribute to, and
has not within six years prior to the Effective Time contributed to, or had an
obligation to contribute to, a "multiemployer plan" within the meaning of
Section 3(37) of ERISA, and the execution of, and performance of the
transactions contemplated by, this Agreement, other than Section 7.14(h), will
not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any benefit plan, policy, arrangement or
agreement or any trust or loan (in connection therewith) that will or may
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund
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benefits with respect to any employee of the Company or any Subsidiary
thereof.
(d) No Company Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of the Company or any Subsidiary of the Company
for periods extending beyond their retirement or other termination of service
other than (i) coverage mandated by applicable law, (ii) death benefits under
any "pension plan" or (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
Section 5.12 Labor Matters. (a) As of the date of this Agreement,
(i) neither the Company nor any of its Subsidiaries is a party to, or bound
by, any collective bargaining agreement or similar contract, agreement or
understanding with a labor union or similar labor organization (A) covering
any U.S. employees or (B) covering, in any single instance, 10% or more of the
employees of the Company and its Subsidiaries taken as a whole, and (ii) to
the Company's knowledge, there are no organizational efforts with respect to
the formation of a collective bargaining unit presently being made or
threatened (x) involving any U.S. employees or (y) involving, in any single
instance, 10% or more of the employees of the Company and its Subsidiaries
taken as a whole.
(b) Except for such matters as do not and are not reasonably likely
to have a Company Material Adverse Effect, (i) neither the Company nor any
Subsidiary of the Company has received any written complaint of any unfair
labor practice or other unlawful employment practice or any written notice of
any material violation of any federal, state or local statutes, laws,
ordinances, rules, regulations, orders or directives with respect to the
employment of individuals by, or the employment practices of, the Company or
any Subsidiary of the Company or the work conditions or the terms and
conditions of employment and wages and hours of their respective businesses
and (ii) there are no unfair labor practice charges or other employee related
complaints against the Company or any Subsidiary of the Company pending or, to
the knowledge of the Company threatened, before any governmental authority by
or concerning the employees working in their respective businesses.
Section 5.13 Environmental Matters. (a) The Company and each
Subsidiary of the Company has been and is in compliance with all applicable
final and binding orders of any court, governmental authority or arbitration
board or tribunal and any applicable law, ordinance, rule, regulation or other
legal requirement (including common law) related to human health and the
environment ("Environmental Laws") except for such matters as do not and are
not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. There are no past or present facts, conditions or
circumstances that interfere with the conduct of any of their respective
businesses in the manner now conducted or which interfere with continued
compliance with any Environmental Law except for any non-compliance or
interference that is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
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(b) Except for such matters as do not and are not reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect,
no judicial or administrative proceedings or governmental investigations are
pending or, to the knowledge of the Company, threatened against the Company or
its Subsidiaries that allege the violation of or seek to impose liability
pursuant to any Environmental Law, and there are no past or present facts,
conditions or circumstances at, on or arising out of, or otherwise associated
with, any current (or, to the knowledge of the Company or its Subsidiaries,
former) businesses, assets or properties of the Company or any Subsidiary of
the Company, including but not limited to on-site or off-site disposal,
release or spill of any material, substance or waste classified, characterized
or otherwise regulated as hazardous, toxic, pollutant, contaminant or words of
similar meaning under Environmental Laws, including petroleum or petroleum
products or byproducts ("Hazardous Materials") which violate Environmental Law
or are reasonably likely to give rise to (i) costs, expenses, liabilities or
obligations for any cleanup, remediation, disposal or corrective action under
any Environmental Law, (ii) claims arising for personal injury, property
damage or damage to natural resources, or (iii) fines, penalties or injunctive
relief.
(c) Neither the Company nor any of its Subsidiaries has (i) received
any notice of noncompliance with, violation of, or liability or potential
liability under any Environmental Law or (ii) entered into any consent decree
or order or is subject to any order of any court or governmental authority or
tribunal under any Environmental Law or relating to the cleanup of any
Hazardous Materials, except for any such matters as do not and are not
reasonably likely to have a Company Material Adverse Effect.
Section 5.14 Intellectual Property. The Company and its Subsidiaries
own or possess adequate licenses or other valid rights to use all patents,
patent rights, trademarks, trademark rights and proprietary information used
or held for use in connection with their respective businesses as currently
being conducted, except where the failure to own or possess such licenses and
other rights does not and is not reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect, and there are no assertions
or claims challenging the validity of any of the foregoing that are reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect. The conduct of the Company's and its Subsidiaries' respective
businesses as currently conducted does not conflict with any patents, patent
rights, licenses, trademarks, trademark rights, trade names, trade name rights
or copyrights of others that are reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect. There is no material
infringement of any proprietary right owned by or licensed by or to the
Company or any of its Subsidiaries that is reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
Section 5.15 Decrees, Etc. Except for such matters as do not and are
not reasonably likely to have a Company Material Adverse Effect, (i) no order,
writ, fine, injunction, decree, judgment, award or determination of any court
or governmental authority has been
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issued or entered against the Company or any Subsidiary of the Company that
continues to be in effect that affects the ownership or operation of any of
their respective assets, and (ii) no criminal order, writ, fine, injunction,
decree, judgment or determination of any court or governmental authority has
been issued against the Company or any Subsidiary of the Company.
Section 5.16 Insurance. (a) Except for such matters as do not and
are not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect, the Company and its Subsidiaries maintain insurance
coverage with financially responsible insurance companies in such amounts and
against such losses as are customary in the international offshore drilling
business prior to the date hereof.
(b) Except for such matters as do not and are not reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect,
no event relating specifically to the Company or its Subsidiaries (as opposed
to events affecting the drilling service industry in general) has occurred
that is reasonably likely, after the date of this Agreement, to result in an
upward adjustment in premiums under any insurance policies they maintain.
Excluding insurance policies that have expired and been replaced in the
ordinary course of business, no excess liability, hull or protection and
indemnity insurance policy has been canceled by the insurer within one year
prior to the date hereof, and to the Company's knowledge, no threat in writing
has been made to cancel (excluding cancellation upon expiration or failure to
renew) any such insurance policy of the Company or any Subsidiary of the
Company during the period of one year prior to the date hereof. Prior to the
date hereof, no event has occurred, including the failure by the Company or
any Subsidiary of the Company to give any notice or information or by giving
any inaccurate or erroneous notice or information, which materially limits or
impairs the rights of the Company or any Subsidiary of the Company under any
such excess liability, hull or protection and indemnity insurance policies.
Section 5.17 No Brokers. The Company has not entered into any
contract, arrangement or understanding with any person or firm which may
result in the obligation of the Company or Parent to pay any finder's fees,
brokerage or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that the Company has retained Morgan Stanley & Co. Incorporated as its
financial advisor, the arrangements with which have been disclosed in writing
to Parent prior to the date hereof.
Section 5.18 Opinion of Financial Advisor. The Board of Directors of
the Company has received the opinion of Morgan Stanley & Co. Incorporated to
the effect that, as of the date of this Agreement, the Common Stock Merger
Ratio is fair, from a financial point of view, to the holders of Company
Common Stock.
Section 5.19 Parent Share Ownership. Neither the Company nor any of
its Subsidiaries owns any shares in the capital of Parent or any other
securities convertible into or
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otherwise exercisable to acquire shares in the capital of Parent.
Section 5.20 Vote Required. The only votes of the holders of any
class or series of Company capital stock necessary to approve any transaction
contemplated by this Agreement are (a) the affirmative vote in favor of the
adoption of this Agreement of the holders of at least a majority of the
outstanding shares of Company Common Stock and (b) the affirmative vote in
favor of amending the certificate of incorporation of the Company as set forth
in Exhibit A (the "Company Charter Amendment") of the holders of at least a
majority of the outstanding shares of Company Common Stock.
Section 5.21 Ownership of Drilling Rigs and Drillships. As of the
date hereof, the Company or a Subsidiary of the Company has good and
marketable title to the drilling rigs and drill ships listed in the Company's
most recent annual report on Form 10-K, in each case free and clear of all
Liens except for (i) defects or irregularities of title or encumbrances of a
nature that do not materially impair the ownership or operation of these
assets and which have not had and are not reasonably likely to have a Company
Material Adverse Effect, (ii) Liens that secure obligations not yet due and
payable or, if such obligations are due and have not been paid, Liens securing
such obligations that are being diligently contested in good faith and by
appropriate proceedings (any such contests involving an amount in excess of
$10 million being described in the Company Disclosure Letter), (iii) Liens for
taxes, assessments or other governmental charges or levies not yet due or
which are being contested in good faith, (iv) Liens in connection with
workmen's compensation, unemployment insurance or other social security, old
age pension or public liability obligations not yet due or which are being
contested in good faith, (v) operators', vendors', suppliers of necessaries to
the Company's drilling rigs, carriers', warehousemen's, repairmen's,
mechanics', workmen's, materialmen's, construction or shipyard liens (during
repair or upgrade periods) or other like Liens arising by operation of law in
the ordinary course of business or statutory landlord's liens, each of which
is in respect of obligations that have not been outstanding more than 90 days
(so long as no action has been taken to file or enforce such Liens within said
90-day period) or which are being contested in good faith and (vi) other Liens
disclosed in the Company Disclosure Letter (the Liens described in clauses
(i), (ii), (iii), (iv), (v) and (vi), collectively, "Company Permitted
Liens"). No such asset is leased under an operating lease from a lessor that,
to the Company's knowledge, has incurred non-recourse indebtedness to finance
the acquisition or construction of such asset.
Section 5.22 Undisclosed Liabilities. Neither the Company nor any of
its Subsidiaries has any liabilities or obligations of any nature, whether or
not fixed, accrued, contingent or otherwise, except liabilities and
obligations that (i) are disclosed in the Company Reports, (ii) are referred
to in the Company Disclosure Letter or (iii) do not and are not reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect.
Section 5.23 Certain Contracts. (a) Section 5.23 of the Company
Disclosure Letter contains a list of all of the following contracts or
agreements (other than those set forth on
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an exhibit index in the Company Reports filed on or prior to the date of this
Agreement) to which the Company or any Subsidiary of the Company is a party or
by which any of them is bound as of the date of this Agreement: (i) any
non-competition agreement that purports to limit the manner in which, or the
localities in which, all or any portion of their respective businesses is
conducted, other than any such limitation that is not material to the Company
and its Subsidiaries, taken as a whole, (ii) any drilling rig construction or
conversion contract with respect to which the drilling rig has not been
delivered and paid for, (iii) any drilling contracts of one year or greater
remaining duration, (iv) any contract or agreement for the borrowing of money
with a borrowing capacity or outstanding indebtedness of $50 million or more
or (v) any "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) (all contracts or agreements of the types described
in clauses (i) through (v) being referred to herein as "Company Material
Contracts").
(b) As of the date of this Agreement, each Company Material Contract
is, to the knowledge of the Company, in full force and effect, and the Company
and each of its Subsidiaries have in all material respects performed all
obligations required to be performed by them to date under each Company
Material Contract to which it is a party, except where such failure to be
binding or in full force and effect or such failure to perform does not and is
not reasonably likely to create, individually or in the aggregate, a Company
Material Adverse Effect. Except for such matters as do not and are not
reasonably likely to have a Company Material Adverse Effect, neither the
Company nor any of its Subsidiaries (x) knows of, or has received written
notice of, any breach of or violation or default under (nor, to the knowledge
of the Company, does there exist any condition which with the passage of time
or the giving of notice or both would result in such a violation or default
under) any Company Material Contract or (y) has received written notice of the
desire of the other party or parties to any such Company Material Contract to
exercise any rights such party has to cancel, terminate or repudiate such
contract or exercise remedies thereunder. Each Company Material Contract is
enforceable by the Company or a Subsidiary of the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights and general
principles of equity, except where such unenforceability is not reasonably
likely to create, individually or in the aggregate, a Company Material Adverse
Effect.
Section 5.24 Capital Expenditure Program. As of the date of this
Agreement, the Company Disclosure Letter accurately sets forth in all material
respects, for each of the Company's sustaining, life extension and newbuild
capital expenditure programs, the capital expenditures for all such programs
that were forecasted to be incurred in 2000 and 2001 on a monthly basis, as
previously provided to Parent. The construction in progress attributable to
the newbuilds and included in the consolidated balance sheet of the Company at
June 30, 2000 included in the Company Reports (excluding capitalized interest
on such newbuilds) and the projected newbuild capital expenditures to be
incurred in 2000 and 2001 equal the projected total construction costs to
complete such newbuilds, as at the time of such forecast.
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Section 5.25 Improper Payments. No bribes, kickbacks or other
improper payments have been made by the Company or any Subsidiary of the
Company or agent of any of them in connection with the conduct of their
respective businesses or the operation of their respective assets, and neither
the Company, any Subsidiary of the Company nor any agent of any of them has
received any such payments from vendors, suppliers or other persons, where any
such payment made or received is reasonably likely to have a Company Material
Adverse Effect.
Section 5.26 Amendment to the Company Rights Agreement. The Company
has amended or taken other action under the Company Rights Agreement so that
none of the execution and delivery of this Agreement, the conversion of shares
of Company Common Stock into the right to receive shares of Parent Ordinary
Shares in accordance with Article 4 of this Agreement, the consummation of the
Merger or any other transaction contemplated hereby, will cause (i) the
Company Rights to become exercisable under the Company Rights Agreement, (ii)
Parent or any of its stockholders or Subsidiaries to be deemed an "Acquiring
Person" (as defined in the Company Rights Agreement), (iii) any such event to
be a "Section 11(a)(ii) Event" or a "Section 13 Event" (as defined in the
Company Rights Agreement) or (iv) a "Stock Acquisition Date" or a
"Distribution Date" (each as defined in the Company Rights Agreement) to occur
upon any such event, and so that the Company Rights will expire immediately
prior to the Effective Time. The Company has delivered to Parent a true and
complete copy of the Company Rights Agreement, as amended to date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF PARENT, SUB AND MERGER SUB
Except as set forth in the disclosure letter delivered to the
Company by Parent at or prior to the execution hereof (the "Parent Disclosure
Letter"), Parent, Sub and Merger Sub, jointly and severally, represent and
warrant to the Company that:
Section 6.1 Existence; Good Standing; Corporate Authority. Each of
Parent, Sub and Merger Sub is a corporation duly incorporated and validly
existing under the laws of its jurisdiction of incorporation. Parent is duly
qualified to do business and, to the extent such concept or similar concept
exists in the relevant jurisdiction, is in good standing under the laws of any
jurisdiction in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified does not and is not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect (as defined in Section 10.9). Parent has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as now conducted. The copies of Parent's memorandum of
association and articles of association and the comparable charter and
organizational documents of Sub and Merger Sub previously made available to
the Company are true and correct and contain all amendments as of the date
hereof.
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Section 6.2 Authorization, Validity and Effect of Agreements. Each
of Parent, Sub and Merger Sub has the requisite corporate power and authority
to execute and deliver this Agreement and all other agreements and documents
contemplated hereby to which it is a party. The consummation by each of
Parent, Sub and Merger Sub of the transactions contemplated hereby, including
the issuance by Parent and delivery by Sub of Parent Ordinary Shares pursuant
to the Merger, have been duly authorized by all requisite corporate action on
behalf of Parent, other than the approvals referred to in Section 6.20. This
Agreement constitutes the valid and legally binding obligation of Parent and
this Agreement constitutes the valid and legally binding obligation of Sub and
Merger Sub, enforceable against Parent, Sub or Merger Sub, as applicable, in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and general principles of equity. Parent has taken all action necessary to
render the restrictions set forth in Article XXVII of its articles of
association inapplicable to this Agreement and the transactions contemplated
hereby.
Section 6.3 Capitalization. As of the date of this Agreement, the
authorized share capital of Parent consists of 300,000,000 Parent Ordinary
Shares and 50,000,000 undesignated shares, par value $0.10 per share, of
Parent ("Parent Preference Shares"). As of August 17, 2000, there were
210,648,411 Parent Ordinary Shares issued, 4,456,805 Parent Ordinary Shares
reserved for issuance upon exercise of outstanding Parent options and no
Parent Preference Shares issued. All such issued Parent Ordinary Shares are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. The Parent Ordinary Shares to be issued in connection with
the Merger, when issued in accordance with this Agreement, will be validly
issued, fully paid, nonassessable and free of preemptive rights. As of the
date of this Agreement, except as set forth in this Section 6.3, there are no
outstanding shares or shares of capital stock, and there are no options,
warrants, calls, subscriptions, convertible securities or other rights,
agreements or commitments which obligate Parent or any of its Subsidiaries to
issue, transfer or sell any shares or shares of capital stock or other voting
securities of Parent or any of its Subsidiaries. Parent has no outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of Parent on any matter.
Section 6.4 Significant Subsidiaries. (a) Each of Parent's
Significant Subsidiaries is a corporation or other legal entity duly
organized, validly existing and, to the extent such concept or similar concept
exists in the relevant jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or other
entity power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing (where applicable) in each jurisdiction in
which the ownership, operation or lease of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing does not and is not
reasonably likely to have a Parent Material Adverse Effect. As of the date of
this Agreement, all of the outstanding shares of
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capital stock of, or other ownership interests in, each of Parent's
Significant Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and are owned, directly or indirectly, by Parent free and clear
of all Liens.
(b) Sub and Merger Sub. All of the outstanding capital stock of
Merger Sub is owned directly by Sub, all of the outstanding capital stock of
Sub is owned directly by Parent, and Merger Sub has been formed solely for the
purpose of engaging in the transactions contemplated hereby and, as of the
Effective Time, will have not engaged in any activities other than in
connection with the transactions contemplated by this Agreement. Immediately
prior to the Effective Time, Merger Sub will have 1,000,000 outstanding shares
of its common stock, par value $0.01 per share.
Section 6.5 Compliance with Laws; Permits. Except for such matters
as, individually or in the aggregate, do not or are not reasonably likely to
have a Parent Material Adverse Effect and except for matters arising under
Environmental Laws which are treated exclusively in Section 6.13:
(a) Neither Parent nor any Subsidiary of Parent is in violation of
any Applicable Laws relating to the ownership or operation of any of their
respective assets, and no claim is pending or, to the knowledge of Parent,
threatened with respect to any such matters. No condition exists that is not
disclosed in the Parent Disclosure Letter and which does or is reasonably
likely to constitute a violation of or deficiency under any Applicable Law
relating to the ownership or operation of the assets of Parent or any
Subsidiary of Parent.
(b) Parent and each Subsidiary of Parent hold all permits, licenses,
certifications, variations, exemptions, orders, franchises and approvals of
all governmental or regulatory authorities necessary for the conduct of their
respective businesses (the "Parent Permits"). All Parent Permits are in full
force and effect and there exists no default thereunder or breach thereof, and
Parent has no notice or actual knowledge that such Parent Permits will not be
renewed in the ordinary course after the Effective Time. No governmental
authority has given, or to the knowledge of Parent threatened to give, any
action to terminate, cancel or reform any Parent Permit.
(c) Each drilling rig, drillship or other drilling unit owned by
Parent or a subsidiary of Parent which is subject to classification is in
class according to the rules and regulations of the applicable classifying
body and is duly and lawfully documented under the laws of its flag
jurisdiction.
(d) Parent and each Subsidiary of Parent possess all permits,
licenses, operating authorities, orders, exemptions, franchises, variances,
consents, approvals or other authorizations required for the present ownership
and operation of all its real property or leaseholds ("Parent Real Property")
except where the failure to possess any of the same does not and is not
reasonably likely to have a Parent Material Adverse Effect. There exists no
material
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default or breach with respect to, and no party or governmental authority has
taken or, to the knowledge of Parent, threatened to take, any action to
terminate, cancel or reform any such permit, license, operating authority,
order, exemption, franchise, variance, consent, approval or other
authorization pertaining to the Parent Real Property.
Section 6.6 No Conflict. (a) Neither the execution and delivery by
Parent, Sub and Merger Sub of this Agreement nor the consummation by Parent,
Sub and Merger Sub of the transactions contemplated hereby in accordance with
the terms hereof will (i) subject to the approvals referred to in Section
6.20, conflict with or result in a breach of any provisions of the memorandum
of association or articles of association of Parent or the certificate of
incorporation or bylaws of Sub or Merger Sub; (ii) violate, or conflict with,
or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or give rise to a right of purchase under or accelerate the
performance required by, or result in the creation of any Lien upon any of the
properties of Parent or its Subsidiaries under, or result in being declared
void, voidable, or without further binding effect, or otherwise result in a
detriment to Parent or any of its Subsidiaries under any of the terms,
conditions or provisions of, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, lease, contract, agreement, joint venture
or other instrument or obligation to which Parent or any of its Subsidiaries
is a party, or by which Parent or any of its Subsidiaries or any of their
properties is bound or affected; or (iii) subject to the filings and other
matters referred to in Section 6.6(b), contravene or conflict with or
constitute a violation of any provision of any law, rule, regulation,
judgment, order or decree binding upon or applicable to Parent or any of its
Subsidiaries, except for such matters described in clause (ii) or (iii) as do
not and are not reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect.
(b) Neither the execution and delivery by Parent, Sub or Merger Sub
of this Agreement nor the consummation by Parent, Sub or Merger Sub of the
transactions contemplated hereby in accordance with the terms hereof will
require any consent, approval or authorization of, or filing or registration
with, any governmental or regulatory authority, other than the Regulatory
Filings and the filing of a listing application with the NYSE pursuant to
Section 7.9(a) and the filing of the resolutions relating to the matters
specified in Section 2.1 with the Registrar of Companies of the Cayman
Islands, except for any consent, approval or authorization the failure of
which to obtain and for any filing or registration the failure of which to
make does not and is not reasonably likely to have a Parent Material Adverse
Effect.
Section 6.7 SEC Documents. Parent has filed with the SEC all
documents required to be so filed by it since January 1, 2000 pursuant to
Sections 13(a), 14(a) and 15(d) of the Exchange Act, and has made available to
the Company each registration statement, report, proxy statement or
information statement (other than preliminary materials) it has so filed, each
in the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Parent Reports"). As of its respective date, each Parent
Report (i) complied in all material
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respects in accordance with the applicable requirements of the Exchange Act
and the rules and regulations thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading except for
such statements, if any, as have been modified by subsequent filings with the
SEC prior to the date hereof. Each of the consolidated balance sheets included
in or incorporated by reference into the Parent Reports (including the related
notes and schedules) fairly presents in all material respects the consolidated
financial position of Parent and its Subsidiaries as of its date, and each of
the consolidated statements of operations, cash flows and equity included in
or incorporated by reference into the Parent Reports (including any related
notes and schedules) fairly presents in all material respects the results of
operations, cash flows or changes in equity, as the case may be, of Parent and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to (x) such exceptions as may be permitted by Form 10-Q
of the SEC and (y) normal year-end audit adjustments), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Except as and to
the extent set forth on the consolidated balance sheet of Parent and its
Subsidiaries included in the Parent Reports, including all notes thereto, as
of the date of such balance sheet, neither Parent nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of Parent or in the notes thereto
prepared in accordance with generally accepted accounting principles
consistently applied, other than liabilities or obligations which do not and
are not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect.
Section 6.8 Litigation. Except as described in the Parent Reports
filed on or prior to the date of this Agreement, there are no actions, suits
or proceedings pending against Parent or any of its Subsidiaries or, to
Parent's knowledge, threatened against Parent or any of its Subsidiaries, at
law or in equity, before or by any U.S. federal, state or non-U.S. court,
commission, board, bureau, agency or instrumentality, that are reasonably
likely to have, individually or in the aggregate, a Parent Material Adverse
Effect.
Section 6.9 Absence of Certain Changes. From December 31, 1999 to
the date of this Agreement, there has not been (i) any event or occurrence
that has had or is reasonably likely to have a Parent Material Adverse Effect,
(ii) any material change by Parent or any of its Subsidiaries, when taken as a
whole, in any of its accounting methods, principles or practices or any of its
tax methods, practices or elections, (iii) any declaration, setting aside or
payment of any dividend or distribution in respect of any share capital of
Parent or any redemption, purchase or other acquisition of any of its
securities, except dividends on Parent Ordinary Shares at a rate of not more
than $0.03 per share per quarter or (iv) any increase in or establishment of
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option, stock purchase or other employee benefit plan,
except in the ordinary course of business.
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Section 6.10 Taxes. (a) Each of Parent, its Subsidiaries and each
affiliated, consolidated, combined, unitary or similar group of which any such
corporation is or was a member has (i) duly filed (or there has been filed on
its behalf) on a timely basis with appropriate governmental authorities all
Returns required to be filed by or with respect to it on or prior to the date
hereof, except to the extent that any failure to file does not and is not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect, and (ii) duly paid, or deposited in full on a timely basis or
made adequate provision in accordance with generally accepted accounting
principles (or there has been paid or deposited or adequate provision has been
made on its behalf) for the payment of, all taxes required to be paid by it,
except to the extent that any failure to pay or deposit or make adequate
provision for the payment of such taxes does not and is not reasonably likely
to have, individually or in the aggregate, a Parent Material Adverse Effect.
Representations made in this Section 6.10 are made to the knowledge of Parent
to the extent that the representations relate to a corporation which was, but
is not currently, a part of Parent's or any Subsidiary's affiliated,
consolidated, combined unitary or similar group.
(b) (i) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any taxes or Returns of
Parent or any of its Subsidiaries as to which any taxing authority has
asserted in writing any claim which, if adversely determined, is reasonably
likely to have a Parent Material Adverse Effect; (ii) no governmental
authority is now asserting in writing any deficiency or claim for taxes or any
adjustment to taxes with respect to which Parent or any of its Subsidiaries
may be liable with respect to income and other material taxes which have not
been fully paid or finally settled, which, if adversely determined, is
reasonably likely to have a Parent Material Adverse Effect; (iii) as of the
date of this Agreement, neither Parent nor any of its Subsidiaries has granted
any requests, agreements, consents or waivers to extend the statutory period
of limitations applicable to the assessment of any taxes with respect to any
Returns of Parent or any of its Subsidiaries; (iv) to the knowledge of Parent,
neither Parent nor any of its Subsidiaries is a party to any closing agreement
described in Section 7121 of the Code or any predecessor provision thereof or
any similar agreement under state, local, or non-U.S. tax law; (v) to the
knowledge of Parent, neither Parent nor any of its Subsidiaries is a party to,
is bound by or has any obligation under any tax sharing, allocation or
indemnity agreement or any similar agreement or arrangement; (vi) neither
Parent nor any of its Subsidiaries is a party to an agreement that provides
for the payment of any amount in connection with the Merger that would be
reasonably likely to constitute an "excess parachute payment" within the
meaning of Section 280G of the Code; (vii) to the knowledge of Parent, neither
Parent nor any of its Subsidiaries has made an election under Section 341(f)
of the Code; (viii) to the knowledge of Parent, neither Parent nor any of its
Subsidiaries has any liability for taxes under Treas. Reg. ss. 1.1502-6 or any
similar provision of state, local, or non-U.S. tax law, except for taxes of
the affiliated group of which Parent is the common parent, within the meaning
of Section 1504(a)(1) of the Code or any similar provision of state, local, or
non-U.S. tax law; and (ix) to the knowledge of Parent, Parent has not been a
United States real property holding corporation within the
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meaning of Section 897(c)(2) of the Code at any time within the past five
years.
(c) Neither Parent nor any of the Parent Subsidiaries knows of any
fact, or has taken any action or has failed to take any action, that is
reasonably likely to (i) prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (ii) cause
the Eligible Company Shareholders who exchange Company Common Stock solely for
Parent Ordinary Shares pursuant to the Merger to recognize taxable gain with
respect to the Merger pursuant to Section 367(a) of the Code (except with
respect to cash received in lieu of fractional shares). Neither Parent nor any
of its Subsidiaries has agreed to pay, or will pay, directly or indirectly,
any consideration for shares of stock of the Company other than Parent voting
shares and other than the cash in lieu of fractional shares to be delivered by
Sub as described in this Agreement.
Section 6.11 Employee Benefit Plans. (a) Section 6.11 of the Parent
Disclosure Letter contains a list of all Parent Benefit Plans. The term
"Parent Benefit Plans" means all material employee benefit plans and other
material benefit arrangements, including all "employee benefit plans" as
defined in Section 3(3) of ERISA, whether or not U.S.-based plans, and all
other employee benefit, bonus, incentive, deferred compensation, stock option
(or other equity-based), severance, employment, change in control, welfare
(including post-retirement medical and life insurance) and fringe benefit
plans or agreements, whether or not subject to ERISA or U.S.-based and whether
written or oral, sponsored, maintained or contributed to or required to be
contributed to by Parent or any of its Subsidiaries, to which Parent or any of
its Subsidiaries is a party or is required to provide benefits under
applicable law or in which any person who is currently, has been or, prior to
the Effective Time, is expected to become an employee of Parent is a
participant. Parent will provide the Company, within 30 days after the date
hereof, with true and complete copies of the Parent Benefit Plans other than
those sponsored by Schlumberger Limited and its subsidiaries and, if
applicable, the most recent trust agreements, Forms 5500, summary plan
descriptions, funding statements, annual reports and actuarial reports, if
applicable, for each such plan.
(b) Except for such matters as, individually or in the aggregate, do
not or are not reasonably likely to have a Parent Material Adverse Effect: all
applicable reporting and disclosure requirements have been met with respect to
Parent Benefit Plans; there has been no "reportable event," as that term is
defined in Section 4043 of ERISA, with respect to Parent Benefit Plans subject
to Title IV of ERISA for which the 30-day reporting requirement has not been
waived; to the extent applicable, Parent Benefit Plans comply with the
requirements of ERISA and the Code or with the regulations of any applicable
jurisdiction, and any Parent Benefit Plan intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS; Parent Benefit Plans have been maintained and operated in accordance
with their terms, and, to Parent's knowledge, there are no breaches of
fiduciary duty in connection with Parent Benefit Plans; there are no pending,
or to Parent's knowledge, threatened claims against or otherwise involving any
Parent Benefit Plan, and no suit, action or
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other litigation (excluding claims for benefits incurred in the ordinary
course of Parent Benefit Plan activities) has been brought against or with
respect to any such Parent Benefit Plan; all material contributions required
to be made as of the date hereof to Parent Benefit Plans have been made or
provided for; with respect to Parent Benefit Plans or any "employee pension
benefit plans," as defined in Section 3(2) of ERISA, that are subject to Title
IV of ERISA and have been maintained or contributed to within six years prior
to the Effective Time by Parent, its Subsidiaries or any of its ERISA
Affiliates, (i) neither Parent nor any of its Subsidiaries has incurred any
direct or indirect liability under Title IV of ERISA in connection with any
termination thereof or withdrawal therefrom; and (ii) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code
or Section 302 of ERISA, whether or not waived.
(c) Neither Parent nor any of its Subsidiaries nor any of its ERISA
Affiliates contributes to, or has an obligation to contribute to, and has not
within six years prior to the Effective Time contributed to, or had an
obligation to contribute to, a "multiemployer plan" within the meaning of
Section 3(37) of ERISA, and the execution of, and performance of the
transactions contemplated by, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event
under any benefit plan, policy, arrangement or agreement or any trust or loan
(in connection therewith) that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligations to fund benefits
with respect to any employee of Parent or any Subsidiary thereof.
(d) No Parent Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of Parent or any Subsidiary of Parent for
periods extending beyond their retirement or other termination of service
other than (i) coverage mandated by applicable law, (ii) death benefits under
any "pension plan" or (iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
Section 6.12 Labor Matters. (a) As of the date of this Agreement,
(i) neither Parent nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or similar contract, agreement or
understanding with a labor union or similar labor organization (A) covering
any U.S. employees or (B) covering, in any single instance, 10% or more of the
employees of Parent and its Subsidiaries taken as a whole, and (ii) to
Parent's knowledge, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or threatened
(x) involving any U.S. employees or (y) involving, in any single instance, 10%
or more of the employees of Parent and its Subsidiaries taken as a whole.
(b) Except for such matters as do not and are not reasonably likely
to have a Parent Material Adverse Effect, (i) neither Parent nor any
Subsidiary of Parent has received any written complaint of any unfair labor
practice or other unlawful employment practice or any
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written notice of any material violation of any federal, state or local
statutes, laws, ordinances, rules, regulations, orders or directives with
respect to the employment of individuals by, or the employment practices of,
Parent or any Subsidiary of Parent or the work conditions or the terms and
conditions of employment and wages and hours of their respective businesses
and (ii) there are no unfair labor practice charges or other employee related
complaints against Parent or any Subsidiary of Parent pending or, to the
knowledge of Parent, threatened, before any governmental authority by or
concerning the employees working in their respective businesses.
Section 6.13 Environmental Matters. (a) Parent and each Subsidiary
of Parent has been and is in compliance with all Environmental Laws except for
such matters as do not and are not reasonably likely to have, individually or
in the aggregate, a Parent Material Adverse Effect. There are no past or
present facts, conditions or circumstances that interfere with the conduct of
any of their respective businesses in the manner now conducted or which
interfere with continued compliance with any Environmental Law, except for any
non-compliance or interference that is not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(b) Except for such matters as do not and are not reasonably likely
to have, individually or in the aggregate, a Parent Material Adverse Effect,
no judicial or administrative proceedings or governmental investigations are
pending or, to the knowledge of Parent, threatened against Parent or its
Subsidiaries that allege the violation of or seek to impose liability pursuant
to any Environmental Law, and there are no past or present facts, conditions
or circumstances at, on or arising out of, or otherwise associated with, any
current (or, to the knowledge of Parent or its Subsidiaries, former)
businesses, assets or properties of Parent or any Subsidiary of Parent,
including but not limited to on-site or off-site disposal, release or spill of
any Hazardous Materials which violate Environmental Law or are reasonably
likely to give rise to (i) costs, expenses, liabilities or obligations for any
cleanup, remediation, disposal or corrective action under any Environmental
Law, (ii) claims arising for personal injury, property damage or damage to
natural resources, or (iii) fines, penalties or injunctive relief.
(c) Neither Parent nor any of its Subsidiaries has (i) received any
notice of noncompliance with, violation of, or liability or potential
liability under any Environmental Law or (ii) entered into any consent decree
or order or is subject to any order of any court or governmental authority or
tribunal under any Environmental Law or relating to the cleanup of any
Hazardous Materials, except for any such matters as do not and are not
reasonably likely to have a Parent Material Adverse Effect.
Section 6.14 Intellectual Property. Parent and its Subsidiaries own
or possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights and proprietary information used or held
for use in connection with their respective businesses as currently being
conducted, except where the failure to own or possess such licenses and other
rights does not and is not reasonably likely to have, individually or in the
aggregate, a
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Parent Material Adverse Effect, and there are no assertions or claims
challenging the validity of any of the foregoing that are reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect. The
conduct of Parent's and its Subsidiaries' respective businesses as currently
conducted does not conflict with any patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights or copyrights of
others that are reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect. There is no material infringement of any
proprietary right owned by or licensed by or to Parent or any of its
Subsidiaries that is reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect.
Section 6.15 Decrees, Etc. Except for such matters as do not and are
not reasonably likely to have a Parent Material Adverse Effect (i) no order,
writ, fine, injunction, decree, judgment, award or determination of any court
or governmental authority has been issued or entered against Parent or any
Subsidiary of Parent that continues to be in effect that affects the ownership
or operation of any of their respective assets, and (ii) no criminal order,
writ, fine, injunction, decree, judgment or determination of any court or
governmental authority has been issued against Parent or any Subsidiary of
Parent.
Section 6.16 Insurance. (a) Except for such matters as do not and
are not reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, Parent and its Subsidiaries maintain insurance
coverage with financially responsible insurance companies in such amounts and
against such losses as are customary in the international offshore drilling
business prior to the date hereof.
(b) Except for such matters as do not and are not reasonably likely
to have, individually or in the aggregate, a Parent Material Adverse Effect,
no event relating specifically to Parent or its Subsidiaries (as opposed to
events affecting the drilling service industry in general) has occurred that
is reasonably likely, after the date of this Agreement, to result in an upward
adjustment in premiums under any insurance policies they maintain. Excluding
insurance policies that have expired and been replaced in the ordinary course
of business, no excess liability, hull or protection and indemnity insurance
policy has been canceled by the insurer within one year prior to the date
hereof, and to Parent's knowledge, no threat in writing has been made to
cancel (excluding cancellation upon expiration or failure to renew) any
insurance policy of Parent or any Subsidiary of Parent during the period of
one year prior to the date hereof. Prior to the date hereof, no event has
occurred, including the failure by Parent or any Subsidiary of Parent to give
any notice or information or by giving any inaccurate or erroneous notice or
information, which materially limits or impairs the rights of Parent or any
Subsidiary of Parent under any such excess liability, hull or protection and
indemnity insurance policies.
Section 6.17 No Brokers. Parent has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company or
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Parent to pay any finder's fees, brokerage or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that Parent has retained
Goldman Sachs & Co. and Simmons & Company International as its financial
advisors, the arrangements with which have been disclosed in writing to the
Company prior to the date hereof.
Section 6.18 Opinion of Financial Advisor. The Board of Directors of
Parent has received the opinion of each of Goldman Sachs & Co. and Simmons &
Company International to the effect that, as of the date of this Agreement,
the Common Stock Merger Ratio is fair to Parent from a financial point of
view.
Section 6.19 Company Stock Ownership. Neither Parent nor any of its
Subsidiaries owns any shares of capital stock of the Company or any other
securities convertible into or otherwise exercisable to acquire capital stock
of the Company.
Section 6.20 Vote Required. The only votes of the holders of any
class or series of Parent share capital necessary to approve any transaction
contemplated by this Agreement are (a) the vote of the holders of Parent
Ordinary Shares required by the rules of the NYSE to approve the issuance of
Parent Ordinary Shares pursuant to the Merger and the amendment of Parent's
Long-Term Incentive Plan contemplated by Section 7.4, (b) the affirmative vote
of at least a majority of the votes represented by the holders of the issued
Parent Ordinary Shares present in person or by proxy at a meeting to be held
in accordance with Section 7.4 to approve the increase in authorized ordinary
share capital contemplated by this Agreement, and (c) the affirmative vote of
at least two- thirds of the votes represented by the holders of the issued
Parent Ordinary Shares present in person or by proxy at the meeting to be held
in accordance with Section 7.4 to approve the increase in the maximum number
of members of the Board of Directors of Parent contemplated by this Agreement.
Section 6.21 Ownership of Drilling Rigs and Drillships. As of the
date hereof, Parent or a Subsidiary of Parent has good and marketable title to
the drilling rigs and drill ships listed in Parent's most recent annual report
on Form 10-K, in each case free and clear of all Liens except for (i) defects
or irregularities of title or encumbrances of a nature that do not materially
impair the ownership or operation of these assets and which have not had and
are not reasonably likely to have a Parent Material Adverse Effect, (ii) Liens
that secure obligations not yet due and payable or, if such obligations are
due and have not been paid, Liens securing such obligations that are being
diligently contested in good faith and by appropriate proceedings (any such
contests involving an amount in excess of $10 million being described in the
Parent Disclosure Letter), (iii) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in
good faith, (iv) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith, (v)
operators', vendors', suppliers of necessaries to the Company's drilling rigs,
carriers', warehousemen's,
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repairmen's, mechanics', workmen's, materialmen's, construction or shipyard
liens (during repair or upgrade periods) or other like Liens arising by
operation of law in the ordinary course of business or statutory landlord's
liens, each of which is in respect of obligations that have not been
outstanding more than 90 days (so long s no action has been taken to file or
enforce such Liens within said 90-day period) or which are being contested in
good faith and (vi) other Liens disclosed in the Parent Disclosure Letter (the
Liens described in clauses (i), (ii), (iii), (iv), (v) and (vi), collectively,
"Parent Permitted Liens"). No such asset is leased under an operating lease
from a lessor that, to Parent's knowledge, has incurred non-recourse
indebtedness to finance the acquisition or construction of such asset.
Section 6.22 Undisclosed Liabilities. Neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
fixed, accrued, contingent or otherwise, except liabilities and obligations
that (i) are disclosed in the Parent Reports, (ii) are referred to in the
Parent Disclosure Letter or (iii) do not and are not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 6.23 Certain Contracts. (a) Section 6.23 of the Parent
Disclosure Letter contains a list of all of the following contracts or
agreements (other than those set forth on an exhibit index in the Parent
Reports filed on or prior to the date of this Agreement) to which Parent or
any Subsidiary of Parent is a party or by which any of them is bound as of the
date of this Agreement: (i) any non-competition agreement that purports to
limit the manner in which, or the localities in which, all or any portion of
their respective businesses is conducted other than any such limitation that
is not material to Parent and its Subsidiaries, taken as a whole, (ii) any
drilling rig construction or conversion contract with respect to which the
drilling rig has not been delivered and paid for, (iii) any drilling contracts
of one year or greater remaining duration, (iv) any contract or agreement for
the borrowing of money with a borrowing capacity or outstanding indebtedness
of $50 million or more or (v) any "material contract" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC) (all contracts or agreements
of the types described in clauses (i) through (v) being referred to herein as
"Parent Material Contracts").
(b) As of the date of this Agreement, each Parent Material Contract
is, to the knowledge of Parent, in full force and effect, and Parent and each
of its Subsidiaries have in all material respects performed all obligations
required to be performed by them to date under each Parent Material Contract
to which it is a party, except where such failure to be binding or in full
force and effect or such failure to perform does not and is not reasonably
likely to create, individually or in the aggregate, a Parent Material Adverse
Effect. Except for such matters as do not and are not reasonably likely to
have a Parent Material Adverse Effect, neither Parent nor any of its
Subsidiaries (x) knows of, or has received written notice of, any breach of or
violation or default under (nor, to the knowledge of Parent, does there exist
any condition which with the passage of time or the giving of notice or both
would result in such a violation or default under) any Parent Material
Contract or (y) has received written notice of the desire of the other party
or parties to any such Parent Material Contract to exercise any rights such
party has to cancel,
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terminate or repudiate such contract or exercise remedies thereunder. Each
Parent Material Contract is enforceable by Parent or a Subsidiary of Parent in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and general principles of equity, except where such unenforceability is not
reasonably likely to create, individually or in the aggregate, a Company
Material Adverse Effect.
Section 6.24 Capital Expenditure Program. As of the date of this
Agreement, the Parent Disclosure Letter accurately sets forth in all material
respects, for each of Parent's sustaining, life extension and newbuild capital
expenditure programs, the capital expenditures for all such programs that were
forecasted to be incurred in 2000 and 2001 on a monthly basis, as previously
provided to the Company. The construction in progress attributable to the
newbuilds and included in the consolidated balance sheet of Parent at June 30,
2000 included in the Parent Reports and the projected newbuild capital
expenditures to be incurred in 2000 and 2001 equal the estimated book value of
the rigs when complete, as at the time of such forecast.
Section 6.25 Improper Payments. No bribes, kickbacks or other
improper payments have been made by Parent or any Subsidiary of Parent or
agent of any of them in connection with the conduct of their respective
businesses or the operation of their respective assets, and neither Parent,
any Subsidiary of Parent, nor any agent of any of them has received any such
payments from vendors, suppliers or other persons, where any such payment made
or received is reasonably likely to have a Parent Material Adverse Effect.
ARTICLE 7
COVENANTS
Section 7.1 Conduct of Company Business. Prior to the Effective
Time, except as set forth in the Company Disclosure Letter or as expressly
contemplated by any other provision of this Agreement or as required by
Applicable Laws (provided that the Company has provided Parent with advance
notice of the proposed action to the extent practicable), unless Parent has
consented in writing thereto, the Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(b) shall use its commercially reasonable best efforts, and shall
cause each of its Subsidiaries to use its commercially reasonable best
efforts, to preserve intact their business organizations and goodwill (except
that any of its Subsidiaries may be merged with or into, or be consolidated
with any of its Subsidiaries or may be liquidated into the Company or any of
its Subsidiaries), keep available the services of their respective officers
and employees and maintain satisfactory relationships with those persons
having business relationships with them;
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(c) shall not amend its certificate of incorporation or bylaws;
(d) shall promptly notify Parent of any material change in its
condition (financial or otherwise) or business or any termination,
cancellation, repudiation or material breach of any Company Material Contract
(or communications indicating that the same may be contemplated) or any
material litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the breach in any material respect of any representation or warranty contained
herein;
(e) shall promptly deliver to Parent true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) shall not, (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement (including the Company Rights
issued pursuant to the Company Rights Agreement) or pursuant to the exercise
of awards granted after the date hereof and expressly permitted under this
Agreement or in connection with transactions permitted by Section 7.1(i) or
pursuant to the payment of dividends on shares of Company Redeemable Preferred
Stock in amounts required under the certificate of designation of the Company
establishing the Company Redeemable Preferred Stock, issue any shares of its
capital stock, effect any stock split or otherwise change its capitalization
as it existed on the date hereof, (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the date hereof to
acquire any shares of its capital stock, except for (A) (1) awards of options
to acquire up to 15,000 shares of Company Common Stock, per person, to newly
hired employees or to existing employees as the result of promotions, in each
case other than officers or directors of the Company (including former
officers or directors) in the ordinary course of business consistent with past
practices as set forth in Section 7.1(f) of the Company Disclosure Letter and
(2) in the event the Effective Time does not occur on or before February 28,
2001, awards of options to employees other than officers and directors of the
Company (including former officers or directors), to acquire up to 15,000
shares of Company Common Stock per employee, up to an aggregate of 500,000
shares of Company Common Stock for all employees, provided in the case of both
clause (1) and (2) that such awards provide for exercisability in three equal
annual installments beginning on each anniversary of the date of grant of the
option subject to continued employment with the Company or its affiliates,
with no right of acceleration of exercisability as a result of the
transactions contemplated by this Agreement, with no right to exercise more
than three months after termination of employment, with no right to have
shares withheld upon exercise, for tax purposes, in excess of the number of
shares needed to satisfy the minimum statutory withholding requirements for
federal and state tax withholding, and in all other respects are made in the
ordinary course of business consistent with past practices, and (B) the
issuance of Company Rights with permitted issuances of Company Common Stock,
(iii) amend or otherwise modify any option, warrant, conversion right or other
right to acquire any shares of its capital stock existing on the date hereof,
(iv) with respect to any of its former, present or future employees,
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increase any compensation or benefits, or enter into, amend or extend (or
permit the extension of) any employment or consulting agreement, except in
each case in the ordinary course of business consistent with past practice,
(v) with respect to any of its former, present or future officers or
directors, increase any compensation or benefits or enter into, amend or
extend (or permit the extension of) any employment or consulting agreement,
(vi) adopt any new employee benefit plan or agreement (including any stock
option, stock benefit or stock purchase plan) or amend (except as required by
law) any existing employee benefit plan in any material respect, except for
changes which are less favorable to participants in such plans, (vii) except
as approved by good faith action of the Board of Directors of the Company
after the Company has provided Parent with advance written notice of the
proposed action and consulted in advance with Parent regarding such action,
terminate any executive officer without cause or permit circumstances to exist
that would give any executive officer a right to terminate employment if the
termination would entitle such executive officer to receive enhanced
separation payments upon consummation of the Merger, or (viii) permit any
holder of an option to acquire Company Common Stock outstanding on the date
hereof to have shares withheld upon exercise, for tax purposes, in excess of
the number of shares needed to satisfy the minimum statutory withholding
requirements for federal and state tax withholding;
(g) except for the payment of dividends on shares of Company
Redeemable Preferred Stock in amounts required under the terms of the
certificate of designation of the Company establishing the Company Redeemable
Preferred Stock, shall not (i) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or (ii) redeem, purchase or otherwise acquire any shares of its capital
stock or capital stock of any of its Subsidiaries, or make any commitment for
any such action;
(h) shall not, and shall not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of any of its assets (including capital stock
of Subsidiaries) which are material to the Company, individually or in the
aggregate, except for sales of surplus equipment or sales of other assets in
the ordinary course of business;
(i) shall not, and shall not permit any of its Subsidiaries to,
except pursuant to contractual commitments in effect on the date hereof and
disclosed in the Company Disclosure Letter, acquire or agree to acquire by
merging or consolidating with, or by purchasing an equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof, in each case (i) for an aggregate consideration for all such
acquisitions in excess of $10 million (excluding acquisitions approved in
writing by Parent) or (ii) where a filing under the HSR Act or any non-U.S.
competition, antitrust or premerger notification laws is required;
(j) shall not, except as may be required as a result of a change in
generally accepted accounting principles, change any of the material
accounting principles or practices used by it;
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(k) shall, and shall cause any of its Subsidiaries to, use
reasonable efforts to maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses as are
customary for such party;
(l) shall not, and shall not permit any of its Subsidiaries to, (i)
make or rescind any material election relating to taxes, including elections
for any and all joint ventures, partnerships, limited liability companies,
working interests or other investments where it has the capacity to make such
binding election, (ii) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes, or (iii) change in any material respect any of its methods
of reporting any item for tax purposes from those employed in the preparation
of its tax returns for the most recent taxable year for which a return has
been filed, except as may be required by applicable law;
(m) shall not, and shall not permit any of its Subsidiaries to, (i)
incur any indebtedness for borrowed money or guarantee any such indebtedness
or issue or sell any debt securities or warrants or rights to acquire any debt
securities of the Company or any of its Subsidiaries or guarantee any debt
securities of others, (ii) except in the ordinary course of business, enter
into any material lease (whether such lease is an operating or capital lease)
or create any material mortgages, Liens, security interests or other
encumbrances on its property in connection with any indebtedness thereof
(other than the Company Permitted Liens) or (iii) make or commit to make
aggregate capital expenditures in excess of $3 million per month for each
month from the date of this Agreement to the Effective Time over the capital
expenditures forecast disclosed in the Company Disclosure Letter for such
month, excluding capital expenditures covered by insurance (A) for any partial
loss not covered by loss of hire insurance, not in excess of $5 million per
occurrence or series of related occurrences and (B) for any vessel for which
the Company has bound loss of hire insurance, provided, however, that capital
expenditures in connection with the total loss (actual or constructive) of any
vessel shall require the consent of Parent;
(n) except as provided in Section 7.20, shall not, and shall cause
its Subsidiaries not to, purchase or otherwise acquire any Parent Ordinary
Shares, Company Common Stock or Company Redeemable Preferred Stock;
(o) subject to Section 7.5, shall not take any action that is
reasonably likely to delay materially or adversely affect the ability of any
of the parties hereto to obtain any consent, authorization, order or approval
of any governmental commission, board or other regulatory body or the
expiration of any applicable waiting period required to consummate the
transactions contemplated by this Agreement;
(p) shall not (i) agree in writing or otherwise to take any of the
foregoing actions or (ii) permit any of its Subsidiaries to agree in writing
or otherwise to take any of the
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foregoing actions that refer to Subsidiaries; and
(q) unless in the good faith opinion of the Board of Directors of
the Company after consultation with its outside legal counsel the following
would be inconsistent with its fiduciary duties, (i) shall not terminate,
amend, modify or waive any provision of any agreement containing a standstill
covenant to which it is a party; and (ii) during such period shall enforce, to
the fullest extent permitted under applicable law, the provisions of such
agreement, including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or any state having jurisdiction.
Section 7.1A Conduct of Parent Business. Prior to the Effective
Time, except as set forth in the Parent Disclosure Letter or as expressly
contemplated by any other provision of this Agreement or as required by
Applicable Laws (provided that Parent has provided the Company with advance
written notice of the proposed action to the extent practicable), unless the
Company has consented in writing thereto, Parent:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations in accordance with the primary business focus of Parent and its
Subsidiaries taken as a whole as of the date of this Agreement;
(b) shall use its commercially reasonable best efforts, and shall
cause each of its Subsidiaries to use its commercially reasonable best
efforts, to preserve intact their business organizations and goodwill, keep
available the services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
(c) except in connection with transactions permitted under this
Section 7.1A, shall not propose any shareholder resolution to amend its
memorandum of association or articles of association;
(d) shall promptly notify the Company of any material change in its
condition (financial or otherwise) or business or any termination,
cancellation, repudiation or material breach of any Parent Material Contract
(or communications indicating that the same may be contemplated) or any
material litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the breach in any material respect of any representation or warranty contained
herein;
(e) shall promptly deliver to the Company true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any of its shares or (ii)
redeem, purchase or otherwise acquire any of its shares or capital stock of
any of its Subsidiaries (other than from one of its Subsidiaries), or make any
commitment for any such action, except for the declaration and payment of
regular, quarterly dividends, consistent with past practice, not to exceed
$0.03 per Parent Ordinary Share per quarter;
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(g) shall not, and shall not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of all or substantially all of the assets of
Parent and its Subsidiaries, taken as a whole (including capital stock of
Subsidiaries), except for sales, leases or other dispositions between Parent
and one of its Subsidiaries or between or among its Subsidiaries;
(h) shall not, except as may be required as a result of a change in
generally accepted accounting principles, change any of the material
accounting principles or practices used by it;
(i) shall, and shall cause any of its Subsidiaries to, use
reasonable efforts to maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses as are
customary for such party;
(j) except for acquisitions by one of Parent's Subsidiaries of
Parent Ordinary Shares from Parent or another Subsidiary of Parent, shall not,
and shall cause its Subsidiaries not to, purchase or otherwise acquire any
Parent Ordinary Shares or Company Common Stock;
(k) subject to Section 7.5, shall not take any action that is
reasonably likely to delay materially or adversely affect the ability of any
of the parties hereto to obtain any consent, authorization, order or approval
of any governmental commission, board or other regulatory body or the
expiration of any applicable waiting period required to consummate the
transactions contemplated by this Agreement;
(l) shall not (i) agree in writing or otherwise to take any of the
foregoing actions or (ii) permit any of its Subsidiaries to agree in writing
or otherwise to take any of the foregoing actions that refer to Subsidiaries;
and
(m) except in connection with a transaction permitted by this
Section 7.1A, shall not terminate, amend, modify or waive any provision of any
agreement with a standstill covenant to which it is a party; and during such
period shall enforce, to the fullest extent permitted under applicable law,
the provisions of such agreement, including by obtaining injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States of America or any
state having jurisdiction.
Section 7.2 No Solicitation by the Company. (a) The Company agrees
that (i) neither it nor any of its Subsidiaries shall, and it shall not
authorize or permit any of its
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officers, directors, employees, agents or representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or
any of its Subsidiaries) to, and on becoming aware of it will stop such person
from continuing to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing nonpublic information), or take any action
designed to facilitate, directly or indirectly, any inquiry, proposal or offer
(including, without limitation, any proposal or offer to its stockholders)
with respect to a tender or exchange offer, merger, consolidation, business
combination, purchase or similar transaction or series of transactions (other
than the transactions contemplated by this Agreement) involving, individually
or in the aggregate, 15% or more of the assets, net revenues or net income of
the Company and its Subsidiaries on a consolidated basis or 15% or more of any
class of capital stock of the Company (any such proposal, offer or transaction
being hereinafter referred to as a "Company Acquisition Proposal") or
cooperate with or assist, participate or engage in any discussions or
negotiations concerning a Company Acquisition Proposal; and (ii) it will
immediately cease and cause to be terminated any existing negotiations with
any parties conducted heretofore with respect to any of the foregoing;
provided that nothing contained in this Agreement shall prevent the Company or
its Board of Directors from (A) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a Company Acquisition Proposal or (B) prior to
the Cutoff Date (as defined herein), providing information (pursuant to a
confidentiality and standstill agreement in reasonably customary form with
terms at least as favorable to the Company as the Confidentiality and
Standstill Agreement dated April 24, 2000, between Parent and the Company (the
"Confidentiality and Standstill Agreement") and which does not contain terms
that prevent the Company from complying with its obligations under this
Section 7.2) to or engaging in any negotiations or discussions with any person
or entity who has made an unsolicited bona fide written Company Acquisition
Proposal with respect to all the outstanding capital stock of the Company or
all or substantially all the assets of the Company that, in the good faith
judgment of the Board of Directors of the Company, taking into account the
likelihood of financing, and based on the advice of a financial advisor of
recognized national reputation, a written summary of which shall be promptly
provided to Parent, is superior to the Merger (a "Company Superior Proposal"),
to the extent the Board of Directors of the Company, after consultation with
its outside legal counsel, determines that the failure to do so would be
inconsistent with its fiduciary obligations.
(b) Prior to taking any action referred to in Section 7.2(a), if the
Company intends to participate in any such discussions or negotiations or
provide any such information to any such third party, the Company shall give
prompt prior oral and written notice to Parent of each such action. The
Company will immediately notify Parent orally and in writing of any such
requests for such information or the receipt of any Company Acquisition
Proposal or any inquiry with respect to or that could lead to a Company
Acquisition Proposal, including the identity of the person or group engaging
in such discussions or negotiations, requesting such information or making
such Company Acquisition Proposal, and the material terms and conditions of
any Company Acquisition Proposal. The Company will (i) keep Parent fully
informed of the status and details (including any changes or proposed changes
to such status or
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details) on a timely basis of any such requests, Company Acquisition Proposals
or inquiries and (ii) provide to Parent as soon as practicable after receipt
or delivery thereof with copies of all correspondence and other written
material sent or provided to the Company from any third party in connection
with any Company Acquisition Proposal or sent or provided by the Company to
any third party in connection with any Company Acquisition Proposal. Any
written notice under this Section 7.2 shall be given by facsimile with receipt
confirmed or personal delivery.
(c) Nothing in this Section 7.2 shall permit the Company to enter
into any agreement with respect to a Company Acquisition Proposal during the
term of this Agreement, it being agreed that during the term of this Agreement
(except pursuant to Section 9.3(c)), the Company shall not enter into any
agreement with any person that provides for, or in any way facilitates, a
Company Acquisition Proposal, other than a confidentiality and standstill
agreement in reasonably customary form with terms at least as favorable to the
Company as the Confidentiality and Standstill Agreement and which does not
contain terms that prevent the Company from complying with its obligations
under this Section.
(d) For purposes hereof, the "Cutoff Date," when used with respect
to the Company, means the date the condition set forth in Section 8.1(a)(i) is
satisfied.
Section 7.3 No Solicitation by Parent. (a) Parent agrees that (i)
neither it nor any of its Subsidiaries shall, and it shall not authorize or
permit any of its officers, directors, employees, agents or representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) to, and on becoming aware of it
will stop such person from continuing to, directly or indirectly, solicit,
initiate or encourage (including by way of furnishing nonpublic information),
or take any action designed to facilitate, directly or indirectly, any
inquiry, proposal or offer (including, without limitation, any proposal or
offer to its shareholders) with respect to a tender or exchange offer, merger,
consolidation, business combination, purchase or similar transaction or series
of transactions (other than the transactions contemplated by this Agreement)
involving, individually or in the aggregate, 15% or more of the assets, net
revenues or net income of Parent and its Subsidiaries on a consolidated basis
or 15% or more of any class of share capital of Parent (any such proposal,
offer or transaction being hereinafter referred to as a "Parent Acquisition
Proposal") or cooperate with or assist, participate or engage in any
discussions or negotiations concerning a Parent Acquisition Proposal; and (ii)
it will immediately cease and cause to be terminated any existing negotiations
with any parties conducted heretofore with respect to any of the foregoing;
provided that nothing contained in this Agreement shall prevent Parent or its
Board of Directors from (A) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a Parent Acquisition Proposal or (B) prior to the
Cutoff Date (as defined herein), providing information (pursuant to a
confidentiality and standstill agreement in reasonably customary form with
terms at least as favorable to Parent as the Confidentiality and Standstill
Agreement and which does not contain terms that prevent Parent from complying
with its obligations under this Section 7.3) to or engaging in any
negotiations or discussions with any person or entity who has made an
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unsolicited bona fide written Parent Acquisition Proposal with respect to all
the outstanding Parent Ordinary Shares or all or substantially all the assets
of Parent that, in the good faith judgment of a committee composed solely of
the outside directors of Parent, taking into account the likelihood of
financing, and based on the advice of a financial advisor of recognized
national reputation, a written summary of which shall be promptly provided to
the Company, is superior to the Merger (a "Parent Superior Proposal"), to the
extent that committee of the Board of Directors of Parent, after consultation
with its outside legal counsel, determines that the failure to do so would be
inconsistent with its fiduciary obligations.
(b) Prior to taking any action referred to in Section 7.3(a), if
Parent intends to participate in any such discussions or negotiations or
provide any such information to any such third party, Parent shall give prompt
prior oral and written notice to the Company of each such action. Parent will
immediately notify the Company orally and in writing of any such requests for
such information or the receipt of any Parent Acquisition Proposal or any
inquiry with respect to or that could lead to a Parent Acquisition Proposal,
including the identity of the person or group engaging in such discussions or
negotiations, requesting such information or making such Parent Acquisition
Proposal, and the material terms and conditions of any Parent Acquisition
Proposal. Parent will (i) keep the Company fully informed of the status and
details (including any changes or proposed changes to such status or details)
on a timely basis of any such requests, Parent Acquisition Proposals or
inquiries and (ii) provide to the Company as soon as practicable after receipt
or delivery thereof with copies of all correspondence and other written
material sent or provided to Parent from any third party in connection with
any Parent Acquisition Proposal or sent or provided by Parent to any third
party in connection with any Parent Acquisition Proposal. Any written notice
under this Section 7.3 shall be given by facsimile with receipt confirmed or
personal delivery.
(c) Nothing in this Section 7.3 shall permit Parent to enter into
any agreement with respect to a Parent Acquisition Proposal during the term of
this Agreement, it being agreed that during the term of this Agreement (except
pursuant to Section 9.4(c)), Parent shall not enter into any agreement with
any person that provides for, or in any way facilitates, a Parent Acquisition
Proposal, other than a confidentiality agreement in reasonably customary form
with terms at least as favorable to Parent as the Confidentiality and
Standstill Agreement.
(d) For purposes hereof, the "Cutoff Date," when used with respect
to Parent, means the date the condition set forth in Section 8.1(a)(ii) is
satisfied.
Section 7.4 Meetings of Stockholders. (a) Each of Parent and the
Company shall take all action necessary, in accordance with applicable law and
its memorandum of association and articles of association (Parent) or
certificate of incorporation and bylaws (the Company), to convene a meeting of
its shareholders as promptly as practicable to consider and vote upon (i) in
the case of Parent, the approval of the amendments to Parent's articles of
association contemplated hereby, the approval of the increase in the
authorized share capital
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contemplated herein, the issuance of Parent Ordinary Shares pursuant to the
Merger and, at the discretion of Parent, an amendment of its Long-Term
Incentive Plan to increase the number of Parent Ordinary Shares reserved for
issuance thereunder and (ii) in the case of the Company, the adoption of this
Agreement and the Company Charter Amendment. Parent and the Company shall
coordinate and cooperate with respect to the timing of such meetings and shall
use their best efforts to hold such meetings on the same day. Notwithstanding
any other provision of this Agreement, unless this Agreement is terminated in
accordance with the terms hereof, the Company and Parent shall each submit
this Agreement to its stockholders and shareholders, respectively, whether or
not the Board of Directors of the Company or Parent, as the case may be,
withdraws, modifies or changes its recommendation and declaration regarding
the foregoing matters.
(b) Each of Parent and the Company, through its Board of Directors,
shall recommend approval of such matters and use its best efforts to solicit
from its shareholders proxies in favor of such matters; provided, however,
that the Board of Directors of Parent or the Board of Directors of the Company
may at any time prior to the Effective Time upon five business days' prior
written notice to the Company or Parent, respectively, withdraw, modify or
change any recommendation and declaration regarding such matters or recommend
and declare advisable any Company Superior Proposal or Parent Superior
Proposal, as the case may be, if in the good faith opinion of such Board of
Directors after consultation with its outside legal counsel the failure to so
withdraw, modify or change its recommendation and declaration or to so
recommend and declare advisable any Company Superior Proposal or Parent
Superior Proposal, as the case may be, would be inconsistent with its
fiduciary obligations.
Section 7.5 Filings; Commercially Reasonable Best Efforts, Etc. (a)
Subject to the terms and conditions herein provided, the Company and Parent
shall:
(i) make their respective required filings under the HSR Act
and any applicable non-U.S. competition, antitrust or premerger notification
laws ("Non-U.S. Antitrust Laws") to be made pursuant to Section 8.1(b) (and
shall share equally all filing fees incident thereto), which filings shall be
made promptly, and which filings as required under the HSR Act and the
antitrust, trade and competition laws of Brazil shall be made in not more than
15 business days from the date hereof, and thereafter shall promptly make any
other required submissions under the HSR Act or other such laws;
(ii) use their commercially reasonable best efforts to
cooperate with one another in (a) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits
or authorizations are required to be obtained prior to the Effective Time
from, governmental or regulatory authorities of the United States, the several
states, and non-U.S. jurisdictions in connection with the execution and
delivery of this Agreement and the consummation of the Merger and the
transactions contemplated hereby; and (b) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations without
causing a Parent Material Adverse Effect or a Company Material Adverse Effect;
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(iii) promptly notify each other of any communication
concerning this Agreement or the transactions contemplated hereby to that
party from any governmental authority and permit the other party to review in
advance any proposed communication concerning this Agreement or the
transactions contemplated hereby to any governmental entity;
(iv) not agree to participate in any meeting or discussion with
any governmental authority in respect of any filings, investigation or other
inquiry concerning this Agreement or the transactions contemplated hereby
unless it consults with the other party in advance and, to the extent
permitted by such governmental authority, gives the other party the
opportunity to attend and participate thereat;
(v) furnish the other party with copies of all correspondence,
filings and communications (and memoranda setting forth the substance thereof)
between them and their affiliates and their respective representatives on the
one hand, and any government or regulatory authority or members or their
respective staffs on the other hand, with respect to this Agreement and the
transactions contemplated hereby; and
(vi) furnish the other party with such necessary information
and reasonable assistance as such other party and its affiliates may
reasonably request in connection with their preparation of necessary filings,
registrations or submissions of information to any governmental or regulatory
authorities, including, without limitation, any filings necessary or
appropriate under the provisions of the HSR Act or any applicable Non-U.S.
Antitrust Laws.
(b) Without limiting Section 7.5(a), but subject to Sections 7.5(c),
7.5(d) and 7.19, Parent and the Company shall:
(i) each use commercially reasonable best efforts to avoid the
entry of, or to have vacated, terminated or modified, any decree, order or
judgment that would restrain, prevent or delay the Closing; and
(ii) each use commercially reasonable best efforts to take any
and all steps necessary to obtain any consents or eliminate any impediments to
the Merger.
(c) At the request of Parent, the Company shall take all
commercially reasonable steps necessary to avoid or eliminate each and every
impediment under any of the HSR Act, Non- U.S. Antitrust Laws or other
antitrust, competition or premerger notification, trade regulation law,
regulation or order ("Antitrust Laws") that may be asserted by any
governmental entity with respect to the Merger so as to enable the Closing to
occur as soon as reasonably possible, including without limitation, proposing,
negotiating, committing to and effecting, by consent decree, hold separate
order or otherwise, the sale, divestiture or disposition of such assets or
businesses of the Company or any of its Subsidiaries or otherwise take or
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commit to take any action that limits its freedom of action with respect to,
or its ability to retain, any of the businesses or assets of the Company or
its Subsidiaries, as may be required in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order or
other order in any suit or proceeding relating to Antitrust Laws which would
otherwise have the effect of preventing or delaying the Closing, provided that
any such action or commitment may be conditioned upon the consummation of the
Merger and the transactions contemplated hereby. At the request of Parent, the
Company shall agree to divest, hold separate or otherwise take or commit to
take any action that limits its freedom of action with respect to, or its
ability to retain, any of the businesses, product lines or assets of the
Company or any of its Subsidiaries, provided that any such action may be
conditioned upon the consummation of the Merger and the transactions
contemplated hereby. Notwithstanding anything to the contrary contained in
this Agreement, in connection with any filing or submission required or action
to be taken by Parent, the Company or any of their respective Subsidiaries to
consummate the Merger or other transactions contemplated in this Agreement,
the Company shall not, without Parent's prior written consent, recommend,
suggest or commit to any divestiture of assets or businesses of the Company
and its Subsidiaries. In the event that this Agreement is terminated at any
time prior to the Effective Time, Parent shall pay the reasonable
out-of-pocket expenses of the Company incurred in connection with its
compliance with this Section 7.5(c); provided that Parent shall not be so
obligated to pay such expenses for services rendered by advisers to the
Company unless such advisors are selected by Parent.
(d) Nothing in this Agreement shall require Parent to dispose of any
of its assets or to limit its freedom of action with respect to any of its
businesses, or to consent to any disposition of the Company's assets or limits
on the Company's freedom of action with respect to any of its businesses,
whether prior to or after the Effective Time, or to commit or agree to any of
the foregoing, to obtain any consents, approvals, permits or authorizations or
to remove any impediments to the Merger relating to Antitrust Laws or to avoid
the entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order in any suit or proceeding relating to
Antitrust Laws, other than dispositions, limitations or consents, commitments
or agreements which in each such case may be conditioned upon the consummation
of the Merger and the transactions contemplated hereby and which, in the
reasonable judgment of Parent, in each such case do not and are not reasonably
likely to individually or in the aggregate either (i) have a Parent Material
Adverse Effect; (ii) have a Company Material Adverse Effect; (iii) materially
impair the benefits or advantages which Parent expects to receive from the
Merger and the transactions contemplated hereby; or (iv) have a material
adverse effect on Parent's business plan or business strategy for the combined
company.
(e) Parent and the Company intend that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. Parent and
the Company shall use commercially reasonable best efforts to cause the Merger
to qualify as a reorganization within the meaning of Section 368(a) of the
Code, and shall not take actions, cause actions to be
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taken, or fail to take actions that (i) could reasonably be expected to
prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code or (ii) could reasonably be expected to cause the
Eligible Company Shareholders who exchange Company Common Stock solely for
Parent Ordinary Shares pursuant to the Merger to recognize taxable gain with
respect to the Merger pursuant to Section 367(a) of the Code (except with
respect to cash received in lieu of fractional shares).
(f) Immediately prior to the Effective Time, the Company shall file
with the Secretary of State of Delaware the Company Charter Amendment. Parent
shall file with the Registrar of Companies of the Cayman Islands the
resolutions relating to the matters specified in Section 2.1.
Section 7.6 Inspection. From the date hereof to the Effective Time,
each of the Company and Parent shall allow all designated officers, attorneys,
accountants and other representatives of Parent or the Company, as the case
may be, access, at all reasonable times, upon reasonable notice, to the
records and files, correspondence, audits and properties, as well as to all
information relating to commitments, contracts, titles and financial position,
or otherwise pertaining to the business and affairs of Parent and the Company
and their respective Subsidiaries, including inspection of such properties;
provided that no investigation pursuant to this Section 7.6 shall affect any
representation or warranty given by any party hereunder, and provided further
that notwithstanding the provision of information or investigation by any
party, no party shall be deemed to make any representation or warranty except
as expressly set forth in this Agreement. Notwithstanding the foregoing, no
party shall be required to provide any information which it reasonably
believes it may not provide to the other party by reason of applicable law,
rules or regulations, which constitutes information protected by
attorney/client privilege, or which it is required to keep confidential by
reason of contract or agreement with third parties. The parties hereto shall
make reasonable and appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. Each
of Parent and the Company agrees that it shall not, and shall cause its
respective representatives not to, use any information obtained pursuant to
this Section 7.6 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. All non-public information
obtained pursuant to this Section 7.6 shall be governed by the Confidentiality
and Standstill Agreement.
Section 7.7 Publicity. The parties will consult with each other and
will mutually agree upon any press releases or public announcements pertaining
to this Agreement or the transactions contemplated hereby and shall not issue
any such press releases or make any such public announcements prior to such
consultation and agreement, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange, in which case the party proposing to issue such press release or
make such public announcement shall use its best efforts to consult in good
faith with the other party before issuing any such press releases or making
any such public announcements.
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Section 7.8 Registration Statement on Form S-4. (a) Each of Parent
and the Company shall cooperate and promptly prepare and Parent shall file
with the SEC as soon as practicable a Registration Statement on Form S-4 (the
"Form S-4") under the Securities Act, with respect to the Parent Ordinary
Shares issuable in the Merger, a portion of which Registration Statement shall
also serve as the joint proxy statement with respect to the meetings of the
stockholders of Parent and of the Company in connection with the transactions
contemplated by this Agreement (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Parent shall use commercially reasonable best efforts, and the
Company shall cooperate with Parent, to have the Form S-4 declared effective
by the SEC as promptly as practicable. Parent shall use commercially
reasonable best efforts to obtain, prior to the effective date of the Form
S-4, all necessary non-U.S., state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this
Agreement and the parties shall share equally all expenses incident thereto
(including all SEC and other filing fees and all printing and mailing expenses
associated with the Form S-4 and the Proxy Statement/Prospectus). Parent will
advise the Company, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the qualification of
the Parent Ordinary Shares issuable in connection with the Merger for offering
or sale in any jurisdiction or any request by the SEC for amendment of the
Proxy Statement/Prospectus or the Form S-4 or comments thereon and responses
thereto or requests by the SEC for additional information. Each of the parties
shall also promptly provide each other party copies of all written
correspondence received from the SEC and summaries of all oral comments
received from the SEC in connection with the transactions contemplated by this
Agreement. Each of the parties shall promptly provide each other party with
drafts of all correspondence intended to be sent to the SEC in connection with
the transactions contemplated by this Agreement and allow each such party the
opportunity to comment thereon prior to delivery to the SEC.
(b) Parent and the Company shall each use its best efforts to cause
the Proxy Statement/Prospectus to be mailed to its stockholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
(c) Each of Parent and the Company shall ensure that the information
provided by it for inclusion in the Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the
time of the respective meetings of stockholders of Parent and the Company, or,
in the case of information provided by it for inclusion in the Form S-4 or any
amendment or supplement thereto, at the time it becomes effective, (i) will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (ii) will comply as to form in all
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material respects with the provisions of the Securities Act and the Exchange
Act.
Section 7.9 Listing Applications. (a) Parent shall promptly prepare
and submit to the NYSE a listing application covering the Parent Ordinary
Shares issuable in the Merger and shall use commercially reasonable best
efforts to obtain, prior to the Effective Time, approval for the listing of
such Parent Ordinary Shares, subject to official notice of issuance.
(b) The Company shall promptly prepare and submit to the NYSE,
another national securities exchange or the Nasdaq National Market System a
listing application covering the Company Redeemable Preferred Stock and shall
use commercially reasonable best efforts to obtain, prior to the record date
for the meeting of the stockholders of the Company to adopt this Agreement,
approval for the listing of the Company Redeemable Preferred Stock.
Section 7.10 Letters of Accountants. (a) The Company shall use
commercially reasonable best efforts to cause to be delivered to Parent
"comfort" letters of Arthur Andersen LLP, the Company's independent public
accountants, dated the effective date of the Form S-4 and the Closing Date,
respectively, and addressed to Parent with regard to certain financial
information regarding the Company included in the Form S-4, in form reasonably
satisfactory to Parent and customary in scope and substance for "comfort"
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) Parent shall use commercially reasonable best efforts to cause
to be delivered to the Company "comfort" letters of Ernst & Young LLP and
PricewaterhouseCoopers LLP, Parent's independent public accountants, dated the
effective date of the Form S-4 and the Closing Date, respectively, and
addressed to the Company, with regard to certain financial information
regarding Parent included in the Form S-4, in form reasonably satisfactory to
the Company and customary in scope and substance for "comfort" letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
Section 7.11 Agreements of Rule 145 Affiliates. Prior to the
Effective Time, the Company shall cause to be prepared and delivered to Parent
a list identifying all persons who the Company believes, at the date of the
meeting of the Company's stockholders to consider and vote upon the adoption
of this Agreement, may be deemed to be "affiliates" of the Company, as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act
(the "Rule 145 Affiliates"). The Company shall use commercially reasonable
best efforts to cause each person who is identified as a Rule 145 Affiliate in
such list to deliver to Parent, at or prior to the Effective Time, a written
agreement, in the form of Exhibit B. Parent shall be entitled to place
restrictive legends on any Parent Ordinary Shares issued to such Rule 145
Affiliates pursuant to the Merger.
Section 7.12 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated
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hereby shall be paid by the party incurring such expenses, except as expressly
provided herein or as otherwise agreed in writing by the parties.
Notwithstanding any other provision of the Agreement, in no case will Parent
directly or indirectly use its own funds to pay any expenses arising in
connection with the Merger that are incurred by stockholders of the Company.
Section 7.13 Indemnification and Insurance. (a) From and after the
Effective Time, Parent and the Surviving Entity shall indemnify, defend and
hold harmless to the fullest extent permitted under applicable law each person
who is, or has been at any time prior to the Effective Time, an officer or
director of the Company (or any Subsidiary or division thereof) and each
person who served at the request of the Company as a director, officer,
trustee or fiduciary of another corporation, partnership, joint venture,
trust, pension or other employee benefit plan or enterprise (individually, an
"Indemnified Party" and, collectively, the "Indemnified Parties") against all
losses, claims, damages, liabilities, costs or expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation arising
out of or pertaining to acts or omissions, or alleged acts or omissions, by
them in their capacities as such, whether commenced, asserted or claimed
before or after the Effective Time. In the event of any such claim, action,
suit, proceeding or investigation (an "Action"), (i) Parent and the Surviving
Entity shall pay, as incurred, the fees and expenses of counsel selected by
the Indemnified Party, which counsel shall be reasonably acceptable to the
Surviving Entity, in advance of the final disposition of any such Action to
the fullest extent permitted by applicable law and, if required, upon receipt
of any undertaking required by applicable law, and (ii) Parent and the
Surviving Entity will cooperate in the defense of any such matter; provided,
however, the Surviving Entity shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld
or delayed), and provided further, that Parent and the Surviving Entity shall
not be obligated pursuant to this Section 7.13 to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any
single Action, unless, in the good faith judgment of any of the Indemnified
Parties, there is or may be a conflict of interests between two or more of
such Indemnified Parties, in which case there may be separate counsel for each
similarly situated group.
(b) The parties agree that the rights to indemnification,
including provisions relating to advances of expenses incurred in defense of
any action or suit, in the certificate of incorporation and bylaws of the
Company and its Subsidiaries with respect to matters occurring through the
Effective Time, shall survive the Merger.
(c) For a period of six years after the Effective Time, Parent and
the Surviving Entity shall cause to be maintained officers' and directors'
liability insurance covering the Indemnified Parties who are, or at any time
prior to the Effective Time, covered by the Company's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance, provided
that Parent and the Surviving Entity shall not be required to pay annual
premiums in excess of 150% of the
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last annual premium paid by the Company prior to the date hereof (the amount
of which premium is set forth in the Company Disclosure Letter), but in such
case shall purchase as much coverage as reasonably practicable for such
amount.
(d) The rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have under the
certificate of incorporation or bylaws of the Company or any of its
Subsidiaries, under applicable law or otherwise. The provisions of this
Section 7.13 shall survive the consummation of the Merger and expressly are
intended to benefit each of the Indemnified Parties.
(e) In the event Parent, the Surviving Entity or any of their
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then and in either such case,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Entity, as the case may be, shall assume the obligations set
forth in this Section 7.13.
Section 7.14 Employee Matters. (a) At the Effective Time, Parent
will cause the Surviving Entity and its Subsidiaries to continue the
employment of all of the employees of the Company and its Subsidiaries
initially at the same salaries and wages of such employees immediately prior
to the Effective Time. Nothing in this Agreement shall be considered a
contract between Parent, the Surviving Entity, its Subsidiaries and any
employee or consideration for, or inducement with respect to, any employee's
continued employment and, without limitation, all such employees are and will
continue to be considered to be employees at will pursuant to the applicable
employment at will laws or doctrines, subject to any express written agreement
to the contrary with such employee, and the Surviving Entity and its
Subsidiaries will have the right, in their discretion and subject to this
Section 7.14, to alter the salaries, wages and terms of employment of such
employees at any time after the Effective Time.
(b) With respect to each employee of the Company and its
Subsidiaries ("Affected Employee"), Parent shall cause the Surviving Entity to
deem the period of employment with the Company and its Subsidiaries to have
been employment and service with Parent for purposes of determining the
Affected Employee's eligibility to join and vesting (but not benefit accrual
for any purpose other than vacation pay and sick leave) under all employee
benefit plans, programs, policies or similar employment related arrangements
of Parent and its Subsidiaries in which the Affected Employee is eligible to
participate. Parent shall waive, and to the extent necessary to effect the
terms hereof, shall use its best efforts to cause the relevant insurance
carriers and other third parties to waive, any restrictions and limitations
for medical conditions existing as of the Effective Time of those Affected
Employees and their dependents who were covered immediately prior to the
Effective Time under a group health plan maintained by the Company, but only
to the extent that such medical condition would be covered by
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Parent's or the Surviving Entity's group health plan if it were not a
pre-existing condition and only to the extent that such limitations would not
have applied under the Company's group health plan prior to the Effective
Time. Further, Parent shall cause the Surviving Entity to offer at the
Effective Time to each Affected Employee coverage under a group health plan
(as defined in Section 5000(b)(1) of the Code) which credits such Affected
Employee towards the deductibles, coinsurance and maximum out-of-pocket
provisions imposed under such group health plan, for the year during which the
Effective Time (or such later date as the Affected Employees participate in
such group health plan) occurs, with any applicable expenses already incurred
during such year under the Company's group health plan.
(c) Parent agrees to cause the Surviving Entity to continue the
Company Severance Pay Benefit Plan (as amended and restated effective as of
January 1, 1999 and attached to the Company Disclosure Letter, the "Severance
Plan"), for the benefit of any Affected Employee who would be eligible for
severance benefits under that plan due to an involuntary termination of
employment within nine months after the Effective Time; provided, that any
Affected Employee who would otherwise have satisfied the eligibility
requirements for such severance benefits but whose employment is involuntarily
terminated during the period commencing nine months following the Effective
Time and ending twelve months following the Effective Time shall be treated as
if such Affected Employee was terminated within nine months after the
Effective Time if in the good faith determination of Parent such Affected
Employee would have been terminated within nine months following the Effective
Time if the integration of Parent's and the Company's operations in respect of
such Affected Employee had been completed at such earlier time. For purposes
of the Severance Plan, cause shall be determined consistent with the Company's
Involuntary Termination Policy as in effect on the date hereof ("Cause").
(d) Parent agrees that employees of the Company and its Subsidiaries
immediately prior to the Effective Time (the "Employees") will continue to be
provided through December 31, 2001 with benefits under employee benefit plans,
programs, policies or arrangements which in the aggregate are, in Parent's
discretion, either (i) not less favorable than those provided to the Employees
immediately prior to the Effective Time, or (ii) not less favorable than those
provided to similarly situated employees of Parent and its Subsidiaries,
taking into account for purposes of determining similarly situated employees
such factors as Parent reasonably deems relevant; provided, that employees who
retired from the Company and its Subsidiaries prior to the Effective Time
shall continue to be provided through December 31, 2001 with the retiree
health and life insurance benefits provided to such retirees immediately prior
to the Effective Time without adverse changes during such period.
(e) Notwithstanding anything in this Agreement to the contrary, the
Company shall be permitted to continue to accrue its annual bonuses for
employees of the Company and its Subsidiaries in respect of the Company's 2000
fiscal year (the "Year 2000 Bonuses") consistent with the level of bonuses
actually paid to employees for the Company's 1999 fiscal year, subject
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to such discretionary determinations as were made consistent with the
practices of the Company for the 1999 fiscal year; provided, however, that the
Company shall be permitted to continue to accrue Year 2000 Bonuses for the
individuals set forth in Section 7.14(e) of the Company Disclosure Letter in
the amounts set forth therein. The Company agrees to pay the bonuses to the
individuals set forth in Section 7.14(e) of the Company Disclosure Letter, in
the amount set forth therein, on or before December 31, 2000. If the Year 2000
Bonuses have not been paid prior to the Effective Time, Parent shall cause the
Company to pay the Year 2000 Bonuses in accordance with the foregoing. All
determinations and allocations in respect of the Year 2000 Bonuses shall be
made in accordance with the foregoing by Company management as constituted
prior to the Effective Time. In addition, if the Effective Time has not
occurred by March 31, 2001, the Company shall be permitted to accrue a
pro-rated bonus during the period from January 1, 2001 through the Effective
Time in respect of the Company's 2001 fiscal year in accordance with the
foregoing (the "Year 2001 Bonuses"). Parent shall cause the Company to pay the
Year 2001 Bonuses consistent with the practices of the Company for the 1999
fiscal year; provided, however, that the Year 2001 Bonuses for the individuals
set forth in Section 7.14(e) of the Company Disclosure Letter shall be a
pro-rated amount of their Year 2000 Bonuses, payable in cash, and any Year
2001 Bonuses due hereunder to such individuals shall be applied toward any
pro-rata bonus awards the individuals become entitled to receive under the
terms of the CIC Agreements for the 2001 fiscal year.
(f) Notwithstanding anything in this Agreement to the contrary,
Parent and the Company agree that Parent shall cause the Company to take all
actions on its part to amend each of the employment and change in control
agreements for the seven executive officers set forth in Section 7.14(f) of
the Company Disclosure Letter (the "CIC Agreements") immediately following the
Effective Time, to provide that the officer shall have the right, for a 30-day
period commencing on the first anniversary of the Effective Time, to
voluntarily terminate employment for any reason and such termination shall be
deemed to be a "Qualifying Termination" within the "Window Period" as defined
in the CIC Agreements. Parent acknowledges that, solely for purposes of the
CIC Agreements, "Good Reason" shall exist pursuant to the terms of the CIC
Agreements if the officer is not assigned, immediately following the Effective
Time, to a position with Parent with duties that are not materially
inconsistent with the authorities, duties, responsibilities and status
(including offices, titles, and reporting relationships) that the officer held
with the Company immediately prior to the Effective Time, or if there is a
reduction or alteration in the nature or status of the officer's authorities,
duties, or responsibilities from those in effect during the fiscal year
immediately preceding the fiscal year in which the Effective Time occurs.
Notwithstanding and in addition to the foregoing, if Parent has not notified
the officer in writing by the date that is 30 days immediately preceding the
date on which the Effective Time occurs whether or not such officer's
employment is to be continued on terms that would not give rise to Good Reason
under the terms of the CIC Agreements and this Section 7.14(f), then such
officer shall be treated by Parent and the Company as if such officer had
incurred immediately following the Effective Time a Qualifying Termination
within the Window Period under the CIC Agreement and the Company shall pay the
amounts described in Section 7.1(a) through (d)
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of the CIC Agreement to the officer by the close of the day on which the
Effective Time occurs, and all other cash amounts payable under the terms of
the CIC Agreements shall be paid as soon as practicable but in no event later
than 30 days following the Effective Time; provided, however, that the
foregoing provisions of this sentence shall not apply if an event occurs after
the date notice is given and prior to the Effective Time that was
unanticipated by Parent and is considered, in the good faith determination of
Parent's Chief Executive Officer or Board of Directors, to materially change
Parent's determination not to continue the officer's employment on such terms,
and Parent in fact promptly following such event notifies the officer of its
decision to continue and in fact continues the officer's employment on terms
that would not give rise to Good Reason under the terms of the CIC Agreements
and this Section 7.14(f). Parent further agrees that the amounts payable to an
executive officer whose employment terminates due to a "Qualifying
Termination" within the "Window Period" under the CIC Agreements (as amended
to reflect this Section 7.14(f)) shall be no less than the amounts set forth
in Section 7.14(f) of the Company Disclosure Letter. Parent and the Company
further agree that following the Effective Time none of such executive
officers shall be bound by any of the noncompetition provisions of the CIC
Agreements. Parent agrees that the CIC Agreements shall be binding upon, and
shall inure to the benefit of, any successor to the Company, and any such
successor shall be deemed substituted for all purposes as the "Company" under
the terms of the CIC Agreements.
(g) Except with respect to offers of employment to prospective new
employees in the ordinary course of business consistent with past practices
and other than statements that merely repeat or summarize the effects of this
Section 7.14, the Company agrees that it shall not make, and it shall not
permit its Subsidiaries to make, any representations or promises, oral or
written, to employees of the Company and its Subsidiaries concerning continued
employment following the Effective Time, or the terms and conditions of that
employment, except as requested by Parent under Section 7.14(i) or otherwise
in writing with the prior written consent of Parent.
(h) The Company will cause to vest and become exercisable effective
48 hours prior to the Effective Time (conditioned on the subsequent occurrence
of the Effective Time) all or any portion of the unvested Company Options and
restricted stock, other than those granted after the date hereof as permitted
by Section 7.1(f)(ii) that would not otherwise become vested and exercisable
as a result of the Merger.
(i) To the extent allowed by Applicable Laws, prior to the Effective
Time, the Company shall take any action reasonably requested by Parent as part
of Parent's preparation for a prompt and efficient integration of Parent's and
the Company's operations following the Effective Time. To the extent allowed
by Applicable Law, in furtherance of such cooperation, the Company agrees to
supply Parent, in a prompt manner, with such information and documentation as
the officers of Parent deem relevant to the integration, and to use its
commercially reasonable best efforts to make its supervisory employees
available, on a
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reasonable basis, to discuss staffing and integration issues with Parent. The
actions requested of the Company pursuant to this Section 7.14(i) shall be at
reasonable times and on reasonable notice. Nothing in this Section 7.14(i)
shall require the Company to begin the implementation of the integration prior
to the Effective Time. Notwithstanding the foregoing, the Company shall not be
deemed to make any representation or warranty except as expressly set forth in
this Agreement and shall not be required to provide any information which it
reasonably believes it may not provide to Parent by reason of applicable law,
rules or regulations, which constitutes information protected by
attorney/client privilege, or which it is required to keep confidential by
reason of contract or agreement with third parties. The parties hereto shall
make reasonable and appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. Each
of Parent and the Company agrees that it shall not, and shall cause its
respective representatives not to, use any information obtained pursuant to
this Section 7.14(i) for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. All non-public information
obtained pursuant to this Section 7.14(i) shall be governed by the
Confidentiality and Standstill Agreement.
Section 7.15 Rights Agreement. Except for actions contemplated by
this Agreement that are taken by the Company simultaneously with its entering
into a binding definitive agreement pursuant to Section 9.3(c), neither the
Board of Directors of the Company nor the Company shall take any other action
to (a) terminate the Company Rights Agreement, (b) redeem the Company Rights,
(c) amend the Company Rights Agreement in a manner adverse to Parent, or (d)
cause any person not to be or become an "Acquiring Person."
Section 7.16 Delivery of Parent Ordinary Shares. Prior to the
Merger, Sub shall purchase from Parent and Parent shall sell to Sub all or a
portion of that number of Parent Ordinary Shares which Sub is required to
deliver pursuant to Section 4.3(a). If Sub purchases fewer than all such
shares from Parent, Parent will otherwise provide to Sub the remaining
required shares.
Section 7.17 Consulting Agreements. As of the Effective Time, Parent
shall cause the Surviving Entity to execute and deliver to Mr. Paul B. Loyd,
Jr. a consulting agreement substantially in the form of Exhibit C, and the
Company shall use commercially reasonable efforts to cause Mr. Loyd to enter
into such consulting agreement.
Section 7.18 Assets in the Coastwise Trade. Prior to the Closing
Date, the Company and its Subsidiaries shall at the request of Parent (a) use
their commercially reasonable best efforts to sell, transfer, assign,
contribute or otherwise dispose of all their respective vessels involved in
the coastwise trade (within the meaning of that term as used in Section 2 of
the Shipping Act, 1916, as amended (46 USC ss. 808)) to such person or persons
as designated by Parent and as directed by and on such terms and conditions as
specified by Parent, provided that any such action may be conditioned upon the
consummation of the Merger and the transactions contemplated hereby, (b)
cancel and refrain from extending any agreement that would require the
operation of vessels and other assets involved in the coastwise trade after
the Effective Time
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and (c) take any action designed to facilitate the termination of the
operation of vessels involved in the coastwise trade and the Company's
business related thereto as of the Effective Time. The Company will provide
reasonable cooperation with Parent, Sub and their advisors retained in
connection with the matters described in this Section 7.18. The Company shall
promptly take any other reasonably requested actions in connection with this
Section 7.18. The Company shall not retain any advisors to the Company with
respect to the foregoing without the consent of Parent.
Section 7.19 Obtaining Investment Grade Rating. (a) As promptly as
practicable after the date of this Agreement, Parent and the Company shall
request that both Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Service ("S&P") rate the $400,000,000 11% Senior Secured Notes
due 2006 of RBF Finance Co., a Delaware corporation ("RBF Finance Co."), RBF
Finance Co.'s $400,000,000 113/8% Senior Secured Notes due 2009, the Company's
$200,000,000 12 1/2% Senior Notes due 2006, the Company's $100,000,000 91/8%
Senior Notes due 2003 and the Company's $300,000,000 9 1/2% Senior Notes due
2008 (collectively, the "Company High Yield Debt") "Investment Grade" or give
the Company High Yield Debt an "Investment Grade Rating" (as such terms are
defined in the applicable Company High Yield Debt indentures) at or prior to
the Effective Time. In connection with such request, each of the Company and
Parent shall use its commercially reasonable best efforts to cooperate
promptly and fully with all reasonable requests of the other, including
without limitation, attending and preparing for meetings and presentations,
providing information and making any related or required applications or
filings and taking other reasonable action as may be requested by Moody's and
S&P with respect to obtaining such rating. Actions reasonably requested by
Moody's or S&P or by Parent or the Company are those relating to the process
of obtaining such rating (and such actions are specifically not those related
to the financial condition, business or operations of Parent or the Company
and their respective Subsidiaries).
(b) If the Company High Yield Debt is not given an "Investment Grade
Rating" or rated "Investment Grade" (as such terms are defined in the
applicable Company High Yield Debt indentures) at the time when the conditions
to Parent's obligations to effect the Merger have otherwise been fulfilled,
then Parent agrees that immediately prior to the Effective Time it shall
deliver a full senior unsecured unconditional payment guarantee (the "Parent
Guarantee") on terms reasonably satisfactory to Parent of the principal of,
interest and premium, if any, on the Company High Yield Debt which shall
become effective only upon the Effective Time. Without limiting the generality
of any other provisions hereof, Parent shall have no obligation under this
Agreement to provide financial assistance of any type to the Company or in
respect of the Company High Yield Debt, other than with respect to its
obligation to provide such Parent Guarantee.
Section 7.20 Agreement Regarding Company Redeemable Preferred Stock.
(a) As promptly as practicable after the date of filing of the Form S-4, the
Company shall file
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with the SEC either a post-effective amendment to its Registration Statement
on Form S-3 (Registration No. 333-39500) or another registration statement on
an appropriate form registering a number of shares of Company Common Stock
sufficient to complete the Public Offering (as defined below) (in either case,
the "Shelf Registration Statement"). The Company shall use commercially
reasonable best efforts, and Parent shall cooperate with the Company, to have
the Shelf Registration Statement declared effective by the SEC prior to the
vote of the Company's stockholders in respect of the Merger. The Company shall
advise Parent, promptly after it receives notice thereof, of the time when the
Shelf Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order or any request by the
SEC for amendment of the Shelf Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information. The
Company shall provide Parent with drafts of the Shelf Registration Statement,
any prospectus supplement, the underwriting agreement and all other customary
documentation in connection with the Public Offering reasonably in advance of
the anticipated date of use thereof.
(b) In the event that this Agreement shall have been adopted and the
Company Charter Amendment shall have been approved by the affirmative vote of
the holders of at least a majority of the outstanding shares of Company Common
Stock entitled to vote thereon and Parent and the Company are each satisfied
that the other conditions to effect the Merger have otherwise been fulfilled,
as promptly as practicable after receiving written notice from Parent
directing it to do so, the Company shall commence and consummate an
underwritten public offering of shares of Company Common Stock with aggregate
net proceeds to the Company of at least $105 million (but not greater than any
amount specified by Parent) pursuant to the Shelf Registration Statement (the
"Public Offering"). The Company shall be deemed to be in compliance with its
obligations under this Section 7.20(b) during the time that its failure to
commence and consummate the Public Offering results only from the good faith
inability of the Company to commence or consummate the Public Offering with
the price and terms established by Parent. The Company shall promptly take any
action in connection with the Public Offering as Parent reasonably directs,
including without limitation (x) establishing the price to the public, the
underwriting discount and the number of shares of Company Common Stock to be
sold pursuant to the Public Offering, (y) selecting the commencement and
pricing date for the Public Offering, and (z) selection of any underwriter or
group of underwriters for the Public Offering, and any agreement regarding any
fees or expenses in connection therewith. The Company shall place any proceeds
of the Public Offering in a separate account to be used for the purposes
specified in Section 7.20(c).
(c) Promptly upon closing of the Public Offering, the Company shall
give notice of redemption of shares of Company Redeemable Preferred Stock
having an aggregate liquidation preference of up to $105 million at a price in
cash equal to 113.875% of the liquidation preference thereof, plus accrued and
unpaid dividends, if any, to the redemption date with the net cash proceeds
from the Public Offering. The Company shall comply with all applicable terms
of the Company Redeemable Preferred Stock in connection with such
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redemption, and funds necessary for redemption (including an amount in cash in
respect of all dividends that will accumulate to the redemption date) shall be
irrevocably deposited by the Company in trust for the equal and ratable
benefit for the holders of the shares to be redeemed (the "Irrevocable
Deposit"). In making the Irrevocable Deposit, the Company shall use only the
funds placed in the separate account described in the last sentence of Section
7.20(b).
(d) The Company may, in accordance with its previously announced
intention, cause to be repurchased shares of Company Redeemable Preferred
Stock in price and amount and on terms and conditions approved from time to
time in writing by Parent, by causing Unrestricted Subsidiaries (as defined in
the Company High Yield Debt indentures) to repurchase such stock with funds
which such Unrestricted Subsidiaries have on hand. No payment will be made to
holders of Company Redeemable Preferred Stock with funds received, directly or
indirectly, from Parent or any of its Subsidiaries. The parties acknowledge
that, if the Company's disposition program is successfully completed, it will
have estimated $150-200 million in unrestricted funds available for such
repurchases, which unrestricted funds represent cash in excess of the funds
reasonably anticipated to be necessary for such Unrestricted Subsidiaries'
business needs. In no case will Parent or any of its Subsidiaries make
contributions to the Company or the Unrestricted Subsidiaries to replenish
funds used to redeem or repurchase Company stock.
(e) Notwithstanding anything in this Agreement to the contrary
(other than Section 7.5(e)), Parent and each of its Subsidiaries shall be
entitled to acquire shares of Company Redeemable Preferred Stock by exchange
for Parent Ordinary Shares or other voting shares of Parent.
ARTICLE 8
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) (i) This Agreement shall have been adopted and the Company
Charter Amendment shall have been approved by the affirmative vote of holders
of a majority of the outstanding shares of Company Common Stock entitled to
vote thereon; and
(ii) Each of the increase in the authorized ordinary share
capital of Parent and the issuance of Parent Ordinary Shares pursuant to the
Merger shall have been approved by the holders of issued Parent Ordinary
Shares as and to the extent required by Cayman Islands law, Parent's
memorandum of association and articles of association and the rules of the
NYSE.
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(b) (i) Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, (ii) there
shall not be pending or threatened in writing any governmental claim,
proceeding or action by an agency of the government of the United States, of
the United Kingdom or of the European Union seeking to restrain, prohibit or
rescind any transactions contemplated by this Agreement as an actual or
threatened violation of any Antitrust Law, as applicable, or seeking to
penalize a party for completing any such transaction which in any of such
cases is, in the reasonable judgment of Parent, reasonably likely to have any
of the effects described in Section 7.5(d)(i) through (iv), (iii) in the event
of any review by the U.K. Office of Fair Trading or, if applicable, the U.K.
Secretary of State for Trade and Industry, indications reasonably satisfactory
to each of the Company and Parent that the Merger will not be referred to the
Competition Commission shall have been received, (iv) any mandatory waiting
period under any applicable Non-U.S. Antitrust Laws (where the failure to
observe such waiting period referred to in this clause (iv) would, in the
reasonable judgment of Parent, reasonably be expected to have any of the
effects described in Section 7.5(d)(i) through (iv)) shall have expired or
been terminated and (v) there shall not have been a final or preliminary
administrative order denying approval of or prohibiting the Merger issued by a
governmental authority with jurisdiction to enforce applicable Non-U.S.
Antitrust Laws, which order is in the reasonable judgment of Parent reasonably
likely to have any of the effects described in Section 7.5(d)(i) through (iv).
(c) None of the parties hereto shall be subject to any decree, order
or injunction of a court of competent jurisdiction, U.S. or non-U.S., which
prohibits the consummation of the Merger; provided, however, that, prior to
invoking this condition, each party agrees to comply with Section 7.5, and
with respect to other matters not covered by Section 7.5, to use its
commercially reasonable best efforts to have any such decree, order or
injunction lifted or vacated; and no statute, rule or regulation shall have
been enacted by any governmental authority which prohibits or makes unlawful
the consummation of the Merger.
(d) The Form S-4 shall have become effective and no stop order with
respect thereto shall be in effect.
(e) The Parent Ordinary Shares to be issued pursuant to the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
(f) The Company Charter Amendment shall have been filed with the
Secretary of State of the State of Delaware and become effective.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
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(a) Parent, Sub and Merger Sub shall have performed, in all material
respects, their covenants and agreements contained in this Agreement required
to be performed on or prior to the Closing Date, and the representations and
warranties of Parent, Sub and Merger Sub contained in this Agreement (i) that
are qualified as to materiality or Parent Material Adverse Effect shall be
true and correct in all respects as of the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case as of such earlier date), and (ii) those not so qualified shall be
true and correct in all respects as of the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case as of such earlier date), except for such breaches of
representations and inaccuracies in warranties in this clause (ii) that do not
and are not reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, and the Company shall have received a
certificate of each of Parent, Sub and Merger Sub, executed on its behalf by
its President or one of its Vice Presidents, dated the Closing Date,
certifying to such effect.
(b) The Company shall have received the opinion of Cravath, Swaine &
Moore, counsel to the Company, in form and substance reasonably satisfactory
to the Company and dated the Closing Date to the effect that, for United
States federal income tax purposes, the Merger will qualify as a
reorganization under Section 368(a) of the Code and no gain or loss will be
recognized by the stockholders of the Company who exchange Company Common
Stock solely for Parent Ordinary Shares pursuant to the Merger (except with
respect to (i) cash received in lieu of fractional shares or (ii) stockholders
of the Company who are not Eligible Company Shareholders). In rendering such
opinion, such counsel shall be entitled to receive and rely upon
representations of officers of the Company, Parent, Sub and Merger Sub,
substantially in the form of Exhibit D, dated as of the Closing Date.
(c) At any time after the date of this Agreement, there shall not
have been any event or occurrence, or series of events or occurrences, that
has had or is reasonably likely to have, individually or in the aggregate with
all other events or occurrences since the date of this Agreement, a Parent
Material Adverse Effect.
Section 8.3 Conditions to Obligation of Parent, Sub and Merger Sub
to Effect the Merger. The obligations of Parent, Sub and Merger Sub to effect
the Merger shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) The Company shall have performed, in all material respects, its
covenants and agreements contained in this Agreement required to be performed
on or prior to the Closing Date, and the representations and warranties of the
Company contained in this Agreement (i) that are qualified as to materiality
or Company Material Adverse Effect shall be true and correct in all respects
as of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case as of such
earlier date), and (ii) those not so qualified shall be true and correct in
all respects as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case as of such
earlier
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date), except for such breaches of representations and inaccuracies in
warranties in this clause (ii) that do not and are not reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect, and
Parent shall have received a certificate of the Company, executed on its
behalf by its President or one of its Vice Presidents, dated the Closing Date,
certifying to such effect.
(b) Parent shall have received the opinion of Baker Botts L.L.P.,
counsel to Parent, in form and substance reasonably satisfactory to Parent and
dated the Closing Date to the effect that, for United States federal income
tax purposes, the Merger will qualify as a reorganization under Section 368(a)
of the Code and no gain or loss will be recognized by the stockholders of the
Company who exchange Company Common Stock solely for Parent Ordinary Shares
pursuant to the Merger (except with respect to (i) cash received in lieu of
fractional shares or (ii) stockholders of the Company who are not Eligible
Company Shareholders). In rendering such opinion, such counsel shall be
entitled to receive and rely upon representations of officers of the Company,
Parent, Sub and Merger Sub, substantially in the form of Exhibit E, dated as
of the Closing Date.
(c) At any time after the date of this Agreement, there shall not
have been any event or occurrence, or series of events or occurrences, that
has had or is reasonably likely to have, individually or in the aggregate with
all other events or occurrences since the date of this Agreement, a Company
Material Adverse Effect.
(d) The shares of Company Redeemable Preferred Stock shall have been
listed on the NYSE, another national securities exchange or the Nasdaq
National Market System prior to the record date for the meeting of the
Company's stockholders to adopt this Agreement.
(e) Parent shall have received from each Rule 145 Affiliate an
agreement to the effect set forth in Section 7.11.
(f) The closing of the Public Offering shall have occurred, the
notice of redemption contemplated by Section 7.20(c) shall have been duly
given and the Company shall have completed the Irrevocable Deposit; provided,
that this Section 8.3(f) shall expire as a condition to the obligations of
Parent, Sub and Merger Sub to effect the Merger if (i) the other conditions to
the obligations of each party to effect the Merger (other than those that are
expected to be fulfilled but can only be fulfilled on the Closing Date) have
been fulfilled (and Parent shall have received a written notice from the
Company as to such fulfillment) for a period of eight business days, (ii) the
Company has complied with its obligations under Section 7.20 and (iii) the
Shelf Registration Statement shall have become effective and no stop order
shall be in effect during such period of eight business days, provided that
any such noneffectiveness or stop order is not the result of any act or
omission by Parent, Parent's advisors or any underwriter selected by Parent.
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(g) The Company High Yield Debt shall have been rated "Investment
Grade" or been given an "Investment Grade Rating" (as such terms are defined
in the applicable Company High Yield Debt indentures) by Moody's and S&P.
ARTICLE 9
TERMINATION
Section 9.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time by the mutual written
consent of the Company and Parent.
Section 9.2 Termination by Parent or the Company. This Agreement may
be terminated at any time prior to the Effective Time by action of the Board
of Directors of Parent or the Company if:
(a) the Merger shall not have been consummated by August 31, 2001;
provided, however, that the right to terminate this Agreement pursuant to this
clause (a) shall not be available to any party whose failure to perform or
observe in any material respect any of its obligations under this Agreement in
any manner shall have been the cause of, or resulted in, the failure of the
Merger to occur on or before such date;
(b) a meeting (including adjournments and postponements) of the
Company's stockholders for the purpose of obtaining the approvals required by
Section 8.1(a)(i) shall have been held and such stockholder approvals shall
not have been obtained;
(c) a meeting (including adjournments and postponements) of Parent's
shareholders for the purpose of obtaining the approvals required by Section
8.1(a)(ii) shall have been held and such shareholder approvals shall not have
been obtained; or
(d) a U.S. federal, state or non-U.S. court of competent
jurisdiction or federal, state or non-U.S. governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
nonappealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause (d) shall have complied with Section 7.5
and, with respect to other matters not covered by Section 7.5, shall have used
its commercially reasonable best efforts to remove such injunction, order or
decree.
Section 9.3 Termination by the Company. This Agreement may be
terminated at any time prior to the Effective Time by action of the Board of
Directors of the Company, after consultation with its outside legal advisors,
if
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(a) (i) there has been a breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement set forth in this Agreement or
if any representation or warranty of Parent or Merger Sub shall have become
untrue, in either case such that the conditions set forth in Section 8.2(a)
would not be satisfied and (ii) such breach is not curable, or, if curable, is
not cured within 30 days after written notice of such breach is given to
Parent by the Company; provided, however, that the right to terminate this
Agreement pursuant to Section 9.3(a) shall not be available to the Company if
it, at such time, is in breach of any representation, warranty, covenant or
agreement set forth in this Agreement such that the condition set forth in
Section 8.3(a) shall not be satisfied;
(b) the Board of Directors of Parent shall have withdrawn or
materially modified, in a manner adverse to the Company, its approval or
recommendation of the amendments to Parent's articles of association or the
issuance of Parent Ordinary Shares pursuant to the Merger or recommended a
Parent Acquisition Proposal, or resolved to do so; or
(c) prior to the Cutoff Date, (i) the Board of Directors of the
Company has received a Company Superior Proposal, (ii) in light of such
Company Superior Proposal the Board of Directors of the Company shall have
determined in good faith, (A) after consultation with its outside legal
advisors, that proceeding with the Merger would be inconsistent with its
fiduciary obligations and (B) that there is a substantial likelihood that the
adoption by the Company's stockholders of this Agreement will not be obtained
by reason of the existence of such Company Superior Proposal, (iii) the
Company has complied in all material respects with Section 7.2, (iv) the
Company has previously paid the fee due under Section 9.5(a), (v) the Board of
Directors of the Company concurrently approves, and the Company concurrently
enters into, a binding definitive written agreement providing for the
implementation of such Company Superior Proposal and (vi) Parent is not at
such time entitled to terminate this Agreement pursuant to Section 9.4(a);
provided that the Company may not effect such termination pursuant to this
Section 9.3(c) unless and until (i) Parent receives at least ten business
days' prior written notice from the Company of its intention to effect such
termination pursuant to this Section 9.3(c); and (ii) during such ten business
day period, the Company shall, and shall cause its respective financial and
legal advisors to, consider any adjustment in the terms and conditions of this
Agreement that Parent may propose.
Section 9.4 Termination by Parent. This Agreement may be terminated
at any time prior to the Effective Time by action of the Board of Directors of
Parent, after consultation with its outside legal advisors, if:
(a) (i) there has been a breach by the Company of any
representation, warranty, covenant or agreement set forth in this Agreement or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 8.3(a) would not be
satisfied and (ii) such breach is not curable, or, if curable, is not cured
within 30 days after written notice of such breach is given by Parent to the
Company;
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provided, however, that the right to terminate this Agreement pursuant to
Section 9.4(a) shall not be available to Parent if it, at such time, is in
breach of any representation, warranty, covenant or agreement set forth in
this Agreement such that the conditions set forth in Section 8.2(a) shall not
be satisfied; or
(b) the Board of Directors of the Company shall have withdrawn or
materially modified, in a manner adverse to Parent, its approval or
recommendation of the Merger or the Company Charter Amendment or recommended a
Company Acquisition Proposal, or resolved to do so; or
(c) prior to the Cutoff Date, (i) the Board of Directors of Parent
has received a Parent Superior Proposal, (ii) in light of such Parent Superior
Proposal the Board of Directors of Parent shall have determined in good faith,
(A) after consultation with its outside legal advisors, that proceeding with
the Merger would be inconsistent with its fiduciary obligations and (B) that
there is a substantial likelihood that the adoption by Parent's stockholders
of this Agreement will not be obtained by reason of the existence of such
Parent Superior Proposal, (iii) Parent has complied in all material respects
with Section 7.3, (iv) Parent has previously paid the fee due under Section
9.5(b), (v) the Board of Directors of Parent concurrently approves, and Parent
concurrently enters into, a binding definitive written agreement providing for
the implementation of such Parent Superior Proposal and (vi) the Company is
not at such time entitled to terminate this Agreement pursuant to Section
9.3(a); provided that Parent may not effect such termination pursuant to this
Section 9.4(c) unless and until (i) the Company receives at least ten business
days' prior written notice from Parent of its intention to effect such
termination pursuant to this Section 9.4(c); and (ii) during such ten business
day period, Parent shall, and shall cause its respective financial and legal
advisors to, consider any adjustment in the terms and conditions of this
Agreement that the Company may propose.
Section 9.5 Effect of Termination. (a) (i) If this Agreement is
terminated:
(A) by the Company or Parent pursuant to Section 9.2(b)
[failure to obtain Company stockholder approval] after the public announcement
of a Company Acquisition Proposal, whether or not the Company Acquisition
Proposal is still pending or has been consummated; or
(B) by Parent pursuant to Section 9.4(b) [withdrawal of Company
recommendation to stockholders]; or
(C) by the Company pursuant to Section 9.3(c) [fiduciary out];
then the Company shall pay Parent a fee of $225 million at the time of such
termination in cash by wire transfer to an account designated by Parent.
(ii) If this Agreement is terminated by the Company pursuant to
Section 9.3(c) and in accordance with the terms thereof, no fee additional to
the fee specified in Section 9.3(c) shall be payable by the Company to Parent.
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(b) (i) If this Agreement is terminated:
(A) by the Company or Parent pursuant to Section 9.2(c)
[failure to obtain Parent shareholder approval] after the public announcement
of a Parent Acquisition Proposal, whether or not the Parent Acquisition
Proposal is still pending or has been consummated; or
(B) by the Company pursuant to Section 9.3(b) [withdrawal of
Parent recommendation to shareholders]; or
(C) by Parent pursuant to Section 9.4(c) [fiduciary out];
then Parent shall pay the Company a fee of $225 million at the time of such
termination in cash by wire transfer to an account designated by the Company.
(ii) If this Agreement is terminated by Parent pursuant to
Section 9.4(c) and in accordance with the terms thereof, no fee additional to
the fee specified in Section 9.4(c) shall be payable by Parent to the Company.
(c) If this Agreement is terminated by the Company or Parent
pursuant to Section 9.2(b) other than in circumstances covered by Section
9.5(a), then the Company shall pay Parent a fee of $10 million to reimburse it
for its costs and expenses incurred in connection with this transaction. If
this Agreement is terminated by the Company or Parent pursuant to Section
9.2(c), other than in circumstances covered by Section 9.5(b), then Parent
shall pay the Company a fee of $10 million to reimburse it for its costs and
expenses incurred in connection with this transaction.
(d) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 9.5, Section 7.5(c) and Section 7.12 and except for the
provisions of Sections 10.3, 10.4, 10.6, 10.8, 10.9, 10.11, 10.12 and 10.13,
provided that nothing herein shall relieve any party from any liability for
any willful and material breach by such party of any of its representations,
warranties, covenants or agreements set forth in this Agreement and all rights
and remedies of such nonbreaching party under this Agreement in the case of
such a willful and material breach, at law or in equity, shall be preserved.
Section 9.6 Extension; Waiver. At any time prior to the Effective
Time, each party may by action taken by its Board of Directors, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any
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document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE 10
GENERAL PROVISIONS
Section 10.1 Nonsurvival of Representations, Warranties and
Agreements. All representations, warranties and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement shall not survive
the Merger; provided, however, that the agreements contained in Article 4 and
in Sections 3.3, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16, 7.17 and this Article 10
and the agreements delivered pursuant to this Agreement shall survive the
Merger. The Confidentiality and Standstill Agreement shall survive any
termination of this Agreement, and the provisions of such Confidentiality and
Standstill Agreement shall apply to all information and material delivered by
any party hereunder.
Section 10.2 Notices. Except as otherwise provided herein, any
notice required to be given hereunder shall be sufficient if in writing, and
sent by facsimile transmission or by courier service (with proof of service),
hand delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
(a) if to the Company:
R & B Falcon Corporation
901 Threadneedle
Houston, Texas 77027
Attention: Wayne K. Hillin, Esq.
Facsimile: (281) 496-0285
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Richard Hall, Esq.
Facsimile: (212) 474-3700
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(b) if to Parent, Sub or Merger Sub:
Transocean Sedco Forex Inc.
4 East Greenway Plaza
Houston, Texas 77046
Attention: Eric Brown, Esq.
Facsimile: (713) 232-7600
with a copy to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Gene J. Oshman, Esq.
Facsimile: (713) 229-1522
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.
Section 10.3 Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns. Notwithstanding anything contained in this Agreement to the contrary,
except for the provisions of Article 4, Section 7.13, 7.14(f) and 7.17 and
except as provided in any agreements delivered pursuant hereto (collectively,
the "Third-Party Provisions"), nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. The Third-Party Provisions may be enforced by the beneficiaries
thereof.
Section 10.4 Entire Agreement. This Agreement, the exhibits to this
Agreement, the Company Disclosure Letter, the Parent Disclosure Letter and any
documents delivered by the parties in connection herewith constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior agreements and understandings among the parties with
respect thereto, except that the Confidentiality and Standstill Agreement
shall continue in effect. No addition to or modification of any provision of
this Agreement shall be binding upon any party hereto unless made in writing
and signed by all parties hereto.
Section 10.5 Amendments. This Agreement may be amended by the
parties hereto, by action taken or authorized by their Boards of Directors, at
any time before or after
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approval of matters presented in connection with the Merger by the
stockholders of the Company or Parent, but after any such stockholder
approval, no amendment shall be made which by law requires the further
approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to its rules of conflict of laws.
Section 10.7 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
Section 10.8 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretative effect whatsoever.
Section 10.9 Interpretation. In this Agreement:
(a) Unless the context otherwise requires, words describing the
singular number shall include the plural and vice versa, words denoting any
gender shall include all genders, and words denoting natural persons shall
include corporations and partnerships and vice versa.
(b) The phrase "to the knowledge of" and similar phrases relating to
knowledge of the Company or Parent, as the case may be, shall mean the actual
knowledge of its executive officers.
(c) "Material Adverse Effect" with respect to the Company or Parent
shall mean a material adverse effect or change on (a) the business, assets,
conditions (financial or otherwise) or operations of a party (including the
Surviving Entity when used with respect to the Company) and its Subsidiaries
on a consolidated basis, except for such changes or effects in general
economic, capital market, regulatory or political conditions or changes that
affect generally the drilling services industry or changes arising out of the
announcement of this Agreement, or (b) the ability of the party to consummate
the transactions contemplated by this Agreement or fulfill the conditions to
closing. "Company Material Adverse Effect" and "Parent Material Adverse
Effect" mean a Material Adverse Effect with respect to the Company and Parent,
respectively.
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(d) The term "Subsidiary," when used with respect to any party,
means any corporation or other organization (including a limited liability
company), whether incorporated or unincorporated, of which such party directly
or indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization or any organization of which such party
is a general partner.
Section 10.10 Waivers. Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
Section 10.11 Incorporation of Exhibits. The Company Disclosure
Letter, the Parent Disclosure Letter and all exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
Section 10.12 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Section 10.13 Enforcement of Agreement. (a) The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
(b) Each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Delaware state court or any Federal court located
in the State of Delaware in the event any dispute arises out of this Agreement
or any of the transactions contemplated herein, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated
herein in any court other than any Delaware state court or any Federal court
sitting in the State of Delaware and (iv) waives any right to trial by jury
with respect to any action related to or arising out of this Agreement
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or any of the transactions contemplated herein.
(c) Parent designates and appoints The Corporation Trust Company and
such person's successors and assigns as its lawful agent in the United States
of America upon which may be served, and which may accept and acknowledge, for
and on behalf of Parent all process in any action, suit or proceedings that
may be brought against Parent in any of the courts referred to in this
Section, and agrees that such service of process, or the acceptance or
acknowledgment thereof by said agent, shall be valid, effective and binding in
every respect.
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IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
TRANSOCEAN SEDCO FOREX INC.
By: /s/ J. Michael Talbert
-----------------------------
Name: J. Michael Talbert
Title:
TRANSOCEAN HOLDINGS INC.
By: /s/ J. Michael Talbert
-----------------------------
Name: J. Michael Talbert
Title:
TSF DELAWARE INC.
By: /s/ J. Michael Talbert
-----------------------------
Name: J. Michael Talbert
Title:
R&B FALCON CORPORATION
By: /s/ Paul B. Loyd, Jr.
-----------------------------
Name: Paul B. Loyd, Jr.
Title:
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EXHIBIT A
AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
OF
R&B FALCON CORPORATION
R&B FALCON CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Company"), DOES HEREBY CERTIFY:
FIRST: Section 4 of the Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of Preferred Stock
and Qualifications, Limitations and Restrictions Thereof (the "Certificate of
Designations") in respect of the Company's 13-7/8 Senior Cumulative Redeemable
Preferred Stock (the "Preferred Stock") is amended by adding at the end of
said Section 4 the following:
Effective immediately prior to the effective time of the merger
contemplated by the Agreement and Plan of Merger among Transocean Sedco Forex
Inc., Transocean Holdings Inc., TSF Delaware Inc. and the Corporation dated as
of August 19, 2000, as it may be amended from time to time (the "Merger
Agreement"), the Preferred Stock shall have the following additional voting
rights (capitalized terms used herein without definition shall have the
meanings assigned thereto in the Merger Agreement):
The Preferred Stock shall be entitled to vote in the election of
directors and shall vote together with the Common Stock and any other class or
series of shares that generally votes together with the Common Stock as one
class in such election. Each share of Preferred Stock shall have 0.1787 votes
per share [the number (rounded to the nearest ten-thousandth) equal to the
quotient of (a) $1,000 divided by (b) the product of (1) the quotient of the
number of shares of Company Common Stock outstanding as of August 17, 2000
divided by the number of shares of common stock, par value $.01 per share, of
the Surviving Entity (as defined in the Merger Agreement) to be outstanding
immediately after the Effective Time multiplied by (2) the closing price of
the Parent Ordinary Shares on August 18, 2000 multiplied by (3) the Common
Stock Merger Ratio].
SECOND: The foregoing amendment to the Certificate of Designations
was duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
<PAGE>
2
IN WITNESS WHEREOF, the undersigned has caused this Certificate to
be executed in its name and on its behalf by its duly authorized officer and
its corporate seal to be affixed hereto on this ___ day of ______________,
______.
R&B FALCON CORPORATION
By:
---------------------------
Name:
Title:
<PAGE>
EXHIBIT B
_________, 2000
Transocean Sedco Forex Inc.
4 East Greenway Plaza
Houston, TX 77046
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of R&B Falcon Corporation, a Delaware corporation
(the "Company"), as the term "affiliate" is defined for purposes of paragraphs
(c) and (d) of Rule 145 of the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"). I have been further
advised that pursuant to the terms of the Agreement and Plan of Merger dated
as of August ___, 2000 (the "Merger Agreement") among Transocean Sedco Forex
Inc., a Cayman Islands exempted company ("Parent"), Transocean Holdings Inc.,
a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), TSF
Delaware Inc., a Delaware corporation and a wholly owned subsidiary of Sub
("Merger Sub"), and the Company, Merger Sub will be merged with and into the
Company (the "Merger") and that as a result of the Merger, I may receive
Parent Ordinary Shares (as defined in the Merger Agreement) in exchange for
shares of Company Common Stock (as defined in the Merger Agreement) owned by
me.
I represent, warrant and covenant to Parent that in the event I
receive any Parent Ordinary Shares as a result of the Merger:
(a) I shall not make any sale, transfer or other disposition of
such Parent Ordinary Shares in violation of the Act or the
Rules and Regulations.
(b) I have carefully read this letter and discussed its
requirements and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of Parent Ordinary
Shares to the extent I believed necessary with my counsel or
counsel for the Company.
(c) I have been advised that the issuance of Parent Ordinary Shares
to me pursuant to the Merger will be registered with the
Commission under the Act on a Registration Statement on Form
S-4. However, I have also been advised that, since at the time
the Merger will be submitted for a vote of the stockholders of
the Company I may be deemed to have been an affiliate of the
Company for purposes of paragraphs (c) and (d) of Rule 145 of
the Rules and Regulations, I may not sell, transfer or
otherwise dispose of Parent Ordinary Shares issued to me in the
<PAGE>
2
Merger within one year following the Merger if I am not at such
time an affiliate of Parent and later, if I am then an
affiliate of Parent, unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale,
transfer or other disposition is made in conformity with the
volume and other limitations of Rule 145 of the Rules and
Regulations, or (iii) in the opinion of counsel reasonably
acceptable to Parent, such sale, transfer or other disposition
is otherwise exempt from registration under the Act.
(d) I understand that Parent is under no obligation to register
such sale, transfer or other disposition by me or on my behalf
under the Act or take any other action necessary in order to
make compliance with an exemption from such registration
available.
(e) I also understand that stop transfer instructions will be given
to Parent's transfer agents with respect to the Parent Ordinary
Shares and that there will be placed on the certificate for the
Parent Ordinary Shares issued to me in connection with the
Merger, or any substitutions therefor, a legend substantially
in the form set forth below:
"The securities represented by this certificate have been
issued in a transaction to which Rule 145 promulgated
under the Securities Act of 1933 applies. The securities
may not be sold or otherwise transferred except in
compliance with the requirements of said Rule 145 or
pursuant to a registration statement under said act or an
exemption from such registration."
It is understood and agreed that the legend set forth in paragraph
(e) above shall be removed by delivery of substitute certificates without such
legend (i) prior to the first anniversary of the Merger if I am not at such
time an affiliate of Parent, if the undersigned shall have delivered to Parent
a copy of a letter from the staff of the Commission, or an opinion of counsel
reasonably satisfactory to Parent in form and substance reasonably
satisfactory to Parent, to the effect that such legend is no longer required
for purposes of the Act or (ii) thereafter at the request of the undersigned
if I am not at such time an affiliate of Parent.
Execution of this letter should not be construed as an admission,
stipulation or acknowledgment by me that I am an "affiliate" of the Company as
described in the first paragraph hereof or considered as a waiver of any
rights that I may have to object to any claim that I am such an affiliate on
or after the date of this letter.
Very truly yours,
----------------------------------
Name:
<PAGE>
3
ACCEPTED AND AGREED THIS
____ DAY OF ____________, 2000.
TRANSOCEAN SEDCO FOREX INC.
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement") is made and entered into effective as
of the ____ day of _______________, by and between R&B Falcon Corporation, a
Delaware corporation ("Company"), and Paul B. Loyd, Jr., an individual
("Consultant").
WHEREAS, in connection with the transactions contemplated by that certain
Agreement and Plan of Merger, dated as of the date hereof, among Transocean
Sedco Forex Inc. ("Parent"), Transocean Holdings Inc., TSF Delaware Inc. and
Company (the "Merger Agreement"), Company will become an indirect wholly-owned
subsidiary of Parent; and
WHEREAS, in the event of the termination of Consultant's employment with
Company following the transactions contemplated by the Merger Agreement,
Company and Parent wish to have Consultant provide consulting services to the
Company for the period provided in this Agreement and Consultant wishes to
provide services to Company for such period, on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements hereinafter
set forth, and intending to be legally bound hereby the parties agree as
follows:
1. ENGAGEMENT. Company hereby retains Consultant to provide consulting
services with respect to strategies and policies, special projects,
incentives, goals and other matters related to the development and growth of
Company. Such services shall be as directed by the Chief Executive Officer of
Company or other person or persons as designated by the Chief Executive
Officer from time to time. Consultant shall be required to be generally
available to Company to perform the services and agrees to provide upon
request a minimum of thirty hours of service per month to Company at such
times and places as may be reasonably requested by Company and consistent with
Consultant's other activities. Further, Consultant agrees not to perform
substantially similar services during the term hereof to any other company
which provides offshore contract drilling services; provided that Consultant
may request a waiver of such restriction on a case by case basis and Company
agrees not to unreasonably withhold, condition or delay such waiver.
2. TERM. The term of this Agreement shall commence on the effective date of
Consultant's termination of employment with Company at any time following the
Effective Time (as defined in the Merger Agreement) (the "Effective Date") and
continue in effect for a period of three (3) years thereafter; provided,
however, that in the event Consultant becomes a member of the Board of
Directors of Parent ("Parent Board"), the Agreement shall continue in effect
only until the second anniversary of the Effective Date; provided, further,
that Consultant may terminate this Agreement on thirty (30) days' advance
written notice to Company. Upon such an expiration or termination of this
Agreement, neither party shall have any further obligation towards the other
in connection herewith except as provided in Article 5(g).
<PAGE>
3. COMPENSATION. As compensation for the performance by Consultant of services
under this Agreement, Company agrees to pay to Consultant the following:
(a) an annual retainer fee of THREE HUNDRED THOUSAND DOLLARS ($300,000);
provided, that if Consultant becomes a member of the Parent Board, the
annual retainer fee shall thereafter be THREE HUNDRED SIXTY THOUSAND
DOLLARS ($360,000) and Consultant hereby waives any fees or other
remuneration that would otherwise be payable to Consultant for services
as a member of the Parent Board; and
(b) Company agrees to pay direct to the vendor or reimburse Consultant,
as the case may be, reasonable expenses incurred by Consultant in
connection with the performance of his services under this Agreement.
These expenditures and expenses incurred by and on behalf of Consultant
shall be in accordance with those policies in effect for Company from
time to time. These expenses shall include but shall not be limited to:
(1) Transportation, meals and lodging, parking, tips or any other
expenses incurred in accordance with Company's policies and
procedures;
(2) Telephone, facsimile or other communication costs, and
(3) Company's current per mile rate for Consultant's use of his
personal automobile on Company's business.
Consultant shall not be entitled to any other remuneration, benefit or
reimbursement in connection with this Agreement or the services performed
hereunder except as may otherwise be expressly set forth herein.
4. PAYMENTS.
(a) The annual retainer referred to in Article 3(a) above shall be paid in
monthly installments of TWENTY FIVE THOUSAND DOLLARS ($25,000) (or THIRTY
THOUSAND DOLLARS ($30,000) in the event Consultant becomes a member of the
Parent Board), payable on the last day of the calendar month for services
performed during the month.
(b) Expense statements shall be submitted by Consultant with reasonable
documentation in accordance with the policies of Company. Reimbursement shall
be paid within ten (10) business days of receipt of an expense statement by
Company.
(c) Consultant may request cash advances for special purposes such as trips
incurred at Company's request. Such cash advances shall be approved by
Company's designated person, and such amount shall be deducted from
Consultant's first expense statement submitted after such cash advance or any
balance outstanding shall be repaid with submittal of the expense statement.
5. GENERAL.
(a) Consultant agrees that the extent and character of the work to be done by
Consultant shall be subject to the general supervision, direction, control and
approval of Company's Chief
2
<PAGE>
Executive Officer to whom Consultant shall report and be responsible. In the
performance of the work and services hereunder, Consultant shall be deemed an
independent contractor and shall not be an employee of Company. Consultant
shall have no right to bind Company and shall limit the services to be
provided hereunder to those requested or directed to be performed in
accordance with Article 1.
(b) Consultant shall be responsible for the payment of all taxes or other
charges imposed by any governmental authority on his services and fees.
(c) Any suggestions, analyses, programs, products, materials conceived,
prepared or developed by Consultant during the term of this Agreement, whether
alone or jointly with others, which relate to the Company's core offshore
drilling business shall be Company's sole and exclusive property.
(d) All information obtained by Consultant or communicated to Consultant by
Company in the course of conduct of Consultant's work and services hereunder
shall be considered confidential and shall not be divulged by Consultant to
any person, firm or corporation other than Company's representative without
Company's prior written consent unless required to be disclosed by court
order, subpoena or other government process, in which case Consultant shall
notify Company promptly after learning of any such court order, subpoena or
government process. Company shall furnish any information necessary for
Consultant to carry out Consultant's duties.
(e) Consultant shall not assign or subcontract any of Consultant's obligations
hereunder without the prior written consent of Company; provided, that
Consultant shall be permitted to assign this Agreement to any entity that is
wholly-owned by Consultant. This Agreement shall inure to the benefit of and
be binding on the executors, administrators, personal representatives,
permitted assigns and successors of the respective parties.
(f) In acknowledgement of the fees and occasional transportation, meals and
lodgings being provided by Company to enable and assist Consultant in the
execution of his duties and in exchange for Company's agreement to release,
defend and indemnify Consultant from any and all claims, suits, actions,
damages, liabilities and expenses (including attorney fees and court costs)
(collectively, "Claims") for personal injury to the employees, officers,
directors and agents of Company and Company's clients, or damage to Company's
and Company's clients' property arising out of the services to be provided
hereunder, regardless of whether Consultant may be negligent or otherwise
legally at fault, Consultant agrees to release, defend and indemnify Company
and its clients and their respective employees, officers, directors and agents
from any Claims for personal injury to, or death of, Consultant or damage to
or loss of Consultant's property arising out of the services to be provided
hereunder, regardless of whether Company may be or may be alleged to be
negligent or otherwise legally at fault.
(g) The provisions of Article 5(c), (d) and (f) shall survive the expiration
of this Agreement.
6. MODIFICATION. No modification, amendment or waiver of any of the provisions
of this Agreement shall be effective unless made in writing with specific
reference to this Agreement and signed by each of the parties hereto.
3
<PAGE>
7. NOTICES. Any notices required or permitted hereunder shall be in writing
and shall be delivered in person or mailed certified or registered mail,
return receipt requested, properly addressed:
(a) If to Company:
R&B Falcon Corporation
Attn: Chief Executive Officer
(b) If to Consultant:
Paul B. Loyd, Jr.
---------------------------
---------------------------
Either party hereto may designate a different address by written notice given
to the other party in accordance herewith.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to its rules of
conflict of laws.
10. EFFECTIVENESS. Notwithstanding anything herein to the contrary, this
Agreement is conditioned upon the consummation of the Merger (as defined in
the Merger Agreement) and shall be void ab initio and of no force and effect
upon the termination of the Merger Agreement prior to the Effective Time.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed as of the day and year first above written.
-----------------------------
Paul B. Loyd, Jr.
R&B FALCON CORPORATION
By:
---------------------------
Title:
4
<PAGE>
EXHIBIT D
TO THE MERGER AGREEMENT
[Letterhead of R&B Falcon Corporation]
[ ], 2000
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Baker Botts LLP
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
8.2(b) and 8.3(c) of the Agreement and Plan of Merger (the "Merger Agreement")
dated as of [ ], 2000, among TRANSOCEAN SEDCO FOREX INC, a company organized
under the laws of the Cayman Islands ("Parent"), TRANSOCEAN HOLDINGS INC, a
company organized under the laws of Delaware and a wholly owned subsidiary of
Parent ("Sub"), TSF DELAWARE INC., a company organized under the laws of
Delaware and a wholly owned subsidiary of Sub ("Merger Sub"), and R&B FALCON
CORPORATION, a company organized under the laws of Delaware (the "Company"),
pursuant to which Merger Sub will merge with and into the Company, with the
Company being the surviving entity (the "Merger"), and in connection with the
filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the Joint Proxy Statement of Parent, Sub and the Company, each as
amended or supplemented through the date hereof, the undersigned certifies and
represents on behalf of the Company, after due inquiry and investigation, as
follows (any capitalized term used
<PAGE>
2
but not defined herein having the meaning given to such term in the Merger
Agreement):
1. The facts relating to the Merger as described in the Merger
Agreement, Registration Statement and the other documents described in the
Registration Statement are, insofar as such facts pertain to the Company,
true, correct and complete in all material respects. The Merger will be
consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which
each issued and outstanding share of the Company's common stock, par value
$.01 per share, (the "Company Common Stock"), will be converted into fully
paid and nonassessable shares of common stock, par value $.01 per share, of
Parent ("Parent Ordinary Shares"), is the result of arm's length bargaining.
3. In the Merger, shares of Company stock representing at least 80
percent of the total combined voting power of all classes of Company stock
entitled to vote and at least 80 percent of the total number of shares of all
other classes of Company stock will be exchanged solely for Parent voting
stock. For purposes of this representation, (i) shares of Company stock
exchanged for cash or other property furnished, directly or indirectly, by
Parent, Sub or Merger Sub and (ii) shares of Company stock, if any, issued
pursuant to the Public Offering, as described in Section 7.20 of the Merger
Agreement, in each case will be treated as outstanding Company stock on the
Closing Date. Except for the issuance of voting rights as described in
paragraph 4, no shares or other securities of the Company will be issued to
the shareholders of the Company pursuant to the Merger (although shares of the
Company may be issued to other persons pursuant to the Public Offering, as
described in Section 7.20 of the Merger Agreement). Following the Merger, the
Company has no plan or intention to issue additional shares of its stock that
would result in Sub failing to own after the Merger, directly or indirectly,
at least 80 percent of the total combined voting power of all classes of
Company stock entitled to vote and at least 80 percent of the total number of
shares of all other classes of Company stock. To the best knowledge of the
management of the Company, Sub has no plan or intention to, and Parent has no
plan or intention to cause Sub to, sell, transfer or dispose of any stock of
the Company or to cause the Company to issue additional shares of its stock
that would in either case
<PAGE>
3
result in Sub failing to own after the Merger, directly or indirectly, at
least 80 percent of the total combined voting power of all classes of Company
stock entitled to vote and at least 80 percent of the total number of shares
of all other classes of Company stock.
4. The 13.875% Cumulative Redeemable Preferred Stock of the Company
(the "Company Redeemable Preferred Stock") shall continue to be outstanding in
substantially identical form except for (i) the addition of voting rights
pursuant to the Company Preferred Stock Voting Right Charter Amendment and
(ii) Company Redeemable Preferred Stock redeemed by the Company or repurchased
by any of its subsidiaries pursuant to and in accordance with Section 7.20 of
the Merger Agreement.
5. If cash payments are made to holders of Company Common Stock in
lieu of fractional shares of Parent Ordinary Shares that would otherwise be
issued to such holders in the Merger, such payments will be made for the
purpose of saving Parent the expense and inconvenience of issuing and
transferring fractional shares of Parent Ordinary Shares, and will not
represent separately bargained for consideration. The total cash consideration
that will be paid in the Merger to holders of Company Common Stock in lieu of
fractional shares of Parent Ordinary Shares will not exceed one percent of the
total consideration that will be issued in the Merger to shareholders of
Company in exchange for their shares of Company Stock.
6. (i) Except pursuant to and in accordance with Section 7.20 of the
Merger Agreement, neither the Company nor any corporation related to the
Company (as defined in Treasury Regulation Section 1.368-1(e)) has acquired or
has any plan or intention to acquire any Company stock in contemplation of the
Merger, or otherwise as part of a plan of which the Merger is a part
(including, without limitation, in connection with the Public Offering).
(ii) The Company is not aware of any plan or intention on the part
of Parent or Sub to acquire or redeem any of the Parent stock issued in the
Merger, either directly or through any transaction, agreement or arrangement
with any other person. The Company has no plan or intention, nor is the
Company aware of any plan or intention on the part of any person related to
Parent or Sub (as defined in Treasury Regulation Section 1.368-1(e)), to
<PAGE>
4
acquire or redeem any of the Parent stock issued in the Merger, either
directly or through any transaction, agreement or arrangement with any other
person. For purposes of this representation letter, a person is considered to
own or acquire stock owned or acquired (as the case may be) by a partnership
in which such person is a partner in proportion to such person's interest in
the partnership.
7. Except for deemed distributions, if any, made pursuant to and in
accordance with Section 7.20 of the Merger Agreement, the Company has not
made, and does not have any plan or intention to make, any distributions with
respect to any stock of the Company prior to, in contemplation of or otherwise
in connection with, the Merger (other than dividends made in the ordinary
course of business).
8. The Company is not aware of any present plan or intention on the
part of Sub to, or of any present plan or intention of Parent to cause Sub to,
following the Merger, liquidate the Company, merge the Company with or into
another corporation in which the Company is not the survivor, sell or
otherwise dispose of shares of the Company, cause the Company to distribute
the proceeds of any borrowings incurred by the Company or cause the Company or
any of its subsidiaries to sell, distribute or otherwise dispose of any of
their assets, except for (i) dispositions made in the ordinary course of
business and transfers permitted under Section 368(a)(2)(C) of the Code or
Treasury Regulation Section 1.368-1(d) or 1.368-2(k) and (ii) dispositions of
assets of the Company or its subsidiaries having a fair market value,
individually or in the aggregate, not in excess of 70% of the gross fair
market value and 90% of the net fair market value of the assets held by the
Company immediately prior to the Merger. For this purpose, assets used to pay
reorganization expenses, to repurchase Company Redeemable Preferred Stock, to
pay dissenters or to make any other redemption shall be treated as held
immediately prior to the Merger.
9. Except as specifically provided in the Merger Agreement, the
Company and stockholders of the Company will pay their respective expenses, if
any, incurred in connection with the Merger. The Company has neither paid
(directly or indirectly) nor agreed to assume any expense or other liability,
whether fixed or contingent, incurred or to be incurred by any
<PAGE>
5
stockholders of the Company in connection with or as part of the Merger or any
related transactions.
10. Except as otherwise specifically contemplated under the Merger
Agreement, immediately prior to the time of the Merger, the Company will not
have outstanding any warrants, options, convertible securities or any other
type of right pursuant to which any person could acquire Company stock.
Simultaneously with the Merger, all outstanding options and related stock
appreciation rights, if any, to purchase or acquire a share of Company stock
granted under employee incentive or benefits plans, programs or arrangements
and non-employee director plans presently maintained by the Company, together
with all other outstanding awards granted under such plans, will be canceled
or converted into similar instruments of Parent. Immediately following the
Merger, the only classes of Company stock outstanding will be the Company
Common Stock held by Sub and the Company Redeemable Preferred Stock held by
the historic shareholders of the Company.
11. No assets of the Company have been sold, transferred or
otherwise disposed of which would prevent Sub from continuing the "historic
business" of Company or from using a significant portion of the "historic
business assets" of the Company in a business following the Merger (as such
terms are defined in Treasury Regulation Section 1.368-1(d)).
12. In connection with the Merger and related transactions, the
Company Common Stock will be converted solely into Parent voting stock (except
for cash paid in lieu of fractional shares of Parent Ordinary Shares). For
purposes of this representation, Company stock redeemed for cash or other
property furnished, directly or indirectly, by Parent or Sub will be
considered as acquired by Sub. In connection with the Merger and related
transactions, no liabilities of the Company or any of its subsidiaries or any
holders of Company stock will be assumed by Parent or Sub, nor, to the best
knowledge of the management of the Company, will any of the Company stock
acquired by Sub in connection with the Merger be subject to any liabilities.
13. The Company is not an investment Company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
<PAGE>
6
14. The Company will not take, and, to the best knowledge of the
management of Company, there is no plan or intention by stockholders of
Company to take, any position on any Federal, state or local income or
franchise tax return, or take any other tax reporting position, that is
inconsistent with the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code and as a transaction qualifying for the
exemption from gain recognition pursuant to Section 367(a)(1) of the Code
(assuming where applicable the filing of valid gain recognition agreements by
five-percent transferee shareholders as defined in Treasury Regulation Section
1.367(a)-3(c)(5)(ii)), unless otherwise required by a "determination" (as
defined in Section 1313(a)(1) of the Code) or by applicable state or local tax
law (and then only to the extent required by such applicable state or local
tax law).
15. None of the compensation received by any stockholder-employee or
stockholder-independent contractor of the Company in respect of periods at or
prior to the Effective Time represents separate consideration for, or is
allocable to, any of its Company stock. None of the Parent shares that will be
received by any stockholder-employee or stockholder-independent contractor of
the Company in the Merger represents separately bargained for consideration
which is allocable to any employment agreement or arrangement. The
compensation paid to any stockholder-employee or stockholder-independent
contractor will be for services actually rendered and will be determined by
bargaining at arm's length.
16. The Company is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
17. On the date of the Merger, the fair market value of the assets
of the Company will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which such assets are subject.
18. Any funds used by the Company's Unrestricted Subsidiaries to
repurchase any Company Redeemable Preferred Stock will represent funds in
excess of the funds reasonably anticipated to be necessary for such
Unrestricted Subsidiaries' business needs.
<PAGE>
7
19. No warrants, options or similar interests in the Company were
issued or, to the knowledge of the management of the Company, acquired with
the principal purpose of avoiding the general rule contained in Section
367(a)(1) of the Code.
20. The Company will comply with the reporting requirements set
forth in Treasury Regulation Section 1.367(a)- 3(c)(6).
21. There will be no dissenters to the Merger.
22. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of the Company with respect to the Merger.
23. The Merger is being undertaken for purposes of enhancing the
business of the Company and for other good and valid business purposes of the
Company.
24. The undersigned is authorized to make all the representations
set forth herein on behalf of the Company.
The undersigned acknowledges that (i) your opinion will be based on
the accuracy of the representations set forth herein and on the accuracy of
the representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that your opinion will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinion.
Very truly yours,
[Company]
by
---------------------------
Name:
Title:
<PAGE>
EXHIBIT E
TO THE MERGER AGREEMENT
[Letterhead of Transocean Sedco Forex Inc.]
[ ], 2000
Baker Botts LLP
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
8.2(b) and 8.3(c) of the Merger Agreement and Plan of Merger (the "Merger
Agreement") dated as of [ ], 2000, among TRANSOCEAN SEDCO FOREX INC., a
company organized under the laws of the Cayman Islands ("Parent"), TRANSOCEAN
HOLDINGS INC., a company organized under the laws of Delaware and a wholly
owned subsidiary of Parent ("Sub"), TSF DELAWARE INC., a company organized
under the laws of Delaware and a wholly owned subsidiary of Sub ("Merger
Sub"), and R&B FALCON CORPORATION, a company organized under the laws of
Delaware (the "Company"), pursuant to which Merger Sub will merge with and
into the Company, with the Company being the surviving entity (the "Merger"),
and in connection with the filing with the Securities and Exchange Commission
(the "SEC") of the registration statement on Form S-4 (the "Registration
Statement"), which includes the Joint Proxy Statement of Parent, Sub and the
Company, each as amended or supplemented through the date hereof, the
undersigned certifies and represents on behalf of Parent, after due inquiry
and investigation, as follows (any capitalized term used but not
<PAGE>
3
defined herein having the meaning given to such term in the Merger
Agreement):
1. The facts relating to the Merger as described in the Merger
Agreement, Registration Statement and the other documents described in the
Registration Statement are, insofar as such facts pertain to Parent, Sub and
Merger Sub, true, correct and complete in all material respects. The Merger
will be consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which
each issued and outstanding share of the Company's common stock, par value
$.01 per share, (the "Company Common Stock"), will be converted into fully
paid and nonassessable shares of common stock, par value $.01 per share of
Parent ("Parent Ordinary Shares"), is the result of arm's length bargaining.
3. In the Merger, Sub will acquire at least 80 percent of the total
combined voting power of all classes of Company stock entitled to vote and at
least 80 percent of the total number of shares of all other classes of Company
stock, solely in exchange for Parent voting stock. For purposes of this
representation, (i) shares of Company stock exchanged for cash or other
property furnished, directly or indirectly, by Parent, Sub or Merger Sub and
(ii) shares of Company stock, if any, issued pursuant to the Public Offering,
as described in Section 7.20 of the Merger Agreement, in each case will be
treated as outstanding Company stock on the Closing Date. Sub has no present
plan or intention to, and Parent has no plan or intention to cause Sub to,
sell, transfer or dispose of any stock of the Company or to cause the Company
to issue additional shares of its stock that would in either case result in
Sub failing to own after the Merger, directly or indirectly, at least 80
percent of the total combined voting power of all classes of Company stock
entitled to vote and at least 80 percent of the total number of shares of all
other classes of Company stock.
4. The 13.875% Cumulative Redeemable Preferred Stock of the Company
(the "Company Redeemable Preferred Stock") shall continue to be outstanding in
substantially identical form except for (i) the addition of voting rights
pursuant to the Company Preferred Stock Voting Right Charter Amendment and
(ii) Company Redeemable Preferred Stock redeemed by the Company or repurchased
by any of its subsidiaries pursuant to and in accordance with Section 7.20 of
the Merger Agreement.
<PAGE>
3
5. If cash payments are made to holders of Company Common Stock in
lieu of fractional shares of Parent Ordinary Shares that would otherwise be
issued to such holders in the Merger, such payments will be made for the
purpose of saving Parent the expense and inconvenience of issuing and
transferring fractional shares of Parent Ordinary Shares, and will not
represent separately bargained for consideration. The total cash consideration
that will be paid in the Merger to holders of Company Common Stock in lieu of
fractional shares of Parent Ordinary Shares will not exceed one percent of the
total consideration that will be issued in the Merger to shareholders of
Company in exchange for their shares of Company Stock.
6. Neither Parent nor Sub has a plan or intention to cause the
Company to redeem any Company Redeemable Preferred Stock after the Merger,
except that Parent intends to cause the Company to redeem those shares on
their mandatory redemption date, as required by their terms.
7. Neither Parent nor Sub has a plan or intention to acquire or
redeem any of the Parent stock issued in the Merger, either directly or
through any transaction, agreement or arrangement with any other person. To
the best knowledge of the managements of Parent and Sub, no person related to
Parent or Sub (as defined in Treasury Regulation Section 1.368-1(e)) has a
plan or intention to acquire or redeem any of the Parent stock issued in the
Merger, either directly or through any transaction, agreement or arrangement
with any other person. For purposes of this representation letter, a person is
considered to own or acquire stock owned or acquired (as the case may be) by a
partnership in which such person is a partner in proportion to such persons's
interest in the partnership.
8. Parent does not have any plan or intention to make any
distributions after, but in connection with, the Merger to holders of Parent
stock (other than dividends made in the ordinary course of business).
9. None of Parent, Sub, Merger Sub or any corporation related to
Parent, Sub or Merger Sub (as defined in Treasury Regulation Section
1.368-1(e)) has acquired or will, prior to the Effective Time, acquire
(including, without limitation, in
<PAGE>
4
connection with the Public Offering), or has owned in the past five years, any
Company stock, except that Parent owns [ ] shares of Company Common Stock
which it acquired in [ ] in an open market purchase that was not in
contemplation of, or otherwise part of a plan including, the Merger. Prior to
the vote described in Section 8.1(a)(1) of the Merger Agreement, Parent will
sell such shares for cash on the open market.
10. Sub has no present plan or intention to, and Parent has no
present plan or intention to cause Sub to, following the Merger, liquidate the
Company, merge the Company with or into another corporation in which the
Company is not the survivor, sell or otherwise dispose of shares of the
Company, cause the Company to distribute the proceeds of any borrowings
incurred by the Company or cause the Company or any of its subsidiaries to
sell, distribute or otherwise dispose of any of their assets, except for (i)
dispositions made in the ordinary course of business and transfers permitted
under Section 368(a)(2)(C) of the Code or Treasury Regulation Section 1.368-
1(d) or 1.368-2(k) and (ii) dispositions of assets of the Company or its
subsidiaries having a fair market value, individually or in the aggregate, not
in excess of 70% of the gross fair market value and 90% of the net fair market
value of the assets held by the Company immediately prior to the Merger. For
this purpose, assets used to pay reorganization expenses, to repurchase
Company Redeemable Preferred Stock, to pay dissenters or to make any other
redemption shall be treated as held immediately prior to the Merger.
11. Parent and Sub will pay their respective expenses, if any,
incurred in connection with the Merger. Except as specifically provided in the
Merger Agreement, neither Parent nor Sub has paid (directly or indirectly) or
agreed to assume any expense or other liability, whether fixed or contingent,
of the Company or any of its subsidiaries or any holder of Company Stock.
12. In connection with the Merger and related transactions, Company
Common Stock will be converted solely into Parent voting stock (except for
cash paid in lieu of fractional shares of Parent Ordinary Shares). For
purposes of this representation, Company stock redeemed for cash or other
property furnished, directly or indirectly, by Parent or Sub will be
<PAGE>
5
considered as exchanged for other than Parent voting stock. In connection with
the Merger and related transactions, no liabilities of the Company or any of
its subsidiaries or any of the holders of Company stock will be assumed by
Parent or Sub, nor, to the best knowledge of the managements of Parent or Sub,
will any of the Company stock acquired by Sub in connection with the Merger be
subject to any liabilities.
13. Following the Merger, Parent and Sub intend to cause the Company
to continue its "historic business" or to use a significant portion of its
"historic business assets" in a business (as such terms are defined in
Treasury Regulation Section 1.368-1(d)).
14. Neither Parent nor Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
15. At the Effective Time, Parent will own all of the stock of Sub,
and Parent has no present plan or intention to sell, transfer or dispose of
the stock of Sub or to cause Sub to issue additional shares of its stock that
would result in Parent's failing to own at least 80 percent of the total
combined voting power of all classes of Sub stock entitled to vote and at
least 80 percent of the total number of shares of all other classes of Sub
stock.
16. Neither Parent nor Sub will take any position on any Federal,
state or local income or franchise tax return, or take any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code and as a
transaction qualifying for the exemption from gain recognition pursuant to
Section 367(a)(1) of the Code (assuming where applicable the filing of a valid
gain recognition agreement by five-percent transferee shareholders as defined
in Treasury Regulation Section 1.367(a)-3(c)(5)(ii)), unless otherwise
required by a "determination" (as defined in Section 1313(a)(1) of the Code)
or by applicable state or local tax law (and then only to the extent required
by such applicable state or local tax law).
17. None of the compensation received by any stockholder-employee or
stockholder-independent contractor of Company in respect of periods after the
Effective Time represents separate consideration for, or is allocable to, any
of its
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6
Company stock. None of the Parent stock that will be received by any
stockholder-employee or stockholder-independent contractor of the Company in
the Merger represents separately bargained-for consideration which is
allocable to any employment agreement or arrangement. The compensation paid to
any stockholder-employee or stockholder-independent contractor will be for
services actually rendered and will be determined by bargaining at arm's
length.
18. In no case will Parent or any of its Subsidiaries make any
contributions the Company or the Unrestricted Subsidiaries to replenish funds
used to repurchase Company Redeemable Preferred Stock.
19. Neither Parent nor any of its subsidiaries has agreed to pay, or
will pay, directly or indirectly, any consideration for shares of stock of the
Company other than the Parent voting shares, and the cash in lieu of
fractional shares to be delivered by Sub as described in this Agreement.
20. Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
21. Sub and Merger Sub are corporations newly formed for the purpose
of participating in the Merger, and at no time prior to the Merger have they
had assets or business operations.
22. In connection with the Merger, the Parent Ordinary Shares
received in the Merger by holders of Company stock in exchange for Company
Common Stock will not represent more than 50% of the total voting power or
more than 50% of the total value of all shares of Parent stock outstanding
immediately after the Merger.
23. No more than 50% of the total voting power and no more than 50%
of the total value of all shares of Parent outstanding immediately after the
Merger will be owned, in the aggregate and taking into account the rules set
forth in Treasury Regulation Section 1.367(a)-3(c)(4), by U.S. persons that
are either officers or directors of the Company or that are five- percent
shareholders of the Company (within the meaning of Treasury Regulation Section
1.367(a)-3(c)(5)(iii)).
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7
24. No warrants, options or similar interests in Parent were issued
or, to the knowledge of the managements of Parent or Sub, acquired with the
principal purpose of avoiding the general rule contained in Section 367((a)(1)
of the Code.
25. Parent will cause the Company to comply with the reporting
requirements set forth in Treasury Regulation Section 1.367(a)-3(c)(6).
26. Parent or one or more of its qualified subsidiaries or qualified
partnerships (as defined in Treasury Regulations Sections
1.367(a)-3(c)(5)(vii) or (viii)), has been engaged in the active conduct of a
trade or business (within the meaning of Treasury Regulation Section
1.367(a)-3(c)(3)) outside the United States (the "Parent Business") throughout
the 36-month period ending at the Effective Time. Parent has no plan or
intention to substantially dispose of or discontinue (including by way of
disposal) the active conduct of the Parent Business after the Merger.
27. At the Effective Time, the market capitalization of Parent will
be at least equal to the market capitalization of the Company, in each case,
taking into account the application of Treasury Regulation Section
1.367(a)-3(c)(3)(iii)(B).
28. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of Parent with respect to the Merger.
29. The Merger is being undertaken for purposes of enhancing the
business of Parent and for other good and valid business purposes of Parent.
30. The undersigned is authorized to make all the representations
set forth herein on behalf of Parent and Sub.
31. Parent believes that Parent will not be a passive foreign
investment company, as defined in Section 1297(a) of the Code (a "PFIC") for
the calendar year in which the Merger occurs and has no reason, on the basis
of facts presently known, to believe that Parent will become a PFIC for any
subsequent year.
32. Parent believes that it is not a controlled foreign corporation,
within the meaning of Section 957(a) of the Code.
<PAGE>
8
The undersigned acknowledges that (i) your opinion will be based on
the accuracy of the representations set forth herein and on the accuracy of
the representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such covenants or
obligations are not satisfied in all material respects.
<PAGE>
9
The undersigned acknowledges that your opinion will not address any
tax consequences of the Merger or any action taken in connection therewith
except as expressly set forth in such opinion.
Very truly yours,
[Parent]
by
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Name:
Title:
[Sub]
by
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Name:
Title:
