<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 2000
REGISTRATION NO. 333-46374
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
TRANSOCEAN SEDCO FOREX INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
CAYMAN ISLANDS 1381 N/A
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
4 GREENWAY PLAZA
HOUSTON, TEXAS 77046
(713) 232-7500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ERIC B. BROWN, ESQ.
TRANSOCEAN SEDCO FOREX INC.
4 GREENWAY PLAZA
HOUSTON, TEXAS 77046
(713) 232-7500
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
GENE J. OSHMAN, ESQ. RICHARD HALL, ESQ.
BAKER BOTTS L.L.P. CRAVATH, SWAINE & MOORE
3000 ONE SHELL PLAZA 825 EIGHTH AVENUE
HOUSTON, TEXAS 77002 NEW YORK, NEW YORK 10019
(713) 229-1234 (212) 474-1000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions under the Agreement and Plan of Merger included as Annex A to the
enclosed joint proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Ordinary Shares, par value $.01 per
share............................... 110,328,650 shares N/A $5,930,164,938 $1,565,564
Warrants to purchase Ordinary Shares,
par value $.01 per share(3)......... (4) N/A (4) (4)
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</TABLE>
(1) Represents the maximum number of the ordinary shares, par value $.01 per
share ("Transocean Sedco Forex ordinary shares"), of Transocean Sedco Forex
Inc., a company incorporated under the laws of the Cayman Islands
("Transocean Sedco Forex"), estimated to be issuable(i) in connection with
the merger (the "Merger") of TSF Delaware Inc., a Delaware corporation
("Merger Sub") and an indirect wholly owned subsidiary of Transocean Sedco
Forex, with and into R&B Falcon Corporation, a Delaware corporation ("R&B
Falcon"), as described in the Agreement and Plan of Merger, dated as of
August 19, 2000 (the "Merger Agreement"), attached as Annex A to the Joint
Proxy Statement/Prospectus forming part of this Registration Statement,
based on an exchange ratio of 0.5 Transocean Sedco Forex ordinary shares for
each common share, par value $.01 per share, of R&B Falcon ("R&B Falcon
common shares"), (ii) upon exercise of options to purchase R&B Falcon common
shares outstanding at the effective time of the Merger (which options will
be assumed by Transocean Sedco Forex pursuant to the Merger and become
exercisable for Transocean Sedco Forex ordinary shares) and (iii) upon
exercise of warrants to purchase R&B Falcon common shares outstanding at the
effective time of the Merger (which warrants will be assumed by Transocean
Sedco Forex pursuant to the Merger and become exercisable for Transocean
Sedco Forex ordinary shares).
(2) Pursuant to Rules 457(c) and 457(f)(1) under the Securities Act and solely
for the purpose of calculating the registration fee, the proposed maximum
aggregate offering price is equal to (x) the estimated number of R&B Falcon
common shares to be exchanged in the Merger multiplied by (y) $26.875, the
average of the high and low sale prices per R&B Falcon common share on the
New York Stock Exchange on September 21, 2000.
(3) Represents warrants to purchase Transocean Sedco Forex ordinary shares
deemed issuable in connection with the Merger pursuant to the assumption by
Transocean Sedco Forex of warrants to purchase R&B Falcon common shares
referred to in clause (iii) of footnote (1) above.
(4) In accordance with Rule 457(g), because the Transocean Sedco Forex ordinary
shares to be offered pursuant to the warrants are registered hereby, no
separate registration fee is required with respect to the warrants
registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
The information in this joint proxy statement/prospectus is not complete
and may be subject to change. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and we
are not soliciting offers to buy these securities in any jurisdiction where
these activities are not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 26, 2000
[TRANSOCEAN SEDCO FOREX INC. LOGO][R&B FALCON LOGO]
PROPOSED MERGER -- YOUR VOTE IS VERY IMPORTANT
The boards of directors of Transocean Sedco Forex Inc. and R&B Falcon
Corporation have each unanimously approved a merger transaction that will
combine the two companies. We believe that the merger will expand and enhance
both companies' mobile offshore drilling unit fleets and the combined company's
competitiveness in the currently expanding North American natural gas market. We
believe that the merger will benefit the shareholders of both companies, and we
ask for your support in voting for the merger proposals at our meetings.
When the merger is completed, common shareholders of R&B Falcon will be
entitled to receive 0.5 Transocean Sedco Forex ordinary shares for each R&B
Falcon common share they currently own. Transocean Sedco Forex's shareholders
will continue to own their existing Transocean Sedco Forex ordinary shares.
Transocean Sedco Forex expects to issue approximately 100 million of its
ordinary shares in the merger, representing about 32% of the total issued
Transocean Sedco Forex ordinary shares after the merger.
The merger cannot be completed without the approval of Transocean Sedco
Forex's shareholders and R&B Falcon's common shareholders. R&B Falcon's common
shareholders will vote on the merger and a related amendment to R&B Falcon's
certificate of incorporation to grant holders of R&B Falcon's 13.875% cumulative
redeemable preferred shares voting rights in the election of directors.
Transocean Sedco Forex's shareholders will vote on an increase of Transocean
Sedco Forex's authorized ordinary share capital and the issuance of Transocean
Sedco Forex ordinary shares to R&B Falcon's common shareholders. We have
scheduled separate meetings to be held on December , 2000 for our respective
shareholders to vote on these matters.
Transocean Sedco Forex's shareholders will also vote on an amendment to
Transocean Sedco Forex's memorandum and articles of association to increase the
maximum size of the board of directors to 13 persons and make updating and other
clarifying changes and amendments to Transocean Sedco Forex's Long-Term
Incentive Plan and Employee Stock Purchase Plan to increase the number of shares
reserved for issuance under those plans.
The Transocean Sedco Forex and R&B Falcon boards of directors each
recommend that their respective shareholders vote "FOR" the proposals.
The dates, times and places of these meetings are contained in the attached
notices.
This document provides you with detailed information about the merger and
the shareholder meetings. You can also obtain financial and other information
about Transocean Sedco Forex and R&B Falcon from documents filed with the
Securities and Exchange Commission. We encourage you to carefully read this
entire document and the documents incorporated by reference.
<TABLE>
<S> <C>
Victor E. Grijalva Paul B. Loyd, Jr.
Chairman of the Board Chairman of the Board and Chief Executive
Transocean Sedco Forex Inc. Officer
R&B Falcon Corporation
J. Michael Talbert
President and Chief Executive Officer
Transocean Sedco Forex Inc.
</TABLE>
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF RISKS THAT SHOULD BE
CONSIDERED BY R&B FALCON'S AND TRANSOCEAN SEDCO FOREX'S SHAREHOLDERS BEFORE
VOTING AT THEIR RESPECTIVE MEETINGS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE TRANSOCEAN SEDCO FOREX ORDINARY
SHARES TO BE ISSUED IN THE MERGER OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated , 2000 and is first
being mailed to shareholders of Transocean Sedco Forex and R&B Falcon on or
about , 2000.
<PAGE> 3
TRANSOCEAN SEDCO FOREX INC.
P.O. BOX 265GT, WALKER HOUSE
GRAND CAYMAN, CAYMAN ISLANDS
NOTICE OF EXTRAORDINARY GENERAL MEETING OF
TRANSOCEAN SEDCO FOREX INC.
TO BE HELD ON DECEMBER , 2000
To the Holders of Ordinary Shares of TRANSOCEAN SEDCO FOREX INC.:
We will hold an extraordinary general meeting at 4 Greenway Plaza, Room
C-100 (Mall level), Houston, Texas, at 9:00 a.m., Houston time, on December ,
2000 to vote:
- On the increase of our authorized ordinary share capital to $8,000,000,
consisting of 800,000,000 ordinary shares, par value $0.01 per share,
conditional upon the completion of the merger contemplated by the
Agreement and Plan of Merger, dated as of August 19, 2000, among
Transocean Sedco Forex Inc., our direct wholly owned subsidiary,
Transocean Holdings Inc., our indirect wholly owned subsidiary, TSF
Delaware Inc. and R&B Falcon Corporation.
- On the issuance of ordinary shares under the terms of the Agreement and
Plan of Merger, conditional upon completion of the merger.
- On the amendment of our memorandum and articles of association to
increase the maximum size of the board of directors to 13 persons and to
make updating and other clarifying changes described in the accompanying
joint proxy statement/prospectus, conditional upon completion of the
merger.
- On the amendment of our Long-Term Incentive Plan to, among other things,
increase the number of ordinary shares reserved for issuance under the
plan from 13,300,000 to 19,500,000, conditional upon completion of the
merger.
- On the amendment of our Employee Stock Purchase Plan to increase the
number of ordinary shares reserved for issuance under the plan from
750,000 to 1,500,000, conditional upon completion of the merger.
- On any other matters that properly come before the extraordinary general
meeting and any adjournments or postponements of the extraordinary
general meeting.
We have established the close of business on October 30, 2000 as the record
date for determining Transocean Sedco Forex's shareholders entitled to notice of
and to vote at the extraordinary general meeting or any adjournments or
postponements of the meeting. For the purposes of the articles of association,
the resolution increasing authorized share capital will be proposed as an
ordinary resolution and the resolution to amend the memorandum and articles of
association will be proposed as a special resolution.
Your vote is very important. To ensure your shares are represented, you
should complete, sign and date the enclosed proxy and return it promptly in the
enclosed envelope, whether or not you expect to attend the extraordinary general
meeting. You may revoke your proxy and vote in person if you decide to attend
the meeting.
By Order of the Board of Directors
ERIC B. BROWN
Secretary
<PAGE> 4
R&B FALCON CORPORATION
901 THREADNEEDLE
HOUSTON, TEXAS 77079
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
R&B FALCON CORPORATION
TO BE HELD ON DECEMBER , 2000
To the Shareholders of R&B FALCON CORPORATION:
We will hold a special meeting of the shareholders of R&B Falcon
Corporation ("R&B Falcon") on December , 2000 at 9:00 a.m., Houston time, at
the Radisson Suite Hotel East and West, 10655 Katy Freeway (Valencia Room),
Houston, Texas, for the following purposes:
- To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of August 19, 2000, attached as Annex A to the
accompanying joint proxy statement/prospectus, pursuant to which each R&B
Falcon common share will be converted into the right to receive 0.5
Transocean Sedco Forex ordinary shares, as a result of which R&B Falcon
will become an indirect subsidiary of Transocean Sedco Forex. The merger
is more fully described in the accompanying joint proxy
statement/prospectus.
- To consider and vote upon a proposal to approve an amendment to R&B
Falcon's certificate of incorporation to grant holders of R&B Falcon's
outstanding preferred shares voting rights in the election of directors.
The proposed amendment is more fully described in the accompanying joint
proxy statement/prospectus.
- To transact such other business as may properly come before the special
meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on October 30, 2000 are
entitled to notice of, and holders of record of R&B Falcon common shares as of
that date will be entitled to vote at, the special meeting and any adjournment
or postponement thereof. The adoption of the merger agreement and the approval
of the proposed amendment to R&B Falcon's certificate of incorporation will each
require the affirmative vote of at least a majority of R&B Falcon's outstanding
common shares. Neither proposal will be effected unless both proposals are
approved by the holders of R&B Falcon common shares. Failure to return a
properly executed proxy card or to vote at the special meeting will have the
same effect as a vote against the merger agreement and the amendment. Holders of
preferred shares will not be entitled to vote at the special meeting or at any
adjournment or postponement thereof.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE MERGER AGREEMENT AND HAS RESOLVED THAT THE MERGER AGREEMENT
AND THE MERGER ARE ADVISABLE TO R&B FALCON AND ITS SHAREHOLDERS. YOUR BOARD OF
DIRECTORS HAS ALSO RESOLVED THAT THE PROPOSED AMENDMENT TO R&B FALCON'S
CERTIFICATE OF INCORPORATION IS ADVISABLE TO R&B FALCON AND ITS SHAREHOLDERS.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
PROPOSED AMENDMENT TO R&B FALCON'S CERTIFICATE OF INCORPORATION, AND RECOMMENDS
A VOTE FOR ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE PROPOSED
AMENDMENT TO R&B FALCON'S CERTIFICATE OF INCORPORATION.
ALL R&B FALCON SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL
MEETING. HOWEVER, TO ENSURE REPRESENTATION AT THE SPECIAL MEETING, R&B FALCON
COMMON SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. A PRE-ADDRESSED ENVELOPE IS ENCLOSED FOR THAT
PURPOSE.
By Order of the Board of Directors,
WAYNE K. HILLIN
Secretary
<PAGE> 5
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE.
SEE "WHERE YOU CAN FIND MORE INFORMATION" BEGINNING ON PAGE 129 FOR A LISTING OF
DOCUMENTS INCORPORATED BY REFERENCE. TRANSOCEAN SEDCO FOREX DOCUMENTS ARE
AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, UPON REQUEST DIRECTED
TO JEFFREY L. CHASTAIN, DIRECTOR OF INVESTOR RELATIONS AND COMMUNICATIONS,
TRANSOCEAN SEDCO FOREX INC., 4 GREENWAY PLAZA, HOUSTON, TEXAS 77046, TELEPHONE
(713) 232-7500. R&B FALCON DOCUMENTS ARE AVAILABLE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, UPON REQUEST DIRECTED TO CHARLES R. OFNER, SENIOR VICE
PRESIDENT, BUSINESS DEVELOPMENT AND INVESTOR RELATIONS, R&B FALCON CORPORATION,
901 THREADNEEDLE, HOUSTON, TEXAS 77079, TELEPHONE (281) 496-5000. TO ENSURE
TIMELY DELIVERY OF THESE DOCUMENTS, ANY REQUEST BY TRANSOCEAN SEDCO FOREX
SHAREHOLDERS SHOULD BE MADE BY , 2000 AND ANY REQUEST BY R&B FALCON
SHAREHOLDERS SHOULD BE MADE BY , 2000. THE EXHIBITS TO THESE
DOCUMENTS WILL GENERALLY NOT BE MADE AVAILABLE UNLESS THEY ARE SPECIFICALLY
INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE
MERGER.............................. 1
SUMMARY............................... 4
Transocean Sedco Forex Selected
Historical Combined Financial
Data............................. 13
R&B Falcon Corporation Selected
Historical Consolidated Financial
Data............................. 15
Unaudited Pro Forma Combined Summary
Financial Information............ 16
Unaudited Comparative Historical and
Unaudited Pro Forma Per Share
Data............................. 17
RISK FACTORS.......................... 18
Risks Relating to the Merger........ 18
Risks Relating to the Combined
Company's Business Following the
Merger........................... 20
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS.......................... 25
THE TRANSOCEAN SEDCO FOREX
EXTRAORDINARY GENERAL MEETING....... 28
Time, Date and Place................ 28
Purpose of the Transocean Sedco
Forex Extraordinary General
Meeting.......................... 28
Record Date; Voting Rights; Vote
Required for Approval............ 28
Proxies............................. 29
THE SPECIAL MEETING OF R&B FALCON
SHAREHOLDERS........................ 32
Joint Proxy Statement/Prospectus.... 32
Date, Time and Place of the Special
Meeting.......................... 32
</TABLE>
<TABLE>
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<S> <C>
Record Date and Voting Power........ 32
Required Vote....................... 32
Voting; Proxies..................... 32
THE MERGER............................ 34
Background of the Merger............ 34
Transocean Sedco Forex's Reasons for
the Merger....................... 37
Recommendations of Transocean Sedco
Forex's Board of Directors....... 39
R&B Falcon's Reasons for the Merger
and the Proposed Amendment to R&B
Falcon's Certificate of
Incorporation.................... 39
Recommendations of R&B Falcon's
Board of Directors............... 41
Opinion of Goldman, Sachs & Co...... 41
Opinion of Simmons & Company
International.................... 47
Opinion of Morgan Stanley & Co.
Incorporated..................... 53
Interests of Certain Persons in the
Merger........................... 58
Transocean Sedco Forex After the
Merger........................... 62
Exchange of R&B Falcon Common Share
Certificates for Transocean Sedco
Forex Ordinary Share
Certificates..................... 62
Conversion of Stock Options and
Assumption of Stock Plans........ 63
Effect of the Merger on the R&B
Falcon Preferred Shares.......... 64
Employee Benefit Matters............ 64
Dividends........................... 65
Accounting Treatment and
Considerations................... 66
</TABLE>
i
<PAGE> 6
<TABLE>
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Certain United States Federal Income
Tax Consequences................. 66
Regulatory Matters.................. 70
Federal Securities Laws
Consequences; Resale
Restrictions..................... 72
Rights of Dissenting Shareholders... 73
Stock Exchange Listing.............. 73
THE MERGER AGREEMENT.................. 74
Covenants........................... 74
Representations and Warranties...... 81
Conditions to the Merger............ 82
Termination of the Merger
Agreement........................ 85
Expenses and Termination Fees....... 87
Amendment........................... 88
BUSINESS OF TRANSOCEAN SEDCO FOREX.... 89
BUSINESS OF R&B FALCON................ 90
MARKET PRICE AND DIVIDEND
INFORMATION......................... 91
UNAUDITED PRO FORMA FINANCIAL
INFORMATION......................... 92
TRANSOCEAN SEDCO FOREX UNAUDITED
CONDENSED PRO FORMA COMBINED BALANCE
SHEET............................... 94
TRANSOCEAN SEDCO FOREX UNAUDITED
CONDENSED PRO FORMA COMBINED
STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 2000.......... 95
TRANSOCEAN SEDCO FOREX UNAUDITED
CONDENSED PRO FORMA COMBINED
STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1999............. 96
NOTES TO UNAUDITED CONDENSED PRO FORMA
COMBINED FINANCIAL STATEMENTS....... 97
DESCRIPTION OF SHARE CAPITAL OF
TRANSOCEAN SEDCO
FOREX............................... 100
Transocean Sedco Forex Ordinary
Shares........................... 100
Transocean Sedco Forex Preference
Shares........................... 103
Limitation on Director's
Liability........................ 103
</TABLE>
<TABLE>
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<S> <C>
Limitation on Changes in Control.... 103
Transfer Agent and Registrar........ 105
Stock Exchange Listing.............. 105
COMPARISON OF RIGHTS OF
SHAREHOLDERS........................ 106
TRANSOCEAN SEDCO FOREX'S PROPOSAL TO
AMEND ITS MEMORANDUM OF
ASSOCIATION AND ARTICLES OF
ASSOCIATION......................... 115
General............................. 115
Purposes and Effects of Increasing
the Number of Directors.......... 115
Purposes and Effects of Updating and
Other Clarifying Changes......... 115
Vote Required; Recommendation of the
Board of Directors............... 115
TRANSOCEAN SEDCO FOREX'S PROPOSAL TO
INCREASE ITS AUTHORIZED CAPITAL..... 116
General............................. 116
Purposes and Effects of Increasing
the Number of Authorized Ordinary
Shares........................... 116
Vote Required; Recommendation of the
Board of Directors............... 117
TRANSOCEAN SEDCO FOREX'S PROPOSAL TO
AMEND ITS LONG-TERM INCENTIVE
PLAN................................ 118
Description of the Proposal......... 118
Principal Provisions of the
Long-Term Incentive Plan......... 118
U.S. Federal Income Tax
Consequences..................... 121
Vote Required; Recommendation of the
Board of Directors............... 122
TRANSOCEAN SEDCO FOREX'S PROPOSAL TO
AMEND ITS EMPLOYEE STOCK PURCHASE
PLAN................................ 123
Description of the Proposal......... 123
Principal Provisions of the Employee
Stock Purchase Plan.............. 123
U.S. Federal Income Tax
Consequences..................... 124
Vote Required; Recommendation of the
Board of Directors............... 125
R&B FALCON'S PROPOSAL TO AMEND ITS
CERTIFICATE OF INCORPORATION........ 126
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
General............................. 126
Purpose of the Amendment............ 126
Description of the Proposed
Amendment........................ 126
Vote Required; Recommendation of the
Board of Directors............... 126
EXPERTS............................... 127
LEGAL MATTERS......................... 127
FUTURE SHAREHOLDER PROPOSALS.......... 127
Transocean Sedco Forex.............. 128
R&B Falcon.......................... 129
WHERE YOU CAN FIND MORE INFORMATION... 129
Annex A -- Agreement and Plan of
Merger dated as of August 19, 2000
by and among Transocean Sedco Forex
Inc., Transocean Holdings Inc., TSF
Delaware Inc. and R&B Falcon
Corporation
Annex B -- Opinion of Morgan Stanley &
Co. Incorporated dated August 19,
2000
Annex C -- Opinion of Goldman, Sachs &
Co. dated August 19, 2000
Annex D -- Opinion of Simmons &
Company International dated August
18, 2000
Annex E -- Transocean Sedco Forex
Memorandum of Association
Annex F -- Transocean Sedco Forex
Articles of Association
Annex G -- Transocean Sedco Forex
Long-Term Incentive Plan
Annex H -- Transocean Sedco Forex
Employee Stock Purchase Plan
</TABLE>
iii
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHY ARE TRANSOCEAN SEDCO FOREX AND R&B
FALCON PROPOSING TO MERGE?
A. The boards of directors of R&B Falcon and
Transocean Sedco Forex believe that the combined company can become the
drilling contractor of choice for customers, investors and employees. The
combined company will offer:
- Customers -- consistently high quality drilling services in all key
markets of the world, backed by technological expertise and financial
strength;
- Investors -- an investment in a combined company that will, upon
completion of the merger, operate the world's largest fleet of mobile
offshore drilling rigs and, based on current stock prices, have the
largest market capitalization of any offshore contract driller and the
third largest market capitalization of any oil services company; and
- Employees -- career opportunities with a financially strong company that
is an industry leader in the application of offshore drilling technology.
Q. PLEASE BRIEFLY DESCRIBE THE PROPOSED MERGER.
A. R&B Falcon will merge with a recently formed
subsidiary of Transocean Sedco Forex and become an indirect subsidiary of
Transocean Sedco Forex.
Q. WHAT WILL R&B FALCON'S SHAREHOLDERS RECEIVE
AS A RESULT OF THE MERGER?
A. In the merger, all of the R&B Falcon common
shares will be converted into the right to receive Transocean Sedco Forex
ordinary shares based on an exchange ratio of 0.5 Transocean Sedco Forex
ordinary shares for each R&B Falcon common share. Fractional shares will
not be issued. Instead, holders of R&B Falcon's common shares will receive
cash for any fractional share to which they would otherwise be entitled.
The ordinary shares of Transocean Sedco Forex received in the merger will
be listed on the New York Stock Exchange under the ticker symbol "RIG."
Holders of R&B Falcon's outstanding preferred shares will retain their R&B
Falcon preferred shares and remain as shareholders of R&B Falcon following
the merger. Immediately before the merger, the R&B Falcon certificate of
incorporation will be amended to grant the holders of R&B Falcon preferred
shares voting rights in the election of directors.
Q. WILL HOLDERS OF TRANSOCEAN SEDCO FOREX
ORDINARY SHARES RECEIVE ANY NEW SHARES AS A RESULT OF THE MERGER?
A. No. Holders of Transocean Sedco Forex
ordinary shares will continue to hold the Transocean Sedco Forex ordinary
shares they own at the effective time of the merger and will not receive
any new shares.
Q. HOW MANY NEW DIRECTORS WILL SERVE ON THE
BOARD OF DIRECTORS OF TRANSOCEAN SEDCO FOREX?
A. The merger does not affect the status of any of
the 10 current directors of Transocean Sedco Forex. Two new members
designated by R&B Falcon's board of directors will be added to the board.
If the proposal to increase the maximum size of the board of directors to
13 persons is approved by Transocean Sedco Forex's shareholders, R&B
Falcon's board of directors will designate a third additional member to
Transocean Sedco Forex's board of directors. As of the date of this joint
proxy statement/prospectus, the R&B Falcon board of directors has not made
its designation of persons to serve as new directors of Transocean Sedco
Forex.
Q. WHO WILL SERVE AS TRANSOCEAN SEDCO FOREX'S
CHAIRMAN AND EXECUTIVE OFFICERS?
A. Victor E. Grijalva will remain Chairman of the
Board of Directors, J. Michael Talbert will remain President and CEO, and
the other executive officers of Transocean Sedco Forex are expected to
continue to serve as executive officers of Transocean Sedco Forex.
Q. WHAT ARE THE U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER?
A. In general, for U.S. federal income tax
purposes, R&B Falcon's shareholders should not recognize any gain or loss
as a result of the merger except for cash received, if any,
1
<PAGE> 9
instead of fractional Transocean Sedco Forex ordinary shares.
Q. WILL SHAREHOLDERS HAVE APPRAISAL RIGHTS?
A. Shareholders of R&B Falcon or Transocean
Sedco Forex will not have any right to receive an appraisal of the value of
their shares in connection with the merger.
Q. WHEN DO YOU EXPECT THE MERGER TO BE
COMPLETED?
A. We are working toward completing the merger
as quickly as possible after all the conditions to the merger, including
obtaining the approvals of our shareholders at the special meetings, are
fulfilled. Fulfilling some of these conditions, including our receipt of
governmental clearances or approvals, is not entirely within our control.
We currently expect to complete the merger by the end of the first quarter
of 2001.
Q. WHAT DO I NEED TO DO TO VOTE?
A. Both companies' shareholder meetings will
take place on December , 2000. After carefully reading and considering
the information contained in this document and the documents incorporated
by reference, please indicate on the enclosed proxy card how you want to
vote. Mail your signed proxy card in the enclosed return envelope as soon
as possible, so that your shares may be represented at your shareholder
meeting.
Q. WHAT VOTE DOES MY BOARD OF DIRECTORS
RECOMMEND?
A. The R&B Falcon board of directors
unanimously recommends that R&B Falcon's common shareholders vote in favor
of adoption of the merger agreement and approval of the proposed amendment
to R&B Falcon's certificate of incorporation to grant holders of R&B
Falcon's outstanding preferred shares voting rights in the election of
directors.
The Transocean Sedco Forex board of directors unanimously recommends that
Transocean Sedco Forex's shareholders vote for the increase in authorized
ordinary share capital and for the issuance of ordinary shares in the
merger, which are both conditions to the merger. Transocean Sedco Forex's
board also unanimously recommends that Transocean Sedco Forex's
shareholders vote for the amendment of Transocean Sedco Forex's memorandum
and articles of association to increase the maximum size of the board of
directors to 13 persons and make updating and other clarifying changes, and
the amendments to Transocean Sedco Forex's Long-Term Incentive Plan and
Employee Stock Purchase Plan to increase the number of shares reserved for
issuance under those plans.
Q. WHAT SHOULD I DO IF I WANT TO CHANGE MY VOTE?
A. You can change your vote at any time before
your proxy card is voted at your shareholder meeting. You can do this in
one of three ways:
- you can send a written notice stating that you would like to revoke your
proxy;
- you can complete and submit a new proxy card; or
- you can attend your meeting and vote in person.
However, your attendance alone will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow the procedure
provided by your broker to change those instructions.
Q. WHAT IF I PLAN TO ATTEND THE SHAREHOLDER
MEETING IN PERSON?
A. We recommend that you send in your proxy
anyway. You may still attend the meeting and vote in person.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY
BROKER, WILL MY BROKER VOTE MY SHARES FOR ME WITHOUT MY INSTRUCTIONS?
A. We recommend that you contact your broker.
Your broker can give you directions on how to instruct the broker to vote
your shares. Your broker may not be able to vote your shares unless the
broker receives appropriate instructions from you.
Q. SHOULD I SEND IN MY SHARE CERTIFICATES?
A. No. After the merger is completed, we will
send written instructions, including a letter of transmittal, that explains
how to exchange
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R&B Falcon share certificates for Transocean Sedco Forex share
certificates. Please do not send in any R&B Falcon share certificates until
you receive these written instructions and the letter of transmittal.
Transocean Sedco Forex's share-holders will keep their current share
certificates.
Q. WHOM DO I CALL IF I HAVE QUESTIONS ABOUT THE
MEETINGS OR THE MERGER?
A. Transocean Sedco Forex's shareholders should
contact either of the following:
Transocean Sedco Forex:
Jeffrey L. Chastain
Director of Investor Relations and Communications
Transocean Sedco Forex Inc.
4 Greenway Plaza
Houston, Texas 77046
Fax: (713) 232-7001
Phone: (713) 232-7500
the Transocean Sedco Forex proxy solicitor:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Fax: (212) 809-8839
Phone: (800) 290-6433
R&B Falcon's shareholders should contact either of the following:
R&B Falcon:
Charles R. Ofner
Senior Vice President, Business Development and Investor Relations
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Fax: (281) 496-1749
Phone: (281) 496-5000
the R&B Falcon proxy solicitor:
Georgeson Shareholder Communications Inc.
17 State Street
New York, New York 10004
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
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SUMMARY
This summary highlights selected information from this document. To
understand the merger fully and for a more complete description of the legal
terms of the merger, you should carefully read this entire document, including
the annexes and the other documents to which we have referred you in "Where You
Can Find More Information" on page 129. We have included page references in this
summary to direct you to more complete descriptions of the topics presented in
this summary.
THE COMPANIES
TRANSOCEAN SEDCO FOREX INC.
P.O. Box 265 GT
Walker House
Grand Cayman
Cayman Islands
with principal executive offices at:
4 Greenway Plaza
Houston, Texas 77046
Phone: (713) 232-7500
Transocean Sedco Forex is a leading international provider of contract
drilling services for oil and gas wells. As of the date of this joint proxy
statement/prospectus, Transocean Sedco Forex owns, has partial ownership in,
operates or has under construction 71 offshore drilling units. Transocean Sedco
Forex contracts these drilling rigs, related equipment and work crews primarily
on a dayrate basis to drill oil and gas wells. Transocean Sedco Forex
specializes in technically demanding segments of the offshore drilling business
with a particular focus on deepwater and harsh environment drilling services. On
December 31, 1999, Transocean Sedco Forex, then known as "Transocean Offshore
Inc.," merged with Sedco Forex Holdings Limited, the offshore drilling service
business of Schlumberger Limited.
For further information on Transocean Sedco Forex, see "Business of
Transocean Sedco Forex" on page 88.
R&B FALCON CORPORATION
901 Threadneedle
Houston, Texas 77079
Phone: (281) 496-5000
R&B Falcon's primary business is providing marine contract drilling and
ancillary services on a worldwide basis. R&B Falcon provides the equipment and
personnel for drilling wells and conducting workover operations on wells in
marine environments and on land. R&B Falcon possesses experience in deepwater
drilling, U.S. and international shallow-water drilling, inland barge drilling,
land drilling, marine services and turnkey drilling. R&B Falcon is the result of
the 1997 combination of Reading & Bates Corporation and Falcon Drilling Company,
Inc. and the subsequent acquisition of Cliffs Drilling Company in late 1998. R&B
Falcon operates a fleet of 138 marine units, including 61 inland marine drilling
and workover units, 50 shallow-water units, 22 deepwater drilling and service
units and five mobile production units.
For further information on R&B Falcon, see "Business of R&B Falcon" on page
90.
TRANSOCEAN HOLDINGS INC.
4 Greenway Plaza
Houston, Texas 77046
Phone: (713) 232-7500
Transocean Holdings is a direct wholly owned subsidiary of Transocean Sedco
Forex and was recently formed for the purpose of effecting the merger.
TSF DELAWARE INC.
4 Greenway Plaza
Houston, Texas 77046
Phone: (713) 232-7500
TSF Delaware is a direct wholly owned subsidiary of Transocean Holdings and
was recently formed for the purpose of effecting the merger.
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THE SHAREHOLDER MEETINGS (PAGES 28 AND 32)
The extraordinary general meeting of Transocean Sedco Forex's shareholders
will be held on December , 2000, at 9:00 a.m., Houston time, at 4 Greenway
Plaza, Room C-100 (Mall level), Houston, Texas.
The special meeting of R&B Falcon's shareholders will be held on December
, 2000, at 9:00 a.m., Houston time, at the Radisson Suite Hotel East and West,
10655 Katy Freeway (Valencia Room), Houston, Texas.
The record date for Transocean Sedco Forex's shareholders entitled to
receive notice of and to vote at Transocean Sedco Forex's shareholder meeting
was the close of business on October 30, 2000. On that date, approximately
million Transocean Sedco Forex ordinary shares were issued and entitled to vote
at the extraordinary general meeting.
The record date for R&B Falcon's shareholders entitled to receive notice of
and for R&B Falcon common shareholders entitled to vote at R&B Falcon's
shareholder meeting was the close of business on October 30, 2000. On that date,
approximately million R&B Falcon common shares were outstanding and
entitled to vote at the special meeting.
R&B FALCON VOTES REQUIRED FOR APPROVAL OF THE R&B FALCON PROPOSALS (PAGE 32)
The favorable vote of a majority of the outstanding R&B Falcon common
shares is required to adopt the merger agreement and to approve the proposal to
amend the certificate of incorporation of R&B Falcon to grant holders of R&B
Falcon's outstanding preferred shares voting rights in the election of
directors. Both of these proposals must be approved to complete the merger. The
proposal to amend the certificate of incorporation will, if approved, be
implemented only if and immediately before the merger is completed.
A majority of the outstanding R&B Falcon common shares must be present, in
person or by proxy, to constitute a quorum at the special meeting.
As of October , 2000, R&B Falcon directors and executive officers
beneficially owned approximately % of the outstanding R&B Falcon common
shares, including outstanding options. These individuals have indicated that
they intend to vote in favor of the R&B Falcon proposals.
RECOMMENDATION TO R&B FALCON'S SHAREHOLDERS (PAGE 53)
R&B FALCON'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER AND THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION TO GRANT HOLDERS OF R&B FALCON'S OUTSTANDING
PREFERRED SHARES VOTING RIGHTS IN THE ELECTION OF DIRECTORS ARE ADVISABLE TO R&B
FALCON'S SHAREHOLDERS AND RECOMMENDS THAT THE HOLDERS OF R&B FALCON COMMON
SHARES VOTE "FOR" BOTH PROPOSALS.
OPINION OF MORGAN STANLEY & CO. INCORPORATED (PAGE 53)
In deciding to approve the merger, on August 18, 2000, R&B Falcon's board
of directors received and considered the oral opinion of Morgan Stanley & Co.
Incorporated, its financial advisor, that, as of that date, the exchange ratio
under the merger agreement was fair from a financial point of view to the
holders of R&B Falcon common shares. Morgan Stanley subsequently confirmed its
oral opinion by delivery of its written opinion dated August 19, 2000. Morgan
Stanley based its opinion on and delivered it subject to the assumptions,
limitations and qualifications stated in the opinion.
The full text of the written opinion of Morgan Stanley is attached as Annex
B to this document. We encourage you to read the opinion carefully, as well as
the description of the analyses and assumptions upon which the opinion was
based.
TRANSOCEAN SEDCO FOREX VOTES REQUIRED FOR APPROVAL OF THE TRANSOCEAN SEDCO FOREX
PROPOSALS (PAGE 28)
- The proposal for the increase in Transocean Sedco Forex's authorized
ordinary share capital requires the affirmative vote of the holders of at
least a majority of the ordinary shares present in person or by proxy at
the extraordinary general meeting and entitled to vote on the matter.
This proposal must be approved in order to complete the merger, and if
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approved, will be implemented only if the merger is completed.
- The proposal for the issuance of the Transocean Sedco Forex ordinary
shares in the merger requires the affirmative vote of at least a majority
of the votes cast on the proposal, provided that the total number of
votes cast on the proposal represents a majority of the votes entitled to
be cast. This proposal must be approved in order to complete the merger.
- The proposal to amend the memorandum of association and the articles of
association of Transocean Sedco Forex to increase the maximum size of the
board of directors and make updating and other clarifying changes
requires the approval of holders of at least two-thirds of the ordinary
shares present in person or by proxy at the extraordinary general meeting
and entitled to vote on the matter. Approval of this proposal is not
necessary to complete the merger, and if approved, will be implemented
only if the merger is completed.
- The proposal to amend Transocean Sedco Forex's Long-Term Incentive Plan
requires the approval of holders of at least a majority of the votes cast
on the proposal, provided that the total number of votes cast on the
proposal represents a majority of the votes entitled to be cast. Approval
of this proposal is not necessary to complete the merger and, if
approved, will only be implemented if the merger is completed.
- The proposal to amend Transocean Sedco Forex's Employee Stock Purchase
Plan requires the approval of at least a majority of the votes cast on
the proposal, provided that the total number of votes cast on the
proposal represents a majority of the votes entitled to be cast. Approval
of this proposal is not necessary to complete the merger and, if
approved, will only be implemented if the merger is completed.
A majority of the issued ordinary shares of Transocean Sedco Forex must be
present, in person or by proxy, to constitute a quorum at the extraordinary
general meeting.
As of October , 2000, Transocean Sedco Forex directors and executive
officers beneficially owned less than one percent of the issued ordinary shares
of Transocean Sedco Forex, including outstanding options. These individuals have
indicated that they intend to vote in favor of the Transocean Sedco Forex
proposals. In addition, Siem Industries, Inc., an affiliate of Kristian Siem, a
director of Transocean Sedco Forex, holds 1,538,720 ordinary shares of
Transocean Sedco Forex. Siem Industries has indicated that it intends to vote
its shares in favor of all of the proposals.
RECOMMENDATION TO TRANSOCEAN SEDCO FOREX'S SHAREHOLDERS (PAGE 39)
TRANSOCEAN SEDCO FOREX'S BOARD OF DIRECTORS BELIEVES THAT THE INCREASE IN
AUTHORIZED ORDINARY SHARE CAPITAL, THE ISSUANCE OF ORDINARY SHARES IN CONNECTION
WITH THE MERGER, THE AMENDMENT OF THE MEMORANDUM OF ASSOCIATION AND THE ARTICLES
OF ASSOCIATION, THE AMENDMENT OF THE LONG-TERM INCENTIVE PLAN AND THE AMENDMENT
OF THE EMPLOYEE STOCK PURCHASE PLAN ARE ADVISABLE AND IN THE BEST INTERESTS OF
TRANSOCEAN SEDCO FOREX'S SHAREHOLDERS AND RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" EACH OF THE PROPOSALS.
OPINION OF GOLDMAN, SACHS & CO. (PAGE 41)
On August 18, 2000, Goldman, Sachs & Co. delivered its oral opinion to the
Transocean Sedco Forex board of directors to the effect that, as of such date,
the exchange ratio was fair from a financial point of view to Transocean Sedco
Forex. Goldman Sachs subsequently confirmed its oral opinion by delivery of its
written opinion dated August 19, 2000.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS IS ATTACHED TO THIS
DOCUMENT AS ANNEX C. YOU ARE ENCOURAGED TO, AND SHOULD, READ THE OPINION IN ITS
ENTIRETY.
OPINION OF SIMMONS & COMPANY INTERNATIONAL (PAGE 47)
On August 18, 2000, Simmons & Company International delivered its oral
opinion to the Transocean Sedco Forex board of directors to the effect that, as
of such date, the exchange ratio was fair from a financial point of view to
Transocean Sedco Forex. Simmons subsequently confirmed its
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oral opinion by delivery of its written opinion dated August 18, 2000.
THE FULL TEXT OF THE WRITTEN OPINION OF SIMMONS IS ATTACHED TO THIS
DOCUMENT AS ANNEX D. YOU ARE ENCOURAGED TO, AND SHOULD, READ THE OPINION IN ITS
ENTIRETY.
OVERVIEW OF THE MERGER AGREEMENT (PAGE 74)
The merger agreement is attached as Annex A to this joint proxy
statement/prospectus. The merger agreement is the document that governs the
merger. We urge you to read this document carefully.
Transocean Sedco Forex and R&B Falcon are proposing a merger transaction in
which R&B Falcon will become an indirect subsidiary of Transocean Sedco Forex.
The following will occur as a result of the merger:
- Each R&B Falcon common share will automatically be converted into the
right to receive 0.5 ordinary shares of Transocean Sedco Forex. R&B
Falcon common shareholders will own approximately 32% of the total issued
Transocean Sedco Forex ordinary shares after the merger;
- Each Transocean Sedco Forex ordinary share will remain issued as one
Transocean Sedco Forex ordinary share. Transocean Sedco Forex
shareholders will own approximately 68% of the total issued Transocean
Sedco Forex ordinary shares after the merger;
- Each of R&B Falcon's outstanding preferred shares will remain outstanding
and unaffected by the merger. See "The Merger -- Effect of the Merger on
the R&B Falcon Preferred Shares";
- Each option to purchase R&B Falcon common shares granted to R&B Falcon
employees and directors under R&B Falcon's stock option plans that is
outstanding and not yet exercised before completing the merger will
become an option to purchase a number of Transocean Sedco Forex ordinary
shares equal to 0.5 multiplied by the number of R&B Falcon common shares
subject to the option, at an exercise price per Transocean Sedco Forex
ordinary share equal to the exercise price per R&B Falcon common share
subject to the option divided by 0.5; and
- Each warrant to purchase R&B Falcon common shares will be assumed by
Transocean Sedco Forex and become a warrant to purchase a number of
Transocean Sedco Forex ordinary shares equal to 0.5 multiplied by the
number of R&B Falcon common shares into which the warrant is exercisable
immediately before the merger.
CONDITIONS TO THE MERGER (PAGE 82)
The completion of the merger is dependent on a number of conditions,
including the following:
- approval by R&B Falcon's common shareholders of the proposals to adopt
the merger agreement and to approve the amendment to R&B Falcon's
certificate of incorporation;
- approval by Transocean Sedco Forex's shareholders of the proposals to
increase Transocean Sedco Forex's authorized ordinary share capital and
to issue ordinary shares in the merger;
- absence of (1) any court decree, order or injunction prohibiting the
merger and (2) any governmental statute, rule or regulation prohibiting
the merger or making it unlawful;
- the listing of the Transocean Sedco Forex ordinary shares to be issued in
the merger on the New York Stock Exchange;
- the rating of specified R&B Falcon debt as investment grade by Moody's
and Standard & Poor's;
- the completion of a public offering by R&B Falcon of R&B Falcon common
shares with net proceeds of at least $105 million, and the application of
the proceeds to a redemption of R&B Falcon's outstanding preferred shares
having an aggregate liquidation preference of up to $105 million, at the
price of 113.875% of the liquidation preference plus accrued and unpaid
dividends, if any, to the redemption date;
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<PAGE> 15
- the receipt by Transocean Sedco Forex and R&B Falcon from their
respective tax counsel of opinions that, for U.S. federal income tax
purposes, the merger will qualify as a tax-free reorganization and no
gain or loss will be recognized by the common shareholders of R&B Falcon
as a result of the merger, except with respect to cash received in lieu
of fractional shares and except with respect to some shareholders of R&B
Falcon who will hold 5% or more of the shares of Transocean Sedco Forex
after the merger;
- the absence of any event or occurrence having or reasonably likely to
have a material adverse effect on Transocean Sedco Forex's or R&B
Falcon's business, assets, conditions (financial or otherwise) or
operations or its ability to complete the merger or fulfill the
conditions to closing of the merger;
- expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976; and
- receipt of indications reasonably satisfactory to R&B Falcon and
Transocean Sedco Forex that the merger will not be referred to the
Competition Commission of the United Kingdom.
Each of the following is also a condition to the merger:
- expiration or termination of any mandatory waiting period under any
competition, antitrust or premerger notification laws of jurisdictions
other than the United States;
- absence of any claim, proceeding or action, whether pending or threatened
in writing, by the government of the United States, the United Kingdom or
the European Union seeking to prevent the merger or penalize a party for
completing the merger; and
- absence of a final or preliminary administrative order denying approval
of or prohibiting the merger under the competition, antitrust or
premerger notification laws of any jurisdiction other than the United
States;
unless, in each case, if in the reasonable judgment of Transocean Sedco Forex
non-satisfaction of any of these conditions is not reasonably expected to have a
material adverse effect on Transocean Sedco Forex or R&B Falcon, materially
impair the benefits or advantages Transocean Sedco Forex expects to receive from
the merger or have a material adverse effect on Transocean Sedco Forex's
business plan or business strategy for the combined company.
TERMINATION OF THE MERGER AGREEMENT (PAGE 85)
The merger agreement may be terminated by the mutual written consent of R&B
Falcon and Transocean Sedco Forex. In addition, either R&B Falcon or Transocean
Sedco Forex may terminate the merger agreement if:
- the merger has not been completed by August 31, 2001;
- R&B Falcon's common shareholders fail to adopt the merger agreement or to
approve the proposed amendment to R&B Falcon's certificate of
incorporation;
- Transocean Sedco Forex's shareholders fail to approve the increase in
authorized ordinary share capital or the issuance of Transocean Sedco
Forex ordinary shares in the merger; or
- a final and unappealable court or governmental order, decree, ruling or
other action permanently prohibits the merger.
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The merger agreement may also be terminated by R&B Falcon if:
- Transocean Sedco Forex or TSF Delaware breaches any representation,
warranty, covenant or agreement that would give rise to a failure of a
condition to the merger and the breach is not curable or is not cured
within 30 days after receipt of a notice of the breach;
- Transocean Sedco Forex's board (1) withdraws or materially modifies its
approval or recommendation of the merger or (2) recommends a competing
acquisition proposal for Transocean Sedco Forex; or
- before the adoption by the R&B Falcon common shareholders of the merger
agreement and their approval of the proposal to amend the certificate of
incorporation of R&B Falcon, and subject to various other conditions,
including giving prior written notice to Transocean Sedco Forex and the
payment of a $225 million termination fee, R&B Falcon executes an
agreement regarding an alternative transaction after the R&B Falcon board
determines that it would be inconsistent with its fiduciary duties to
proceed with the merger in the face of a superior alternative acquisition
proposal.
The merger agreement may also be terminated by Transocean Sedco Forex if:
- R&B Falcon breaches any representation, warranty, covenant or agreement
that would give rise to a failure of a condition to the merger and the
breach is not curable or is not cured within 30 days after receipt of a
notice of the breach;
- R&B Falcon's board (1) withdraws or materially modifies its approval or
recommendation of the merger or (2) recommends a competing acquisition
proposal for R&B Falcon; or
- before the approval by the Transocean Sedco Forex shareholders of the
proposals summarized on pages 5-6, and subject to various other
conditions, including giving prior written notice to R&B Falcon and the
payment of a $225 million termination fee, Transocean Sedco Forex
executes an agreement regarding an alternative transaction after the
Transocean Sedco Forex board determines that it is inconsistent with its
fiduciary duties to proceed with the merger in the face of a superior
alternative acquisition proposal.
TERMINATION FEES AND EXPENSE REIMBURSEMENT (PAGE 87)
The merger agreement requires R&B Falcon to pay Transocean Sedco Forex a
$225 million fee if:
- the merger agreement is terminated because R&B Falcon's common
shareholders do not adopt the merger agreement or approve the amendment
of R&B Falcon's certificate of incorporation after the public
announcement of a competing acquisition proposal;
- the merger agreement is terminated by Transocean Sedco Forex because R&B
Falcon's board withdraws or materially modifies in a manner adverse to
Transocean Sedco Forex its approval or recommendation of the merger; or
- the merger agreement is terminated by R&B Falcon in order to enter into
an agreement concerning a superior alternative acquisition proposal.
The merger requires Transocean Sedco Forex to pay R&B Falcon a $225 million
fee if:
- the merger agreement is terminated because Transocean Sedco Forex's
shareholders do not approve the increase in Transocean Sedco Forex's
authorized ordinary share capital or the issuance of Transocean Sedco
Forex ordinary shares in the merger after the public announcement of a
competing acquisition proposal;
- the merger agreement is terminated by R&B Falcon because Transocean Sedco
Forex's board withdraws or materially modifies in a manner adverse to R&B
Falcon its approval or recommendation of the merger; or
- the merger agreement is terminated by Transocean Sedco Forex in order to
permit
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Transocean Sedco Forex to enter into an agreement concerning a superior
alternative acquisition proposal.
The merger agreement requires R&B Falcon to pay Transocean Sedco Forex a
fee of $10 million to reimburse Transocean Sedco Forex for its costs and
expenses if the merger agreement is terminated because R&B Falcon's common
shareholders do not adopt the merger agreement or approve the amendment to R&B
Falcon's certificate of incorporation in circumstances in which the $225 million
fee is not payable.
The merger agreement requires Transocean Sedco Forex to pay R&B Falcon a
fee of $10 million to reimburse R&B Falcon for its costs and expenses if the
merger agreement is terminated because Transocean Sedco Forex's shareholders do
not approve the increase of Transocean Sedco Forex's authorized ordinary share
capital or the issuance of Transocean Sedco Forex ordinary shares in the merger
in circumstances in which the $225 million fee is not payable.
"NO SOLICITATION" PROVISIONS (PAGE 79)
The merger agreement contains detailed provisions prohibiting either party
from seeking an alternative transaction. These "no solicitation" provisions
prohibit either party from taking any action to solicit a competing acquisition
proposal as described in pages 79 through 81. The merger agreement does not,
however, prohibit either party or its respective board of directors from
considering, and potentially recommending, an unsolicited written superior
proposal from a third party as described in pages 79 through 81.
TRANSOCEAN SEDCO FOREX AFTER THE MERGER (PAGE 62)
After the merger, the Transocean Sedco Forex board of directors will
continue to manage the business of Transocean Sedco Forex, which then will
include the business of R&B Falcon as an indirect subsidiary. The combined
company will continue to be called "Transocean Sedco Forex Inc." In consultation
with Transocean Sedco Forex, the R&B Falcon board of directors will designate
two persons to become members of the Transocean Sedco Forex board of directors
upon completion of the merger. If the proposal to increase the maximum size of
the Transocean Sedco Forex board of directors to 13 persons is approved, the R&B
Falcon board, in consultation with Transocean Sedco Forex, will also designate
an additional director.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 58)
In considering the boards' recommendations, shareholders should be aware
that some officers and directors of R&B Falcon may have interests in the merger
that may be different from, or in addition to, those of shareholders generally:
- R&B Falcon executive officers have change of control provisions in their
employment agreements with R&B Falcon that will be triggered by the
merger;
- Paul B. Loyd, Jr., currently Chairman and Chief Executive Officer of R&B
Falcon, will enter into a consulting agreement with R&B Falcon in
connection with the merger;
- R&B Falcon's board of directors will, in consultation with Transocean
Sedco Forex, designate two or three persons, who may be current directors
of R&B Falcon, to become new members of Transocean Sedco Forex's board of
directors following the merger;
- Outstanding options to purchase R&B Falcon common shares and restricted
common shares, including options and restricted shares held by officers
and directors of R&B Falcon, will become vested and exercisable effective
48 hours before the merger, conditioned on the subsequent occurrence of
the merger; and
- R&B Falcon officers and directors will be indemnified by Transocean Sedco
Forex as a result of the merger.
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REGULATORY CLEARANCES (PAGE 70)
Transocean Sedco Forex and R&B Falcon have made or will make appropriate
filings to obtain approval of the proposed merger from governmental regulators,
including competition and antitrust authorities in the U.S., the U.K., Ireland
and Brazil.
We are working to obtain the required regulatory clearances and consents.
Although we have not yet received the required clearances, we anticipate that we
will receive regulatory clearances in sufficient time to complete the merger by
the end of the first quarter of 2001. However, we can give no assurance as to
when or whether these clearances and consents will be obtained or the terms and
conditions that these consents and clearances may impose.
ACCOUNTING TREATMENT AND CONSIDERATIONS (PAGE 66)
Transocean Sedco Forex will account for the merger using the purchase
method of accounting, with Transocean Sedco Forex treated as the acquiror. As a
result, Transocean Sedco Forex will record the assets and liabilities of
Transocean Sedco Forex at historical amounts, without restatement to fair
values. Transocean Sedco Forex will record the assets and liabilities of R&B
Falcon at their estimated fair values at the date of the merger, with the excess
of the purchase price over the sum of the estimated fair values recorded as
goodwill. For this purpose, the purchase price is calculated using the estimated
number of Transocean Sedco Forex ordinary shares to be issued in the merger and
the average trading price of Transocean Sedco Forex ordinary shares for a period
immediately before and after the announcement of the merger.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES (PAGE 66)
R&B Falcon's Shareholders
We expect that, for U.S. federal income tax purposes, the R&B Falcon
shareholders' exchange of R&B Falcon common shares for ordinary shares of
Transocean Sedco Forex generally will not cause R&B Falcon shareholders to
recognize any gain or loss for U.S. federal income tax purposes except for cash
received, if any, instead of fractional Transocean Sedco Forex ordinary shares
and except with respect to some shareholders of R&B Falcon who will hold 5% or
more of the shares of Transocean Sedco Forex after the merger.
Transocean Sedco Forex's Shareholders
Because Transocean Sedco Forex ordinary shares remain unchanged, the merger
will not cause Transocean Sedco Forex shareholders to recognize any gain or loss
for U.S. federal income tax purposes.
THIS TAX TREATMENT MAY NOT APPLY TO SOME SHAREHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER FOR A SHAREHOLDER MAY BE COMPLICATED. THE
CONSEQUENCES WILL DEPEND ON EACH SHAREHOLDER'S SPECIFIC SITUATION AND ON
VARIABLES NOT WITHIN OUR CONTROL. EACH SHAREHOLDER SHOULD CONSULT A TAX ADVISOR
AS TO THE TAX CONSEQUENCES OF THE MERGER, INCLUDING ANY ESTATE, GIFT, STATE,
LOCAL OR NON-U.S. TAX CONSEQUENCES OF THE MERGER.
NO APPRAISAL RIGHTS
Shareholders of Transocean Sedco Forex and R&B Falcon will not have any
right to an appraisal of the value of their shares in connection with the
merger.
LISTING OF TRANSOCEAN SEDCO FOREX ORDINARY SHARES (PAGE 73)
Transocean Sedco Forex will apply to list on the New York Stock Exchange
the ordinary shares to be issued in the merger.
11
<PAGE> 19
COMPARISON OF RIGHTS OF SHAREHOLDERS (PAGE 106)
The rights of R&B Falcon common shareholders currently are governed by the
General Corporation Law of Delaware and R&B Falcon's certificate of
incorporation and bylaws. The rights of Transocean Sedco Forex ordinary
shareholders are governed by the Companies Law of the Cayman Islands and
Transocean Sedco Forex's articles of association and memorandum of association.
When the merger is completed, Transocean Sedco Forex ordinary shareholders and
R&B Falcon common shareholders will both be Transocean Sedco Forex ordinary
shareholders, and their rights will be governed by the Companies Law of the
Cayman Islands and Transocean Sedco Forex's articles of association and
memorandum of association. See pages 105 through 113 for more specific
information.
MARKET PRICE AND DIVIDEND INFORMATION (PAGE 91)
Transocean Sedco Forex ordinary shares and R&B Falcon common shares are
both quoted on the New York Stock Exchange. On August 18, 2000, the last trading
day before we announced the merger, Transocean Sedco Forex ordinary shares
closed at $57.69 per share and R&B Falcon common shares closed at $25.19 per
share. On October 25, 2000, the most recent practicable date before the date of
this document, Transocean Sedco Forex ordinary shares closed at $55 1/4 per
share and R&B Falcon common shares closed at $25 15/16 per share. The market
price of Transocean Sedco Forex ordinary shares will fluctuate before and after
the merger, but the exchange ratio is fixed. You should obtain current share
price quotations for Transocean Sedco Forex ordinary shares and R&B Falcon
common shares.
Transocean Sedco Forex has paid quarterly cash dividends of $0.03 per
ordinary share since the fourth quarter of 1993. Transocean Sedco Forex does not
currently plan to change the amount of its dividend payments. Any future
declaration and payment of dividends by Transocean Sedco Forex will be made at
the discretion of its board of directors and will be dependent on a variety of
factors, including Transocean Sedco Forex's results of operations, financial
condition, cash requirements and restrictions contained in its debt agreements.
Any declared dividend will be payable only out of Transocean Sedco Forex's
profits or share premium account in accordance with Cayman Islands law.
R&B Falcon does not generally pay cash dividends. In addition, as of the
date of this joint proxy statement/prospectus, R&B Falcon is unable to pay
dividends because of the covenants in some of its outstanding debt indentures.
12
<PAGE> 20
TRANSOCEAN SEDCO FOREX SELECTED HISTORICAL COMBINED FINANCIAL DATA
On December 31, 1999, the merger of Transocean Offshore Inc. and Sedco
Forex was completed. Sedco Forex was the offshore contract drilling service
business of Schlumberger Limited and was spun off immediately before the merger
transaction. As a result of the merger, Sedco Forex became a wholly owned
subsidiary of "Transocean Offshore Inc.", which changed its name to Transocean
Sedco Forex Inc. The merger was accounted for as a purchase, with Sedco Forex as
the acquiror for accounting purposes.
Transocean Sedco Forex prepared the selected historical combined financial
data in the following table using the combined financial statements of
Transocean Sedco Forex. Transocean Sedco Forex derived the statement of
operations and other financial data for the year ended December 31, 1999 and the
balance sheet data as of December 31, 1999 from its combined financial
statements audited by Ernst & Young LLP, independent auditors. Transocean Sedco
Forex derived the statement of operations and other financial data for each of
the three years in the period ended December 31, 1998, and the balance sheet
data as of December 31, 1997 and 1998, from its combined financial statements
audited by PricewaterhouseCoopers LLP, independent accountants. Transocean Sedco
Forex derived the statement of operations and other financial data for the six
months ended June 30, 2000 and 1999 and the year ended December 31, 1995 and the
balance sheet data as of June 30, 2000 and December 31, 1996 and 1995 from its
unaudited combined financial statements. The unaudited interim financial
statements for the six months ended June 30, 2000 and 1999 include all
adjustments, consisting of normal recurring adjustments, which Transocean Sedco
Forex considers necessary for a fair presentation of the financial position and
the results of operations for these periods. Operating results for the six
months ended June 30, 2000 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 2000. The data should be
read in conjunction with the combined financial statements, related notes and
other financial information incorporated by reference in this joint proxy
statement/prospectus.
The balance sheet data as of December 31, 1999 and June 30, 2000 represents
the consolidated financial position of Transocean Sedco Forex, and the balance
sheet data as of dates prior to the Transocean Offshore Inc. and Sedco Forex
merger reflect the financial position of Sedco Forex and not that of historical
Transocean Offshore Inc. The income statement data and other financial data for
the six months ended June 30, 2000 represent the operating results of Transocean
Sedco Forex and, for the periods prior to the Transocean Offshore Inc. and Sedco
Forex merger, reflect the operating results of Sedco Forex and not that of
historical Transocean Offshore Inc.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
--------------- -----------------------------------------
2000 1999 1999 1998 1997 1996 1995
------ ------ ---- ------ ---- ---- -----------
(UNAUDITED) (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Operating revenues.................... $600 $352 $648 $1,091 $891 $663 $437
Operating income...................... 81 40 49 377 299 163 60
Net income............................ 68 39 58 342 260 148 62
Earnings per share (Pro forma prior to
effective date of the Transocean
Offshore Inc. and Sedco Forex
merger)(a)
Basic............................... 0.33 0.35 0.53 3.12 2.38 1.35 0.57
Diluted............................. 0.32 0.35 0.53 3.12 2.38 1.35 0.57
OTHER FINANCIAL DATA(B)
Cash flows from operating
activities.......................... $ 84 $151 $241 $ 473 $318 $236
Capital expenditures.................. 308 250 537 425 187 151
EBITDA(c)............................. 216 106 186 508 420 272
</TABLE>
13
<PAGE> 21
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------------
2000 1999 1998 1997 1996 1995
-------- ------ ------ ------ ---- -----
(UNAUDITED)
(IN MILLIONS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets............................. $6,314 $6,140 $1,473 $1,051 $899 $781
Total debt............................... 1,468 1,266 100 160 53 44
Equity................................... 3,976 3,910 564 363 462 574
</TABLE>
---------------
(a) Unaudited pro forma earnings per share prior to the effective date of the
Transocean Offshore Inc. and Sedco Forex merger is calculated using the
Transocean Sedco Forex shares and options issued pursuant to the Transocean
Offshore Inc. and Sedco Forex merger agreement.
(b) Other financial data is not available for the year ended December 31, 1995.
(c) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented here because it is a widely accepted financial indication of a
company's ability to incur and service debt. EBITDA measures presented may
not be comparable to similarly titled measures used by other companies.
EBITDA is not a measurement presented in accordance with accounting
principles generally accepted in the United States ("GAAP") and is not
intended to be used in lieu of GAAP presentations of results of operations
and cash provided by operating activities.
14
<PAGE> 22
R&B FALCON CORPORATION SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA
R&B Falcon prepared the selected historical consolidated financial data in
the table below using the consolidated financial statements of R&B Falcon. R&B
Falcon derived the statement of operations data below for each of the five years
in the period ended December 31, 1999, and the consolidated balance sheet data
as of December 31 of each year from 1996 to 1999, from its financial statements
audited by Arthur Andersen LLP, independent public accountants. R&B Falcon
derived the balance sheet data for 1995 from the separate consolidated balance
sheets of Reading & Bates Corporation and Falcon Drilling Company, Inc., each
audited by Arthur Andersen, LLP, independent public accountants. R&B Falcon
derived the consolidated statement of operations data for the six months ended
June 30, 2000 and 1999 and the consolidated balance sheet data as of June 30,
2000 and 1999 from its unaudited consolidated financial statements which, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
unaudited interim periods. Operating results for the six months ended June 30,
2000 are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 2000.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------- --------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- ------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Operating revenues........................ $ 419.4 $ 470.3 $ 918.8 $1,032.6 $ 933.0 $ 609.6 $390.3
Income (loss) from continuing operations
before extraordinary items.............. (68.4) (10.9) (67.8)(a) 91.0(b) 29.8(c) 106.7 23.5
Income (loss) from continuing operations
before extraordinary items and after
preferred share dividends per common
share:
Basic................................... (0.49) (0.10) (0.53) 0.54 0.18 0.70 0.16
Diluted................................. (0.49) (0.10) (0.53) 0.54 0.18 0.67 0.15
OTHER FINANCIAL DATA
Cash flow from operating activities....... $ (81.9) $ 116.9 $ 198.6 $ 247.9 $ 330.1 $ 167.6 $ 56.0
Capital expenditures...................... 204.7 451.2 839.7 1,188.3 690.3 383.2 198.9
EBITDA(d)................................. 95.4 132.2 263.1 422.1 307.2 236.8 111.3
BALANCE SHEET DATA
Total assets.............................. $4,748.3 $4,712.1 $4,921.9 $3,714.0 $2,011.4 $1,455.8 $946.8
Long-term obligations (including current
portion) and redeemable preferred
shares.................................. 3,252.2 2,959.1 3,229.5 1,872.5 827.4 514.2 296.7
Total Shareholders' Equity................ 1,122.1 1,282.6 1,204.4 1,250.2 728.0 716.7 472.6
Dividends on common shares................ -- -- -- -- -- -- --
</TABLE>
---------------
(a) Included in 1999 are expenses of $34.7 million in connection with the
cancellation of certain drillship projects and $3.7 million of oil and gas
development expenses.
(b) Included in 1998 are expenses of $118.3 million in connection with the
cancellation of certain drillship projects, $19.5 million of oil and gas
development expenses and the reversal of $8.0 million of expenses in
connection with the merger of Reading & Bates Corporation and Falcon
Drilling Co. in December 1997, which was accounted for as a pooling of
interests.
(c) Included in 1997 are expenses of $66.4 million in connection with the
merger of Reading & Bates Corporation and Falcon Drilling Co. in December
1997, which was accounted for as a pooling of interests. Additionally, R&B
Falcon incurred oil and gas development expenses and charges of $130.2
million in 1997.
(d) EBITDA (income (loss) from continuing operations before extraordinary
items, interest expense, taxes, depreciation, amortization, cancellation of
conversion projects and merger expenses) is presented here because it is a
widely accepted financial indication of a company's ability to incur and
service debt. EBITDA measures presented may not be comparable to similarly
titled measures used by other companies. EBITDA is not a measurement
presented in accordance with accounting principles generally accepted in
the United States ("GAAP") and is not intended to be used in lieu of GAAP
presentations of results of operations and cash provided by operating
activities.
15
<PAGE> 23
UNAUDITED PRO FORMA COMBINED
SUMMARY FINANCIAL INFORMATION
We have included the following unaudited pro forma combined summary
financial information only for the purposes of illustration. The pro forma
statement of operations data assume that the merger between Transocean Sedco
Forex and R&B Falcon was completed on January 1, 1999 and the pro forma balance
sheet data assume that the merger was completed on June 30, 2000. The pro forma
information does not necessarily indicate what the operating results or
financial position would have been if the merger had been completed at the dates
indicated. Moreover, this information does not necessarily indicate what the
future operating results or financial position of the combined company will be.
This unaudited pro forma combined statement of operations data does not include
adjustments to reflect any cost savings or other operational efficiencies that
may be realized as a result of the merger of Transocean Sedco Forex and R&B
Falcon, or any future merger-related restructuring or integration expenses.
You should read this unaudited pro forma combined summary financial
information in conjunction with the "Unaudited Pro Forma Financial Information"
and the notes thereto beginning on page 90. The pro forma statement of
operations data for the year ended December 31, 1999 also assume that the merger
of Transocean Offshore Inc. and Sedco Forex was completed on January 1, 1999.
The pro forma results for the Transocean Offshore Inc. and Sedco Forex merger
are incorporated by reference in this joint proxy statement/prospectus from the
Form 8-K filed by Transocean Sedco Forex on September 22, 2000.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Operating revenues.......................................... $1,020 $2,498
Operating income (loss)..................................... (9) 151
Income (loss) from continuing operations.................... (76) 14
Loss from continuing operations applicable to
ordinary/common shareholders.............................. (89) (2)
Basic loss per share applicable to ordinary/common
shareholders.............................................. (0.29) (0.01)
Diluted loss per share applicable to ordinary/common
shareholders.............................................. (0.29) (0.01)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
(IN MILLIONS)
<S> <C>
BALANCE SHEET DATA
Total assets................................................ $16,540
Long-term obligations (including current portion)........... 4,492
Redeemable preferred shares................................. 315
Shareholders' equity........................................ 10,247
</TABLE>
16
<PAGE> 24
UNAUDITED COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA
PER SHARE DATA
The following table compares the net income (loss), cash dividends and book
value per share data for Transocean Sedco Forex and R&B Falcon on a historical,
pro forma combined and per share equivalent basis.
You should read the information below together with the historical
financial statements and related notes incorporated by reference in this
document. See "Where You Can Find More Information" on page 129. The unaudited
pro forma data is for informational purposes only. The companies may have
performed differently had they always been combined. You should not rely on the
pro forma data as being indicative of the historical results that would have
been achieved had the companies always been combined or the future results that
the combined company will experience after the merger.
<TABLE>
<CAPTION>
EQUIVALENT
TRANSOCEAN UNAUDITED
SEDCO PRO FORMA
TRANSOCEAN R&B FALCON FOREX PER R&B
SEDCO HISTORICAL UNAUDITED FALCON
FOREX PER PER PRO FORMA COMMON
SHARE COMMON PER SHARE SHARE
DATA(1) SHARE DATA DATA(2) DATA(3)
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
Net income (loss) per share applicable to
ordinary shareholders:
Basic.......................................... $ 0.33 $(0.49) $(0.29) $(0.14)
Diluted........................................ 0.32 (0.49) (0.29) (0.14)
Dividends per share(4)......................... 0.06 --
Book value per share........................... 18.88 5.76 33.06 16.52
YEAR ENDED DECEMBER 31, 1999
Net income (loss) per share applicable to
ordinary shareholders:
Basic.......................................... $ 1.13 $(0.53) $(0.01) $ 0.00
Diluted........................................ 1.13 (0.53) (0.01) 0.00
Dividends per share(4)......................... 0.12 --
</TABLE>
---------------
(1) The Transocean Sedco Forex results for the year ended December 31, 1999 are
pro forma results that assume the merger of Transocean Offshore and Sedco
Forex was completed on January 1, 1999. These pro forma results are
incorporated by reference in this joint proxy statement/prospectus from the
Form 8-K filed by Transocean Sedco Forex on September 22, 2000.
(2) See "Transocean Sedco Forex Unaudited Condensed Pro Forma Combined Financial
Statements."
(3) Equivalent unaudited pro forma per R&B Falcon common share data represents
the Transocean Sedco Forex pro forma per share data multiplied by the merger
exchange ratio of 0.50.
(4) Transocean has paid quarterly cash dividends of $0.03 per share since the
fourth quarter of 1993. Any future declaration and payment of dividends will
be:
- dependent upon Transocean Sedco Forex's results of operations, financial
condition, cash requirements and other relevant factors;
- subject to the discretion of its board of directors;
- subject to restrictions contained in its revolving credit agreement and
other then-outstanding debt instruments; and
- payable only out of Transocean Sedco Forex's profits or share premium
accounts in accordance with Cayman Islands law.
17
<PAGE> 25
RISK FACTORS
In addition to the other information contained in this document and the
documents incorporated by reference, you should carefully consider the following
risk factors before you decide how to vote on the proposed transactions.
RISKS RELATING TO THE MERGER
THE VALUE OF THE TRANSOCEAN SEDCO FOREX ORDINARY SHARES TO BE RECEIVED IN THE
MERGER WILL FLUCTUATE.
The merger agreement does not contain any provisions for adjustment of the
exchange ratio and does not provide for rights of termination by either party
based upon fluctuations in the market price of the Transocean Sedco Forex
ordinary shares before the completion of the merger. Because no adjustment will
be made to the exchange ratio, the market value of the consideration to be
received by R&B Falcon's common shareholders in connection with the merger
cannot presently be determined and will vary based upon the market price of
Transocean Sedco Forex ordinary shares at the time the merger is completed.
These variations may be the result of:
- changes in the business or results of operations of Transocean Sedco
Forex or R&B Falcon;
- the prospects for the post-merger operations of the combined company;
- the timing of the merger;
- the worldwide supply/demand balance for oil and gas and the prevailing
commodity price environment;
- the level of drilling activity of Transocean Sedco Forex's and R&B
Falcon's customers;
- competition in the offshore contract drilling industry;
- regulatory considerations;
- construction and commissioning risks associated with Transocean Sedco
Forex's and R&B Falcon's respective newbuild programs;
- general stock market and economic conditions; and
- other factors beyond the control of Transocean Sedco Forex or R&B Falcon,
including those described elsewhere in this "Risk Factors" section.
R&B Falcon's shareholders are urged to obtain current market quotations for
their shares and for Transocean Sedco Forex ordinary shares.
THE PRICE OF TRANSOCEAN SEDCO FOREX ORDINARY SHARES MAY DECLINE AS A RESULT OF
THE MERGER.
Assuming the respective merger proposals are approved by Transocean Sedco
Forex's and R&B Falcon's shareholders and the merger is completed, the number of
issued and freely tradable Transocean Sedco Forex ordinary shares will increase
by nearly 50%. As a result of the issuance of this large number of additional
shares, the market price of Transocean Sedco Forex ordinary shares may
experience temporary volatility or decline unrelated to the financial
performance of Transocean Sedco Forex.
TRANSOCEAN SEDCO FOREX MAY FACE DIFFICULTIES IN INTEGRATING THE OPERATIONS OF
R&B FALCON.
Before the merger, Transocean Sedco Forex and R&B Falcon will have operated
as separate companies. The management team of Transocean Sedco Forex has not
previously managed the business of R&B Falcon. Transocean Sedco Forex may not be
able to integrate the operations of Transocean Sedco Forex and R&B Falcon
without a loss of employees, customers or suppliers, a loss of revenues, an
increase in operating or other costs or other difficulties. In addition,
Transocean Sedco Forex may not be able to realize the operating efficiencies,
synergies, cost savings or other benefits expected from the merger. Any
18
<PAGE> 26
unexpected costs or delays incurred in connection with the integration could
have an adverse effect on Transocean Sedco Forex's business, results of
operations or financial condition. Transocean Sedco Forex expects to incur
charges to earnings relating to restructuring and related expenses in connection
with the merger, the amount of which has not yet been determined.
TRANSOCEAN SEDCO FOREX IS SUBJECT TO ANTI-TAKEOVER PROVISIONS.
Transocean Sedco Forex's articles of association contain provisions that
could prevent or delay an acquisition of Transocean Sedco Forex by means of a
tender offer, a proxy contest or otherwise. These provisions may also adversely
affect prevailing market prices for Transocean Sedco Forex's ordinary shares.
These provisions, among other things:
- classify the Transocean Sedco Forex board into three classes of
directors, each of which will serve for staggered three-year periods;
- provide that the Transocean Sedco Forex board may designate the terms of
any new series of preference shares;
- provide that any shareholder of Transocean Sedco Forex who wishes to
propose any business or to nominate a person or persons for election as
director at any annual meeting may only do so if advance notice is given
to the Secretary of Transocean Sedco Forex;
- provide that the exact number of directors on the board can be set from
time to time by a majority of the whole board of directors and not by the
shareholders, subject to a minimum of two and a maximum of 12, or 13 if
the proposal to increase the maximum board size is approved by
shareholders;
- provide that directors can be removed from office only for cause, as
defined in the articles of association, by the affirmative vote of the
holders of the issued shares generally entitled to vote;
- provide that any vacancy on the board of directors will be filled by the
affirmative vote of the remaining directors and not by the shareholders;
- provide that any action required or permitted to be taken by the holders
of ordinary shares must be taken at a duly called annual or extraordinary
general meeting of shareholders unless taken by written consent of all
holders of ordinary shares;
- provide that only a majority of the directors may call extraordinary
general meetings of the shareholders;
- limit the ability of the shareholders of Transocean Sedco Forex to amend
or repeal some provisions of Transocean Sedco Forex's articles of
association; and
- limit transactions between Transocean Sedco Forex and an "interested
shareholder," which is generally defined as a shareholder that, together
with its affiliates and associates, beneficially, directly or indirectly,
owns 15% or more of Transocean Sedco Forex's issued voting shares.
See "Description of Share Capital of Transocean Sedco Forex" beginning on
page 100 and "Comparison of Rights of Shareholders" beginning on page 106.
THE PLANNED RESTRUCTURING OF R&B FALCON'S ASSETS FOLLOWING THE MERGER COULD
RESULT IN A TAXABLE GAIN TO TRANSOCEAN SEDCO FOREX.
Following the merger, Transocean Sedco Forex plans to restructure the
ownership of a portion of the assets currently held by R&B Falcon and its
subsidiaries. This restructuring would be intended to lower the worldwide
effective corporate tax rate from what that rate would have been in the absence
of the restructuring and to achieve operational efficiencies, including improved
worldwide cash management and increased flexibility for operating rigs in
various jurisdictions. Any transfers of assets by R&B Falcon or one of its
subsidiaries to Transocean Sedco Forex or one of its non-U.S. subsidiaries in
this restructuring
19
<PAGE> 27
could, in some cases, result in the imposition of additional taxes. In
determining the amount of gain, if any, on the assets transferred in the
restructuring, the value of those assets will be determined by appraisal. The
appraisal will not be binding on the tax authorities, and they may argue that
the taxable gain is larger than Transocean Sedco Forex determines. While
Transocean Sedco Forex expects that all or a substantial portion of the gain
will be offset by net operating loss carryovers of R&B Falcon and its
subsidiaries, we cannot assure you that this will be the case. Additionally,
changes in the tax laws or regulations could adversely affect Transocean Sedco
Forex and the benefits it is seeking to achieve in the restructuring.
R&B FALCON'S ASSETS ARE CURRENTLY SUBJECT TO A SIGNIFICANT AMOUNT OF DEBT.
R&B Falcon's assets are currently subject to a significant amount of debt.
Transocean Sedco Forex's overall debt level will increase as a result of this
R&B Falcon debt. Some of this debt has relatively high interest rates. The R&B
Falcon debt agreements also contain restrictions and requirements relating to,
among other things:
- additional borrowing;
- entering into transactions with affiliates;
- selling assets;
- paying dividends; and
- merging.
These restrictions and requirements may limit the combined company's
flexibility in conducting its operations. Although the combined company may seek
to refinance this debt on more favorable terms after the merger, we cannot
assure you that it will be successful in refinancing the debt or that the terms
of the refinancing will be favorable to the combined company.
THE ENFORCEMENT OF CIVIL LIABILITIES AGAINST THE COMBINED COMPANY MAY BE MORE
DIFFICULT THAN IS CURRENTLY THE CASE AGAINST R&B FALCON.
The combined company will be a Cayman Islands company and a substantial
portion of its assets will be located outside the U.S. As a result, investors
could experience more difficulty enforcing in U.S. courts judgments obtained
against the combined company than is currently the case against R&B Falcon. In
addition, some claims may be more difficult to bring against the combined
company in Cayman Islands courts than similar claims against a U.S. company in
U.S. courts.
RISKS RELATING TO THE COMBINED COMPANY'S BUSINESS FOLLOWING THE MERGER
THE COMBINED COMPANY'S BUSINESS WILL DEPEND ON THE LEVEL OF ACTIVITY IN THE OIL
AND GAS INDUSTRY, WHICH IS SIGNIFICANTLY AFFECTED BY VOLATILE OIL AND GAS
PRICES.
The combined company's business will depend on the level of activity in
offshore oil and gas exploration, development and production in markets
worldwide. Oil and gas prices, market expectations of potential changes in these
prices and a variety of political and economic factors significantly affect this
level of activity. Oil and gas prices are extremely volatile and are affected by
numerous factors, including:
- worldwide demand for oil and gas;
- the ability of the Organization of Petroleum Exporting Countries,
commonly called "OPEC," to set and maintain production levels and
pricing;
- the level of production in non-OPEC countries;
- the policies of the various governments regarding exploration and
development of their oil and gas reserves;
20
<PAGE> 28
- advances in exploration and development technology; and
- the political environment of oil-producing regions.
THE LEVEL OF ACTIVITY IN THE OIL AND GAS DRILLING INDUSTRY HAS BEEN LOW
RECENTLY, WHICH HAS ADVERSELY AFFECTED TRANSOCEAN SEDCO FOREX'S AND R&B FALCON'S
DAYRATES AND RIG UTILIZATION.
Fleet activity in 1999 and early 2000 suffered from the global reduction in
exploration and development spending by Transocean Sedco Forex's and R&B
Falcon's customers, resulting from the sustained period of significantly lower
oil prices from late 1997 through early 1999 and consolidation activity among
major oil producers over the same period. Despite a recovery in crude oil prices
which began in the latter part of 1999 and has continued in 2000, spending
levels have only recently begun to increase appreciably and there remains
surplus rig capacity, particularly in the lower specification semisubmersible
and some jackup markets. This excess capacity resulted from expiring contracts
and delivery of newly constructed or upgraded drilling rigs by a number of
offshore drilling contractors. Although utilization rates have recently
increased from levels experienced in 1999 and early 2000, dayrates may not
increase significantly in the near term. In addition, a decline in oil prices
could reduce demand for drilling services and adversely affect both utilization
and dayrates.
THE COMBINED COMPANY'S INDUSTRY WILL BE HIGHLY COMPETITIVE AND CYCLICAL, WITH
INTENSE PRICE COMPETITION.
The offshore contract drilling industry is highly competitive with numerous
industry participants, none of which has a dominant market share. Drilling
contracts are traditionally awarded on a competitive bid basis. Intense price
competition is often the primary factor in determining which qualified
contractor is awarded a job, although rig availability and the quality and
technical capability of service and equipment may also be considered.
The combined company's industry has historically been cyclical. There have
been periods of high demand, short rig supply and high dayrates, followed by
periods of lower demand, excess rig supply and low dayrates. The industry
experienced a period of significantly lower demand during 1999 as a result of
reduced spending for exploration and development by Transocean Sedco Forex's and
R&B Falcon's customers in response to dramatically lower crude oil prices during
1998. In addition, rig availability has increased as a result of contract
expirations and construction by other drilling contractors of new rigs that are
competing with Transocean Sedco Forex's and R&B Falcon's rigs. Periods of excess
rig supply intensify the competition in the industry and often result in rigs
being idle for long periods of time.
THE COMBINED COMPANY'S DRILLING CONTRACTS MAY BE TERMINATED DUE TO A NUMBER OF
EVENTS.
The combined company's customers may terminate some of the combined
company's term drilling contracts under various circumstances such as the loss
or destruction of the drilling unit, the suspension of drilling operations for a
specified period of time as a result of a breakdown of major equipment. In
addition, the drilling contracts for some of the combined company's newbuild
rigs contain termination or term reduction provisions tied to late delivery of
these units. In reaction to depressed market conditions, the combined company's
customers may also seek renegotiation of firm drilling contracts to reduce their
obligations. If the combined company's customers cancel some of its significant
contracts and the combined company is unable to secure new contracts on
substantially similar terms, it could adversely affect the combined company's
results. Some drilling contracts permit the customer to terminate the contract
at the customer's option without paying a termination fee.
THE COMBINED COMPANY'S CONSTRUCTION AND CONVERSION PROJECTS ARE SUBJECT TO
DELAYS AND COST OVERRUNS.
As of the date of this joint proxy statement/prospectus, Transocean Sedco
Forex and R&B Falcon had several new rigs in shipyards under construction or
undergoing sea trials or commissioning. These
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<PAGE> 29
construction projects are subject to risks of delay or cost overruns inherent in
any large construction project resulting from numerous factors, including the
following:
- shortages of equipment, materials or skilled labor;
- unscheduled delays in the delivery of ordered materials and equipment;
- engineering problems, including those relating to the commissioning of
newly designed equipment;
- work stoppages;
- weather interference;
- shipyard unavailability;
- unanticipated cost increases; and
- difficulty in obtaining necessary permits or approvals.
These factors may contribute to cost variations and delays in the delivery
of the combined company's drilling units under construction. Delays in delivery
of these units will result in delays in contract commencements, resulting in a
loss of revenue, and may also cause customers to terminate or shorten the term
of the drilling contracts for these rigs pursuant to late delivery clauses for
the Sedco Express-class semisubmersibles. R&B Falcon's customers for its
drillship Deepwater Navigator and its semisubmersible Falcon 100 canceled their
contracts because of R&B Falcon's late delivery of these rigs. In addition, the
customer for R&B Falcon's drillship Deepwater Expedition, which has commenced
operations for this customer, has notified R&B Falcon of a claim of
approximately $10.0 million for late delivery of this rig.
THE COMBINED COMPANY WILL CONDUCT TURNKEY DRILLING OPERATIONS, WHICH WILL EXPOSE
IT TO RISKS NORMALLY BORNE BY THE OPERATOR UNDER A DAYWORK DRILLING CONTRACT.
The combined company will conduct most of its drilling services under
daywork drilling contracts where the customer pays for the period of time
required to drill or workover a well. However, R&B Falcon currently provides
and, after the effective time, the combined company will provide, a portion of
its services under turnkey drilling contracts. Under turnkey drilling contracts,
the combined company will contract to drill a well to a contract depth under
specified conditions for a fixed price. The combined company's risks under a
turnkey drilling contract are substantially greater than on a well drilled on a
daywork basis because under a turnkey drilling contract the combined company
will normally assume most of the risks associated with drilling operations,
including the risks of blowout, loss of hole, stuck drill stem, machinery
breakdowns, abnormal drilling conditions and risks associated with
subcontractors' services, supplies and personnel. These risks are generally
assumed by the operator in a daywork contract.
THE COMBINED COMPANY'S BUSINESS WILL INVOLVE NUMEROUS OPERATING HAZARDS.
The combined company's operations will be subject to the usual hazards
inherent in the drilling of offshore oil and gas wells, such as blowouts,
reservoir damage, loss of production, loss of well control, punchthroughs,
craterings and fires. The occurrence of these events could result in the
suspension of drilling operations, damage to or destruction of the equipment
involved and injury or death to rig personnel. The combined company will also be
subject to personal injury and other claims of rig personnel as a result of its
drilling operations. Operations also may be suspended because of machinery
breakdowns, abnormal drilling conditions, failure of subcontractors to perform
or supply goods or services or personnel shortages. In addition, offshore
drilling operators are subject to perils peculiar to marine operations,
including capsizing, grounding, collision and loss or damage from severe
weather. Damage to the environment could also result from the combined company's
operations, particularly through oil spillage or extensive uncontrolled fires.
The combined company may also be subject to damage claims by oil and gas
companies. The combined company's insurance policies and contractual rights to
indemnity may not adequately cover losses, and it may not have insurance
coverage or rights to indemnity for all risks.
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<PAGE> 30
THE COMBINED COMPANY'S NON-U.S. OPERATIONS WILL INVOLVE ADDITIONAL RISKS NOT
ASSOCIATED WITH ITS U.S. OPERATIONS.
The combined company will operate in various regions throughout the world
that may expose it to political and other uncertainties, including risks of:
- war and civil disturbances;
- expropriation of equipment;
- the inability to repatriate income or capital; and
- changing taxation policies.
Although the combined company will maintain insurance in the areas in which
it operates, pollution and environmental risks generally are not fully
insurable. If a significant accident or other event occurs and is not fully
covered by insurance, it could adversely affect the combined company's
operations.
The offshore drilling business is subject to significant government
regulations in different jurisdictions. Many governments favor or effectively
require the awarding of drilling contracts to local contractors or require
contractors to employ citizens of, or purchase supplies from, a particular
jurisdiction. These practices may adversely affect the combined company's
ability to compete.
Another risk inherent in the combined company's operations is the
possibility of currency exchange losses where revenues are received and expenses
are paid in nonconvertible currencies. The combined company may also incur
losses as a result of an inability to collect revenues because of a shortage of
convertible currency available to the country of operation.
FAILURE TO RETAIN KEY PERSONNEL COULD HURT THE COMBINED COMPANY'S OPERATIONS.
The combined company will require highly skilled personnel to operate and
provide technical services and support for drilling units. To the extent demand
for drilling services and the size of the worldwide industry fleet increase,
shortages of qualified personnel could arise, creating upward pressure on wages.
Based on the number of represented employees as of June 30, 2000, the
combined company will have approximately 13% of its total employees working
under collective bargaining agreements, most of whom were working in Norway,
Nigeria and Venezuela. Of these represented employees, a majority are working
under agreements that are subject to salary negotiation in 2000 or 2001. In
addition, each company has signed a recognition agreement requiring negotiations
with a labor union representing employees in the U.K. These negotiations could
result in collective bargaining agreements covering these employees.
GOVERNMENTAL LAWS AND REGULATIONS MAY ADD TO THE COMBINED COMPANY'S COSTS OR
LIMIT DRILLING ACTIVITY.
The combined company's operations will be affected from time to time in
varying degrees by governmental laws and regulations. The drilling industry is
dependent on demand for services from the oil and gas exploration industry and,
accordingly, is affected by changing tax and other laws relating to the energy
business generally. The combined company may be required to make significant
expenditures to comply with governmental laws and regulations. It is also
possible that these laws and regulations may in the future add significantly to
operating costs or may significantly limit drilling activity.
THE COMBINED COMPANY'S NON-U.S. OPERATIONS WILL BE SUBJECT TO THE LAWS AND
REGULATIONS OF THE COUNTRIES IN WHICH IT OPERATES.
The combined company's non-U.S. contract drilling operations will be
subject to various laws and regulations in countries in which it operates,
including laws and regulations relating to the equipping and operation of
drilling units, currency conversions and repatriation, oil and gas exploration
and development, taxation of offshore earnings and earnings of expatriate
personnel and use of local employees and suppliers by foreign contractors.
Governments in some foreign countries have become increasingly active in
23
<PAGE> 31
regulating and controlling the ownership of concessions and companies holding
concessions, the exploration of oil and gas and other aspects of the oil and gas
industries in their countries. In addition, government action, including
initiatives by OPEC, may continue to cause oil price volatility. In some areas
of the world, this governmental activity has adversely affected the amount of
exploration and development work done by major oil companies and may continue to
do so.
COMPLIANCE WITH OR BREACH OF ENVIRONMENTAL LAWS CAN BE COSTLY AND COULD LIMIT
THE COMBINED COMPANY'S OPERATIONS.
The combined company's operations will be subject to regulations
controlling the discharge of materials into the environment, requiring removal
and cleanup of materials that may harm the environment or otherwise relating to
the protection of the environment. For example, the combined company, as an
operator of mobile offshore drilling units in navigable United States waters and
some offshore areas, may be liable for damages and costs incurred in connection
with oil spills related to those operations. Laws and regulations protecting the
environment have become more stringent in recent years, and may in some cases
impose strict liability, rendering a person liable for environmental damage
without regard to negligence. These laws and regulations may expose the combined
company to liability for the conduct of or conditions caused by others or for
acts that were in compliance with all applicable laws at the time they were
performed. The application of these requirements or the adoption of new
requirements could have a material adverse effect on the combined company's
financial position and results of operations.
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<PAGE> 32
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference in this joint
proxy statement/prospectus contain both historical and forward-looking
statements. All statements other than statements of historical fact are, or may
be deemed to be, forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements include the information concerning possible or
assumed future results of operations of Transocean Sedco Forex and R&B Falcon,
including statements about the following subjects:
- benefits, effects or results of the merger,
- cost reductions, operating efficiencies or synergies,
- operations and results after the merger,
- integration of operations,
- business strategies,
- growth opportunities,
- competitive position,
- market outlook,
- expected financial position,
- expected results of operations,
- future cash flows,
- future dividends,
- financing plans,
- budgets for capital and other expenditures,
- timing and cost of completion of capital projects,
- plans and objectives of management,
- timing of the merger,
- tax treatment of the merger,
- accounting treatment of the merger,
- transaction-related expenses,
- performance of contracts,
- outcomes of legal proceedings,
- compliance with applicable laws,
- adequacy of insurance, and
- any other statements regarding future growth, future cash needs, future
operations, business plans and future financial results, and any other
statements that are not historical facts.
Forward-looking statements in this joint proxy statement/prospectus are
identifiable by use of the following words and other similar expressions, among
others:
- "anticipate,"
- "believe,"
- "budget,"
- "could,"
- "estimate,"
- "expect,"
- "forecast,"
- "intend,"
- "may,"
- "might,"
- "plan,"
- "predict,"
- "project," and
- "should."
The following factors could affect the future results of operations of
Transocean Sedco Forex or R&B Falcon and could cause those results to differ
materially from those expressed in the forward-looking statements included in
this document or incorporated by reference:
- worldwide demand for oil and gas;
- oil and gas prices;
- the level of activity in offshore oil and gas exploration, development
and production;
- exploration success by producers;
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<PAGE> 33
- competition and market conditions in the offshore contract drilling
industry;
- the ability to enter into and the terms of future drilling contracts;
- delay or cost overruns on construction projects;
- drilling contracts may be terminated due to a number of events;
- risks of international operations and compliance with foreign laws;
- compliance with or breach of environmental laws;
- work stoppages by shipyard workers;
- delays in construction projects, which in some cases may trigger the
drilling contract customer's right to terminate the drilling contract for
the unit under construction;
- risks inherent in turnkey contracts;
- the availability of qualified personnel;
- labor relations and wage negotiations with unions;
- operating hazards;
- political and other uncertainties inherent in non-U.S. operations,
including exchange and currency fluctuations;
- the impact of governmental laws and regulations;
- the adequacy of sources of liquidity;
- the effect of litigation and contingencies;
- fluctuations in the value of Transocean Sedco Forex ordinary shares;
- difficulties in integrating the operations of Transocean Sedco Forex and
R&B Falcon;
- the anti-takeover provisions of Transocean Sedco Forex's articles of
association;
- the risk that the planned restructuring of R&B Falcon's assets after the
merger could result in taxable gain to Transocean Sedco Forex;
- the significant amount of debt of R&B Falcon; and
- the difficulty of enforcing civil liabilities against Transocean Sedco
Forex.
The above factors are in addition to those factors discussed:
- in this joint proxy statement/prospectus under the "Risk Factors" and
"-- R&B Falcon's Reasons for the Merger and the Proposed Amendment to R&B
Falcon's Certificate of Incorporation" and "-- Transocean Sedco Forex's
Reasons for the Merger" subsections of "The Merger" section and
elsewhere;
- in the documents that Transocean Sedco Forex incorporates by reference
into this joint proxy statement/prospectus, including in the "Market
Outlook," "Other Factors Affecting Operating Results" and "Liquidity and
Capital Resources" subsections of the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of
Transocean Sedco Forex's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 and its Quarterly Reports on Form 10-Q for the
periods ended March 31, 2000 and June 30, 2000 and subsequent SEC filings
on those forms; and
- in the documents that R&B Falcon incorporates by reference into this
joint proxy statement/ prospectus, including in the "Liquidity and
Capital Resources," "Liquidity" and "Other" subsections of the
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the "Quantitative and Qualitative Disclosures About
Market Risk" sections of R&B Falcon's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 and its Quarterly Reports on Form
10-Q for the periods ended March 31, 2000 and June 30, 2000 and
subsequent SEC filings on those forms.
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<PAGE> 34
Nothing in this document is intended to provide guidance for financial
results for future periods for either Transocean Sedco Forex or R&B Falcon. Any
actual or purported guidance given prior to the date of the Joint Proxy
Statement/Prospectus, including in any document filed with the SEC prior to this
date by either company or by those acting on their behalf spoke only as of the
date such statement was made and no obligation to update was undertaken. Any
such guidance is no longer valid and should no longer be relied upon. Any
projection or estimate by Transocean Sedco Forex or R&B Falcon that was
furnished to their respective financial advisors, including those statements
summarized herein, were made as of a date shortly before the date of the merger
agreement and spoke only as of the date furnished and have not been updated.
These estimates and projections were only intended to be used by such financial
advisors for analysis of the merger and are not intended to provide guidance as
to future results. You should not place undue reliance on forward-looking
statements. Each forward-looking statement speaks only as of the date of the
particular statement, and we undertake no obligation to publicly update or
revise any forward-looking statements.
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<PAGE> 35
THE TRANSOCEAN SEDCO FOREX EXTRAORDINARY GENERAL MEETING
Transocean Sedco Forex is furnishing this joint proxy statement/prospectus
to its shareholders in connection with the solicitation of proxies by Transocean
Sedco Forex's board of directors for use at the extraordinary general meeting.
Transocean Sedco Forex is first mailing this joint proxy statement/ prospectus
and accompanying form of proxy to its shareholders beginning on or about
, 2000.
TIME, DATE AND PLACE
The extraordinary general meeting of Transocean Sedco Forex's shareholders
will be held on December , 2000, at 9:00 a.m., Houston time, at 4 Greenway
Plaza, Room C-100 (Mall level), Houston, Texas.
PURPOSE OF THE TRANSOCEAN SEDCO FOREX EXTRAORDINARY GENERAL MEETING
At the meeting, Transocean Sedco Forex's board of directors will ask the
shareholders to vote to approve:
- the increase of Transocean Sedco Forex's authorized ordinary share
capital to $8,000,000, consisting of 800,000,000 ordinary shares, par
value $0.01 per share;
- the issuance, pursuant to the merger agreement, of Transocean Sedco Forex
ordinary shares in exchange for all of the then-outstanding R&B Falcon
common shares at a ratio of 0.5 Transocean Sedco Forex ordinary shares
for each R&B Falcon common share;
- the amendment of Transocean Sedco Forex's memorandum of association and
articles of association to increase the maximum number of directors
constituting the Board of Directors of Transocean Sedco Forex from 12 to
13 and make updating and other clarifying changes;
- the amendment of Transocean Sedco Forex's Long-Term Incentive Plan to,
among other things, increase the number of ordinary shares reserved for
issuance under the plan from 13,300,000 to 19,500,000;
- the amendment of Transocean Sedco Forex's Employee Stock Purchase Plan to
increase the number of ordinary shares reserved for issuance under the
plan from 750,000 to 1,500,000; and
- any other matters that properly come before the extraordinary general
meeting and any adjournments or postponements of the extraordinary
general meeting.
Transocean Sedco Forex's board of directors has unanimously approved the
increase in authorized ordinary share capital, the issuance of ordinary shares
to R&B Falcon common shareholders in the merger, the amendment of Transocean
Sedco Forex's memorandum of association and articles of association to increase
the maximum size of the board of directors and make updating and other
clarifying changes, the amendment to Transocean Sedco Forex's Long-Term
Incentive Plan and the amendment to Transocean Sedco Forex's Employee Stock
Purchase Plan, and unanimously recommends that Transocean Sedco Forex's
shareholders vote "FOR" the same.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED FOR APPROVAL
The Transocean Sedco Forex board has fixed the close of business on October
30, 2000 as the record date for Transocean Sedco Forex's extraordinary general
meeting.
Only holders of record of Transocean Sedco Forex ordinary shares on the
record date are entitled to notice of and to vote at the meeting.
On the record date for Transocean Sedco Forex's shareholder meeting,
approximately million Transocean Sedco Forex ordinary shares were issued
and entitled to vote at the meeting. Each Transocean Sedco Forex ordinary share
is entitled to one vote.
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<PAGE> 36
The presence, in person or by proxy, of the holders of a majority of the
issued Transocean Sedco Forex ordinary shares is necessary to constitute a
quorum at the extraordinary general meeting. Abstentions, proxies returned
without instructions and broker non-votes will count in the determination of
shares present at the meeting for purposes of determining the presence of a
quorum.
Assuming the presence of a quorum, the following shareholder votes are
required to approve the indicated proposals at the extraordinary general
meeting.
<TABLE>
<CAPTION>
PROPOSAL VOTE 'FOR' REQUIRED
-------- -------------------
<S> <C>
(1) Increase in authorized ordinary share - holders of at least a majority of the
capital ordinary shares present in person or by
proxy at the meeting and entitled to vote
on the matter
(2) Issuance of ordinary shares in the - holders of at least a majority of votes
merger cast on the proposal, provided that the
total number of votes cast on the proposal
represents a majority of the votes
entitled to be cast
(3) Amendment of the memorandum of - holders of at least two-thirds of the
association and articles of association to ordinary shares present in person or by
increase the maximum size of the board of proxy at the meeting and entitled to vote
directors and make updating and other on the matter
clarifying changes
(4) Amendment of the Long-Term Incentive - holders of at least a majority of votes
Plan cast on the proposal, provided that the
total number of votes cast on the proposal
represents a majority of the votes
entitled to be cast
(5) Amendment of the Employee Stock Purchase - holders of at least a majority of votes
Plan cast on the proposal, provided that the
total number of votes cast on the proposal
represents a majority of the votes
entitled to be cast
</TABLE>
Approval of the proposals to increase the authorized ordinary share capital
and to issue ordinary shares in the merger are conditions to the completion of
the merger. Approval of the proposals to amend Transocean Sedco Forex's
Long-Term Incentive Plan, to amend Transocean Sedco Forex's Employee Stock
Purchase Plan and to amend Transocean Sedco Forex's memorandum of association
and articles of association to increase the maximum size of the board of
directors and make updating and other clarifying changes are not conditions to
the completion of the merger. The proposals to increase the authorized ordinary
share capital, to issue ordinary shares in the merger, to amend the memorandum
of association and articles of association, to increase the number of ordinary
shares available for grant under the Long-Term Incentive Plan and to increase
the number of ordinary shares available for grant under the Employee Stock
Purchase Plan, if approved, will be implemented only if the merger is completed.
The directors and executive officers of Transocean Sedco Forex have
indicated that they intend to vote their shares in favor of all of the
proposals. On the record date, directors and executive officers of Transocean
Sedco Forex and their affiliates beneficially owned less than one percent of the
issued Transocean Sedco Forex ordinary shares. In addition, Siem Industries,
Inc., an affiliate of Kristian Siem, a director of Transocean Sedco Forex, holds
1,538,720 ordinary shares of Transocean Sedco Forex. Siem Industries has
indicated that it intends to vote its shares in favor of all of the proposals.
PROXIES
All ordinary shares of Transocean Sedco Forex represented by properly
executed proxies received at or prior to the Transocean Sedco Forex
extraordinary general meeting and not revoked will be voted in accordance with
the instructions indicated in those proxies.
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<PAGE> 37
A properly executed proxy that is returned without instructions as the vote
desired on any or all of the proposals will be voted "FOR" each proposal. If any
other matters properly come before the extraordinary general meeting, the proxy
will vote the shares represented by the enclosed proxy card in accordance with
his best judgment, unless authority to do so is withheld by you in your proxy.
Transocean Sedco Forex's shareholders may abstain on any or all of the
proposals, by marking "ABSTAIN" with respect to any or all of the proposals.
Under New York Stock Exchange rules, brokers who hold shares in street name
for customers have the authority to vote on "routine" proposals when they have
not received instructions from beneficial owners, but are precluded from
exercising their voting discretion with respect to proposals for "nonroutine"
matters. Proxies submitted by brokers without instructions from customers for
these nonroutine matters are referred to as "broker non-votes." Each of
Transocean Sedco Forex's proposals is a non-routine matter under NYSE rules.
The following table shows the effect that a proxy without instructions, an
abstention or, in the case of the proposals for non-routine matters, a "broker
non-vote" will have on the votes on Transocean Sedco Forex's proposals.
<TABLE>
<CAPTION>
EFFECT ON VOTE
-------------------------------------------
PROXY
WITHOUT BROKER
PROPOSAL INSTRUCTIONS ABSTENTION NON-VOTES
-------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
(1) Increase in authorized ordinary share "FOR" "AGAINST"(a) "AGAINST"(a)
capital
(2) Issuance of ordinary shares in the merger "FOR" None(b) None(c)
(3) Amendment of the memorandum of "FOR" "AGAINST"(d) "AGAINST"(b)
association and the articles of
association to increase the maximum size
of the board of directors and make
updating and other clarifying changes
(4) Amendment of the Long-Term Incentive Plan "FOR" None(b) None(c)
(5) Amendment of the Employee Stock Purchase "FOR" None(b) None(c)
Plan
</TABLE>
---------------
(a) An abstention or broker non-vote on the proposal to increase the authorized
ordinary share capital has the effect of a vote "AGAINST" the proposal
because that proposal requires approval by the majority of the shares
present or represented by proxy at the meeting and entitled to vote on the
matter.
(b) An abstention on these proposals will not affect the voting on them as long
as holders of a majority of ordinary shares cast votes on the proposal.
Otherwise, the effect of an abstention is a vote "AGAINST" the proposal.
(c) A broker non-vote on these proposals will not affect the voting on them as
long as holders of the majority of ordinary shares cast votes on the
proposal. Otherwise, the effect of such broker non-vote is a vote "AGAINST"
the proposal because the broker has no discretion to vote the shares to
help reach a majority participation in the vote.
(d) An abstention or broker non-vote on the proposal to amend the memorandum of
association and articles of association to increase the maximum size of the
board of directors and make updating and other clarifying changes has the
effect of a vote "AGAINST" the proposal because that proposal requires
approval by two-thirds of the shares present or represented by proxy at the
meeting and entitled to vote on the matter.
Transocean Sedco Forex's shareholders may use the accompanying proxy card
if they are unable or do not wish to attend the extraordinary general meeting in
person or if they wish to have their shares voted by
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<PAGE> 38
proxy even though they do attend the meeting. Transocean Sedco Forex's
shareholders may revoke a proxy before it is voted by:
- delivering to the Secretary of Transocean Sedco Forex at 4 Greenway
Plaza, Houston, Texas 77046, before or at the meeting, a written notice
revoking their proxy;
- delivering a later-dated, executed proxy card relating to the same
shares; or
- attending the meeting, notifying the Secretary and voting by ballot in
person; however, if a Transocean Sedco Forex shareholder attends the
meeting but does not vote in person, that shareholder's proxy will still
be voted.
Transocean Sedco Forex and R&B Falcon will equally share the expenses
incurred in connection with the printing and mailing of this joint proxy
statement/prospectus. All other costs of solicitation of proxies from holders of
Transocean Sedco Forex's ordinary shares will be paid by Transocean Sedco Forex.
In addition to solicitation by mail, Transocean Sedco Forex will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send the proxy materials to beneficial owners, and Transocean
Sedco Forex will, upon request, reimburse those brokerage houses and custodians
for their reasonable related expenses. Transocean Sedco Forex has retained D.F.
King & Co., Inc. for a fee of $7,000, plus expenses, to aid in the solicitation
of proxies and to verify certain records related to the solicitations. To the
extent necessary in order to ensure sufficient representation at its
extraordinary general meeting, Transocean Sedco Forex or its proxy solicitor may
request the return of proxy cards by personal interview, mail, telephone,
facsimile or other means of electronic transmission. The extent to which this
will be necessary depends upon how promptly proxy cards are returned. Transocean
Sedco Forex urges its shareholders to send in their proxies without delay.
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<PAGE> 39
THE SPECIAL MEETING OF R&B FALCON SHAREHOLDERS
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus is being furnished to R&B Falcon
shareholders in connection with the solicitation of proxies by R&B Falcon's
board of directors with respect to the proposed merger and the proposed
amendment to R&B Falcon's certificate of incorporation.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of shareholders of R&B Falcon is scheduled to be held
as follows:
December , 2000
9:00 a.m., Houston time
Radisson Suite Hotel East and West (Valencia Room) 10655 Katy Freeway
Houston, Texas
RECORD DATE AND VOTING POWER
R&B Falcon's board of directors has fixed the close of business on October
30, 2000 as the record date for determination of R&B Falcon shareholders
entitled to notice of and R&B Falcon common shareholders who are entitled to
vote at the special meeting. On the record date, there were R&B Falcon
common shares outstanding held by approximately holders of record.
Each holder of R&B Falcon common shares is entitled to one vote for each share
held on the record date. Holders of R&B Falcon preferred shares are entitled to
notice of the special meeting but are not entitled to vote in respect of the
adoption of the merger agreement or the amendment to the R&B Falcon certificate
of incorporation.
REQUIRED VOTE
A majority of the outstanding R&B Falcon common shares entitled to vote at
the special meeting, represented in person or by proxy, constitutes a quorum at
the special meeting. The affirmative vote of the holders of at least a majority
of R&B Falcon common shares outstanding and entitled to vote at the special
meeting is required to adopt the merger agreement and approve the proposed
amendment to R&B Falcon's certificate of incorporation. Neither proposal will be
effected unless both proposals are approved by the holders of R&B Falcon common
shares, and the amendment to the certificate of incorporation will not be
effected unless the merger is consummated.
As of the record date for the special meeting, R&B Falcon directors and
executive officers beneficially owned approximately R&B Falcon common
shares, which represented approximately % of all outstanding R&B Falcon
common shares entitled to vote at the special meeting.
VOTING; PROXIES
All R&B Falcon common shares represented by properly executed proxy cards
received before or at the special meeting will, unless revoked, be voted in
accordance with the instructions indicated on the proxy cards. If no
instructions are indicated on a properly executed proxy card, the shares will be
voted FOR adoption of the merger agreement and approval of the proposed
amendment to R&B Falcon's certificate of incorporation. You are urged to mark
the box on the proxy card to indicate how to vote your shares. If a properly
executed proxy card is returned and the shareholder has abstained from voting on
adoption of the merger agreement or approval of the proposed amendment to R&B
Falcon's certificate of incorporation, the R&B Falcon common shares represented
by the proxy will be considered present at the special meeting for the purposes
of determining a quorum but will not be considered to have been voted in favor
of adoption of the merger agreement or approval of the proposed amendment to R&B
Falcon's certificate of incorporation. Similarly, if an executed proxy card is
returned by a broker holding R&B
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Falcon common shares in street name that indicates the broker does not have
discretionary authority to vote for adoption of the merger agreement or approval
of the amendment to R&B Falcon's certificate of incorporation, the shares will
be considered present at the meeting for purposes of determining the presence of
a quorum but will not be considered to have been voted in favor of adoption of
the merger agreement or approval of the amendment to R&B Falcon's certificate of
incorporation. Your broker will vote your shares only if you indicate how you
want the broker to vote by following the instructions provided to you by your
broker.
Because adoption of the merger agreement and approval of the amendment to
R&B Falcon's certificate of incorporation each requires the affirmative vote of
holders of at least a majority of R&B Falcon common shares outstanding as of the
record date, abstentions, failures to vote and broker non-votes all will have
the same effect as votes against adoption of the merger agreement and against
approval of the amendment to R&B Falcon's certificate of incorporation.
If any other matters properly come before the special meeting, the proxy
will vote the shares represented by the enclosed proxy card in accordance with
his best judgment, unless authority to do so is withheld by you in your proxy.
You may revoke your proxy at any time prior to its exercise at the special
meeting by:
- notifying in writing the Secretary of R&B Falcon at 901 Threadneedle,
Houston, Texas 77079;
- granting a subsequent proxy; or
- appearing in person and voting at the special meeting.
Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.
R&B Falcon and Transocean Sedco Forex will equally share the expenses
incurred in connection with the printing and mailing of this joint proxy
statement/prospectus. All other costs of solicitation of proxies from holders of
R&B Falcon's common shares will be paid by R&B Falcon. R&B Falcon has retained
Georgeson Shareholder Communications, Inc. at an estimated cost of $12,500 plus
reimbursement of expenses to assist in the solicitation of proxies. R&B Falcon
also will request banks, brokers and other intermediaries holding shares
beneficially owned by others to send this joint proxy statement/prospectus and
related materials to and obtain voting instructions from the beneficial owners
and will reimburse the holders for their reasonable expenses in so doing.
YOU SHOULD NOT SEND IN ANY SHARE CERTIFICATES WITH YOUR PROXY CARD.
INSTRUCTIONS FOR THE EXCHANGE OF YOUR SHARES WILL BE MAILED TO YOU AS SOON AS
PRACTICABLE AFTER COMPLETION OF THE MERGER.
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THE MERGER
BACKGROUND OF THE MERGER
The managements of Transocean Sedco Forex and R&B Falcon have from time to
time reviewed possible strategic opportunities with other offshore drilling
contractors with the objective of further enhancing shareholder value and
meeting the global needs of their clients. R&B Falcon was formed through the
merger of Reading & Bates Corporation and Falcon Drilling Company, Inc. in
December 1997 and subsequently acquired Cliffs Drilling Company in December
1998. Transocean Sedco Forex was formed in December 1999 through the combination
of Transocean Offshore Inc. and Sedco Forex Holdings Limited.
On February 22, 2000, J. Michael Talbert, the Chief Executive Officer and
President of Transocean Sedco Forex, called Paul B. Loyd, Jr., the Chairman and
Chief Executive Officer of R&B Falcon, to suggest that they meet while both were
in New York attending an energy conference. On February 25, 2000, the two met
and discussed the possibility of a combination of the two companies. The
discussions focused on the strategic rationale behind such a transaction, and
each agreed that a combination could be mutually beneficial to the shareholders
of both companies. They agreed to further analyze the potential impact and
benefits of a transaction. During this period, Transocean Sedco Forex began
informally consulting with its financial advisors, Goldman Sachs and Simmons.
On March 6, 2000, Robert L. Long, the Chief Financial Officer of Transocean
Sedco Forex, and Tim W. Nagle, the Chief Financial Officer of R&B Falcon, had a
telephone conversation concerning the type of preliminary information which
Transocean Sedco Forex would need to perform an initial analysis of a possible
transaction. The two also generally discussed R&B Falcon's exploration and
production business.
On March 17, 2000, Mr. Talbert and Mr. Long met in Houston with Mr. Loyd
and Mr. Nagle to continue preliminary discussions concerning a possible
combination. The conversation focused primarily on the views of each company as
to the potential benefits of a combination, the process to be followed by the
parties as their discussions progressed and the areas of R&B Falcon's business
operations and financial structure as to which Transocean Sedco Forex needed to
conduct additional due diligence, including an understanding of R&B Falcon's
debt structure and its exploration and production business. Mr. Talbert and Mr.
Loyd also privately discussed management issues and board representation.
Following this meeting, the companies began to exchange limited data to allow
for a more detailed analysis of a potential transaction.
On March 20, 2000, Mr. Talbert and Mr. Long briefed Victor Grijalva,
Chairman of the Board of Transocean Sedco Forex, and the Finance and Benefits
Committee of Transocean Sedco Forex (which is the board committee that reviews
acquisitions) on the possible combination. Representatives of Simmons were also
present at the telephonic meeting. Mr. Talbert described the preliminary
discussions with Mr. Loyd and Mr. Nagle, and Mr. Long reviewed initial financial
analytical models for the transaction and other materials regarding R&B Falcon.
On April 3, 2000, Mr. Talbert and Mr. Loyd attended a conference in New
Orleans and had a brief meeting. They discussed the status of the analysis and
confirmed that each still wished to continue to explore the potential
transaction.
On April 6, 2000, Mr. Talbert and Mr. Long updated Mr. Grijalva and the
Finance and Benefits Committee of Transocean Sedco Forex on the status of the
possible transaction, including potential valuations and transaction structures.
Representatives of Goldman Sachs, Simmons and Transocean Sedco Forex's legal
advisors, Baker Botts L.L.P., were also present at the telephonic meeting.
On April 10, 2000, Mr. Loyd informed the R&B Falcon board about his recent
discussions with Mr. Talbert concerning a potential transaction and that R&B
Falcon had provided Transocean Sedco Forex with financial and other information
to enable Transocean Sedco Forex to better analyze a potential transaction. Mr.
Loyd recommended that management explore whether a business combination with
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Transocean Sedco Forex was desirable and that R&B Falcon hire a financial
advisor to advise the R&B Falcon board in connection with a potential
transaction.
Mr. Talbert and Mr. Long again met with Mr. Loyd and Mr. Nagle in Houston
on April 14, 2000 in order to discuss possible valuations, valuation
methodologies, tax considerations and other issues regarding the possible
transaction. Following the April 14 meeting, the parties exchanged due diligence
request lists, and each party continued analyzing the possible combination.
Transocean Sedco Forex formally engaged each of Goldman Sachs and Simmons as its
financial advisors effective April 15, 2000.
On April 17, 2000, Mr. Loyd updated the R&B Falcon board on the status of
the ongoing negotiations, and described to the board the April 14 meeting with
Mr. Talbert and Mr. Long. On April 18, at a meeting attended by management of
R&B Falcon and some members of its board of directors, Morgan Stanley was
selected as R&B Falcon's financial advisor in connection with the possible
combination.
On April 19, 2000, R&B Falcon began consulting with Morgan Stanley in
connection with the possible combination. On April 24, 2000, the parties entered
into mutual confidentiality and standstill agreements. On April 25, 2000, a
meeting was held in Houston among Mr. Long, other executives of Transocean Sedco
Forex, representatives of Goldman Sachs, Simmons and Baker Botts, Mr. Nagle and
representatives of Morgan Stanley and R&B Falcon's legal advisors, Cravath,
Swaine & Moore, to discuss the possible structures and tax aspects of the
transaction. Following this meeting, the parties exchanged due diligence
materials.
A meeting was held in Houston on May 2, 2000 at which executives of
Transocean Sedco Forex and representatives of their financial and legal advisors
discussed due diligence matters with executives of R&B Falcon and their
advisors. Also on May 2, 2000, executives of R&B Falcon and representatives of
their financial and legal advisors discussed the structure and related tax
aspects of the transaction as proposed by Transocean Sedco Forex and its
financial and legal advisors. On May 3, 2000, executives of Transocean Sedco
Forex and R&B Falcon and representatives of their respective financial and legal
advisors discussed the structure and related tax aspects of the transaction.
Following these meetings, executives of Transocean Sedco Forex met with their
financial and legal advisors to continue their analysis of the transaction, make
modifications to the proposed structure and develop a proposed exchange ratio.
On May 8, 2000, Mr. Talbert met with Mr. Loyd in Houston and presented Mr.
Loyd with a letter expressing an indication of interest in a transaction. The
letter contemplated a merger transaction in which each R&B Falcon common share
would be exchanged for 0.461 Transocean Sedco Forex ordinary shares and in which
three director positions would be offered to R&B Falcon designees. The letter
also stated that any transaction was subject to the execution of a definitive
agreement and Transocean Sedco Forex board approval. Mr. Talbert and Mr. Loyd
discussed the terms of the letter. Mr. Loyd said that he would consider the
letter and consult with the R&B Falcon board. The same day, Baker Botts
delivered a draft agreement and plan of merger to Cravath, Swaine & Moore.
On May 9, 2000, representatives of Morgan Stanley contacted representatives
of Goldman Sachs to further discuss the suggested exchange ratio of 0.461
Transocean Sedco Forex ordinary shares on behalf of their respective clients.
Morgan Stanley expressed R&B Falcon's view that the proposed exchange ratio was
significantly lower than an exchange ratio that might be acceptable. Morgan
Stanley also stated that as a result of recent changes in the relative market
prices of each company's shares, the proposed exchange ratio did not represent a
premium for R&B Falcon's common shares based on then current market prices.
On May 10, Mr. Talbert spoke with Mr. Nagle, as Mr. Loyd was unavailable,
to explain that Transocean Sedco Forex could not significantly increase the
proposed exchange ratio and that, given the differing views of the parties as to
the exchange ratio, the negotiations were terminated.
Mr. Talbert briefed the Transocean Sedco Forex board at a regularly
scheduled meeting on May 11, 2000. Both Mr. Talbert and Mr. Long briefly
reviewed the transaction and explained why the negotiations had been terminated.
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Mr. Loyd called Mr. Talbert on May 12, and Mr. Talbert explained why the
talks had been ended. Although Transocean Sedco Forex considered the
negotiations to be terminated, representatives of Morgan Stanley met with
representatives of Goldman Sachs and Simmons on May 15, 2000 in New York. At
this meeting, Morgan Stanley presented financial measures that indicated that an
exchange ratio of 0.56 or above would be appropriate. The representatives of
Goldman Sachs and Simmons indicated that Transocean Sedco Forex would not be
interested in a transaction at this exchange ratio.
On May 17, at a regular meeting of the R&B Falcon board, Mr Loyd informed
the board of his discussions with Mr. Talbert, who had indicated that the
companies were too far apart with respect to possible exchange ratios and that
further discussions would not be productive. At this meeting, representatives of
Morgan Stanley reviewed with the board the results of their valuation work and
financial analyses to date.
There was no further contact between Mr. Talbert and Mr. Loyd until July
11, 2000. By that time, the relative share prices had returned to a range where
Mr. Talbert felt a deal was possible. Mr. Talbert called Mr. Loyd to inquire if
it would be useful for both sides to again analyze a possible transaction. Both
agreed to review their valuation models, consider their respective positions as
to the exchange ratio and then discuss whether to proceed. At Mr. Talbert's
request, on July 14, 2000, Mr. Nagle sent to Mr. Long updated information
relating to R&B Falcon's drilling contracts and significant recent business
developments.
On July 25, 2000, Mr. Talbert called Mr. Loyd to confer on the status of
each company's review and to establish a procedure for any potential future
discussions. No commercial terms were mentioned, and the two executives agreed
to meet in early August with a view to determine if the parties' views of
potential exchange ratios were close enough to merit additional discussions.
Mr. Talbert and Mr. Loyd met on August 8, 2000 to discuss the exchange
ratio and other key elements of a combination. They agreed that they could
discuss with their respective boards a transaction at an exchange ratio of 0.5
Transocean Sedco Forex ordinary shares for each R&B Falcon common share and in
which R&B Falcon would designate for membership on the Transocean board of
directors at least two directors, and, if the Transocean charter documents could
be appropriately amended, three directors. In connection with this meeting,
Cravath, Swaine & Moore and Baker Botts discussed the terms and structure of the
transaction and began negotiating the merger agreement.
On August 9, 2000, Mr. Talbert and Mr. Loyd both informed members of the
respective boards of the terms of the proposed transaction. On August 10, 2000,
Mr. Talbert again spoke to Mr. Loyd about the terms of the proposed transaction.
The two executives agreed that each company should move quickly to continue
their due diligence investigation and to commence negotiations towards reaching
a definitive merger agreement.
On August 10, 2000, the R&B Falcon board of directors held a meeting
attended by members of R&B Falcon's senior management and representatives of R&B
Falcon's financial and legal advisors. Mr. Loyd discussed with the board his
meeting with Mr. Talbert on August 8 and reviewed with the board the strategic
rationale for the proposed transaction. Representatives of Cravath, Swaine &
Moore then reviewed the regulatory and tax implications of the proposed
transaction. Representatives of Morgan Stanley then reviewed the financial
aspects with respect to the proposed transaction. Following a discussion of
these presentations, the R&B Falcon board authorized R&B Falcon's management to
proceed with negotiations with Transocean Sedco Forex, based on an exchange
ratio of 0.5 Transocean ordinary shares per R&B Falcon common share, and to
determine whether a mutually satisfactory definitive merger agreement could be
reached, subject to approval by the R&B Falcon board of directors.
From August 10 to August 17, senior executives of Transocean Sedco Forex
and R&B Falcon and representatives of their respective financial and legal
advisors held a series of negotiations to further define the principal financial
and legal terms of the transaction, including related tax and employee benefits
matters. During this period, executives of both parties and their respective
advisors met to negotiate various aspects of the transaction and to conduct due
diligence investigations of the other party. On
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August 11, Mr. Talbert and other senior executives briefed Mr. Grijalva and the
Finance and Benefits Committee of Transocean Sedco Forex on the status of the
discussions.
On August 18, 2000, Transocean Sedco Forex's board of directors met to
consider the proposed transaction. Mr. Talbert reviewed the strategic rationale
and the anticipated benefits of the transaction to Transocean Sedco Forex's
shareholders, and Mr. Long presented an overview of the structure, terms and
effects of the merger. Representatives of Simmons and Goldman Sachs each made a
presentation to the board regarding the financial terms of the proposed merger
and each delivered its oral opinion (which was subsequently confirmed in
writing) to the effect that as of the dates of their respective opinions the
exchange ratio was fair from a financial point of view to Transocean Sedco
Forex. Transocean Sedco Forex's legal advisors reviewed the terms of the merger
agreement and legal issues relating to the transaction. Transocean Sedco Forex's
board unanimously approved the merger agreement and related amendments to the
Transocean Sedco Forex memorandum of association and articles of association and
authorized the officers to enter into the merger agreement and related
transactions subject to final changes deemed appropriate by the officers.
Also on August 18, 2000, the R&B Falcon board of directors held a meeting
attended by members of R&B Falcon's senior management and representatives of R&B
Falcon's financial and legal advisors. Members of R&B Falcon's senior management
discussed their views of the strategic rationale for the proposed combination
and the anticipated strategic and operational benefits of the proposed
combination. The R&B Falcon board, assisted by R&B Falcon's legal and financial
advisors, considered the proposed merger agreement and the transactions
contemplated thereby. The R&B Falcon board also considered the proposed
amendment to R&B Falcon's certificate of incorporation. Representatives of
Morgan Stanley described the financial analyses performed by them with respect
to the possible combination with Transocean Sedco Forex. See "-- Opinion of
Morgan Stanley & Co. Incorporated." The representatives of Morgan Stanley then
delivered the oral opinion of Morgan Stanley, later confirmed in writing, that,
as of the date of the opinion, the exchange ratio was fair to the common
shareholders of R&B Falcon from a financial point of view. The R&B Falcon board
then concluded that the merger and the proposed amendment to R&B Falcon's
certificate of incorporation were advisable to R&B Falcon and its shareholders
and unanimously approved the merger agreement and the proposed amendment to R&B
Falcon's certificate of incorporation.
Following the board meetings, the merger agreement was finalized and on
August 19, 2000, the parties signed the merger agreement. On August 21,
Transocean Sedco Forex and R&B Falcon issued press releases announcing the
execution of the merger agreement.
TRANSOCEAN SEDCO FOREX'S REASONS FOR THE MERGER
The Transocean Sedco Forex board of directors believes that the merger will
expand and enhance its offshore drilling fleet and thus better position the
combined company to address the growing and more technically challenging needs
of its customers on a global basis, provide its customers with consistently high
quality service in all key offshore drilling areas of the world and increase
Transocean Sedco Forex's exposure to the currently expanding North American
natural gas market.
In reaching its conclusion to approve the merger, Transocean Sedco Forex's
board of directors consulted with members of management and its financial and
legal advisors and considered many factors, including the following:
- Following the merger, Transocean Sedco Forex will own, operate or manage
208 rigs, including several newbuilds currently under construction or
undergoing sea trials or commissioning. This will represent the largest
fleet of mobile offshore drilling units in the world. The combined
company will be better positioned, and will possess the necessary
efficiencies and resources, to meet its customers' needs and attract
customers and qualified personnel.
- The merger will increase Transocean Sedco Forex's presence in all major
offshore operating areas, including the North Sea, West Africa, Asia, the
U.S. Gulf of Mexico and Brazil. The increased infrastructure in these
areas should help to create critical mass and better enable the combined
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company to meet its customers' needs on a global basis, may provide
regional economies of scale and should reduce the possible impact of any
future downturn in a single geographic area.
- As a result of R&B Falcon's strong position in the shallow-water U.S.
Gulf of Mexico, the merger will provide the combined company with
exposure to the North American natural gas market. The board believes
that this exposure will provide the combined company with the opportunity
to benefit from the current favorable conditions in this market.
- The merger should strengthen the combined company's ability to serve
customers in deepwater and harsh environment drilling. Both Transocean
Sedco Forex and R&B Falcon have technical expertise in deepwater drilling
operation and in new rig construction programs. The two companies also
share a history of technical leadership and innovative engineering in the
offshore drilling industry.
- The transaction should enhance the company's position in the financial
markets. The combined company would be the third largest oil services
company based on equity capitalization as of the date of this joint proxy
statement/prospectus. This should help attract a broader group of large
institutional investors, which may increase trading liquidity, create
broader market visibility and allow for the possibility of an increased
stock market valuation multiple.
- Although R&B Falcon's significant outstanding debt will increase the
combined company's debt load (the combined company's pro forma
consolidated debt, including redeemable preferred shares, to total
capitalization ratio is 32% as of June 30, 2000, as compared to a 27%
ratio for Transocean Sedco Forex), Transocean Sedco Forex expects that it
will be able to complete the merger while preserving an investment grade
rating.
- The board considered the effect of the merger on cash flow per share,
cash earnings per share and earnings per share of the combined entity as
compared to Transocean Sedco Forex on a stand-alone basis. In particular,
Transocean Sedco Forex expects that the proposed merger will be
immediately accretive to cash flow per share and cash earnings per share,
while dilutive to earnings per share in 2001 and accretive thereafter.
- Following the merger, the Transocean Sedco Forex board expects potential
cost savings to be achievable through elimination of duplicative overhead
and redundant shore-based facilities and increased purchasing power in
areas such as insurance and materials.
- The Transocean Sedco Forex board reviewed the tax considerations of the
merger, including the expectation that the merger will be tax-free to
Transocean Sedco Forex and its shareholders and that, after the merger,
tax savings may be achieved by reason of the fact that Transocean Sedco
Forex is a Cayman Islands company and that earnings generated outside the
United States may be subjected to an effective corporate tax rate which
is lower than the U.S. rate.
- The Transocean Sedco Forex board considered the financial performance and
condition, business operations and future prospects of Transocean Sedco
Forex and R&B Falcon.
- The Transocean Sedco Forex board considered the expected accounting
treatment of the merger as a purchase and the related amortization of
goodwill.
- The Transocean Sedco Forex board considered the respective presentations
by and the oral opinions of Goldman, Sachs & Co. and Simmons & Company
International delivered on August 18, 2000, and subsequently confirmed in
writing, to the effect that as of the date of the opinions the exchange
ratio was fair, from a financial point of view, to Transocean Sedco
Forex. See "-- Opinion of Goldman, Sachs & Co." and "-- Opinion of
Simmons & Company International."
- The Transocean Sedco Forex board believed the corporate cultures of the
two companies are compatible.
- The Transocean Sedco Forex board considered the challenges and potential
costs of combining and integrating the businesses, and the attendant
risks of not achieving expected cost and tax savings.
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- The Transocean Sedco Forex board considered the amount and terms of R&B
Falcon's existing indebtedness, the potential for the combined company to
refinance that indebtedness on more favorable terms following the merger
and the possibility that the combined company might not be successful in
achieving that refinancing on terms currently anticipated.
- The Transocean Sedco Forex board considered the terms and conditions of
the merger agreement, including the fact that the exchange ratio is
fixed, covenants applicable to each party, the conditions to completion
of the merger, including required regulatory clearances, the right of the
parties to the merger agreement, under specified circumstances, to
respond to, evaluate and negotiate with respect to other business
combination proposals, the circumstances under which the merger agreement
could be terminated and the size and impact of termination fees
associated with a termination.
- The Transocean Sedco Forex board considered the interests of the officers
and directors of R&B Falcon in the merger, including the matters
described under "-- Interests of Certain Persons in the Merger."
- The Transocean Sedco Forex board considered the need to divest or cease
operation of R&B Falcon's marine division, consisting of offshore and
inland tugs, support vessels and barges, in order to comply with
restrictions on ownership and operation by foreign corporations of
vessels involved in the coastwise trade under applicable U.S. maritime
laws and regulations.
- The Transocean Sedco Forex board considered the opportunities and
alternatives available to Transocean Sedco Forex if the merger were not
to be undertaken, including pursuing the acquisition of entities other
than R&B Falcon, and the risks, uncertainties and expense of that
strategy.
- The Transocean Sedco Forex board considered the diversion of management
focus and resources from other strategic opportunities and from
operational matters while working to implement the merger.
In determining that the merger was advisable and in the best interests of
Transocean Sedco Forex's shareholders, the board of directors of Transocean
Sedco Forex considered the enumerated factors as a whole and did not quantify or
otherwise assign relative weights to the different factors. Individual directors
may have given different weights to different factors. Moreover, the foregoing
discussion of the reasons for the merger is not intended to be exhaustive.
RECOMMENDATIONS OF TRANSOCEAN SEDCO FOREX'S BOARD OF DIRECTORS
FOR THE REASONS DISCUSSED, TRANSOCEAN SEDCO FOREX'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT AND RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE INCREASE IN AUTHORIZED ORDINARY SHARE
CAPITAL AND THE ISSUANCE OF ORDINARY SHARES IN THE MERGER.
R&B FALCON'S REASONS FOR THE MERGER AND THE PROPOSED AMENDMENT TO R&B FALCON'S
CERTIFICATE OF INCORPORATION
In approving the merger agreement and the transactions contemplated thereby
and in recommending that the shareholders of R&B Falcon adopt the merger
agreement and approve the proposed amendment to the R&B Falcon certificate of
incorporation, the R&B Falcon board considered a number of positive factors,
including the following:
- The offshore drilling services industry is extremely cyclical and,
although the industry is currently experiencing a general upward trend,
the R&B Falcon board and management recognize that the trend may not
continue and that the ability of R&B Falcon, on a stand-alone basis, to
compete effectively during a downturn in industry conditions is unclear.
The R&B Falcon board and management concluded that a combination with a
company with the financial strength of Transocean Sedco Forex would
create a much stronger company in the offshore drilling services industry
and would afford greater protection to R&B Falcon's shareholders in the
event of a
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prolonged downturn in the offshore drilling sector than if R&B Falcon
remained a stand-alone company.
- The offshore drilling services industry is becoming increasingly
competitive from a capital and technology perspective, particularly in
those sectors of the industry that offer the greatest prospects for
growth. The combined company will have a greater ability to invest in the
capital assets and technology that customers expect and should therefore
be better able to respond to the needs of customers, the increased
competitiveness of the drilling industry and the opportunities that
changes in the drilling industry might bring.
- The most significant customers of R&B Falcon are large, integrated oil
companies. These companies have undergone significant consolidation of
their own over the last several years, resulting in more formidable
customers for all the companies in the offshore drilling services
industry. The R&B Falcon board and management believe that the greater
financial strength of the combined company should permit it to respond to
this trend better than R&B Falcon could on its own.
- The merger will make the combined company's overall results of operations
less vulnerable to fluctuations in the conditions in the varying
geographies in which R&B Falcon now operates, such as the Gulf of Mexico
shallow water region.
- Transocean Sedco Forex, which is one of the most established offshore
drilling companies in the world, will provide added credibility and
established relationships with major oil and gas companies engaged in
offshore exploration.
- The market capitalization of the combined company will be significantly
greater than R&B Falcon's current market capitalization, providing
enhanced liquidity for R&B Falcon's shareholders and the prospect for
higher stock market valuation multiples.
- The exchange ratio of 0.5 Transocean Sedco Forex ordinary shares for each
R&B Falcon common share, based on the last reported sale price of
Transocean Sedco Forex ordinary shares as reported on the NYSE Composite
Tape on August 17, 2000, the last trading day prior to approval of the
merger agreement, represented a premium of 18.5% over the last reported
sale price of R&B Falcon common shares on that date and a premium of
17.9% over the trading price of R&B Falcon common shares over the 10
trading days prior to the approval of the merger agreement.
- The presentation by and the oral opinion of Morgan Stanley delivered on
August 18, 2000, and subsequently confirmed in writing, to the R&B Falcon
board that, as of such date and based upon and subject to the matters
stated in the opinion, the exchange ratio was fair to the holders of R&B
Falcon common shares from a financial point of view (see "-- Opinion of
Morgan Stanley & Co. Incorporated").
- The advice of its counsel that the transaction could be accomplished on a
tax-free basis for federal income tax purposes (see "-- Certain United
States Federal Income Tax Consequences").
In approving the merger agreement and the transactions contemplated thereby
and in recommending that the shareholders of R&B Falcon adopt the merger
agreement and approve the proposed amendment to the R&B Falcon certificate of
incorporation, the R&B Falcon board also considered a number of negative
factors, including the following:
- The conditions to the merger, including those relating to regulatory
clearances and the debt indentures of R&B Falcon. The R&B Falcon board
discussed the obligations of Transocean Sedco Forex under the merger
agreement relating to these conditions and the possible risks to R&B
Falcon should the transaction not be consummated.
- The cost and the burden of integrating the two companies, including the
possibility that some of the expected operational benefits may not be
realized.
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In approving the merger agreement and the transactions contemplated thereby
and in recommending that the shareholders of R&B Falcon adopt the merger
agreement and approve the proposed amendment to the R&B Falcon certificate of
incorporation, the R&B Falcon board also considered a number of other matters,
including the following:
- The provisions of the merger agreement that would restrict the ability of
the R&B Falcon board and the Transocean Sedco Forex board to solicit or
negotiate alternative proposals, would require the R&B Falcon board and
the Transocean Sedco Forex board (subject to their fiduciary duties) to
recommend the merger to their respective shareholders, would (under
limited circumstances) allow R&B Falcon and Transocean Sedco Forex to
terminate the merger agreement to pursue a competing proposal and would
in some circumstances require the terminating party to pay a termination
fee to the other party. In connection with these provisions, the R&B
Falcon board noted that they were broadly symmetrical and thus provided
some assurance to each party with respect to the other party's commitment
to the transaction. The R&B Falcon board also received advice from
management, Morgan Stanley and legal counsel relating to the likely
effect of these provisions on a competing bid for R&B Falcon.
- The provisions of the merger agreement pursuant to which R&B Falcon's
outstanding preferred shares would remain outstanding after the merger
and unaffected by the transaction, except for the voting rights granted
to the preferred shares as a result of the proposed amendment to R&B
Falcon's certificate of incorporation (see "-- Effect of the Merger on
the R&B Falcon Preferred Shares" and "-- R&B Falcon's Proposal to Amend
its Certificate of Incorporation").
- The fact that the merger agreement provides that the employment of
certain officers of R&B Falcon, including Messrs. Loyd, Nagle, Bakonyi,
Hillin, Ofner, Toufeeq and Stewart, could be terminated upon the
consummation of the merger, thus resulting in those individuals receiving
lump sum payments and other benefits under their employment contracts
with R&B Falcon (see "-- Interests of Certain Persons in the Merger").
- The fact that the Transocean Sedco Forex board of directors after the
transaction will be composed of 12 or 13 directors, two or three of whom
will be designated by R&B Falcon.
The foregoing discussion of the factors considered by the R&B Falcon board
is not intended to be exhaustive. The R&B Falcon board did not assign relative
weights to the above factors or determine that any factor was of particular
importance. The R&B Falcon board viewed its position and recommendations as
being based on the totality of the information presented to, and considered by,
it.
RECOMMENDATIONS OF R&B FALCON'S BOARD OF DIRECTORS
At a special meeting held on August 18, 2000, the R&B Falcon board
unanimously resolved that the merger agreement and the merger are advisable to
R&B Falcon and its shareholders. At this meeting, the R&B Falcon board also
approved the merger agreement and the transactions contemplated by the merger
agreement. The R&B Falcon board unanimously recommends that the R&B Falcon
common shareholders adopt the merger agreement and approve the proposed
amendment to the R&B Falcon certificate of incorporation.
OPINION OF GOLDMAN, SACHS & CO.
On August 18, 2000, Goldman Sachs delivered its oral opinion to the
Transocean Sedco Forex board to the effect that, as of such date, the exchange
ratio was fair from a financial point of view to Transocean Sedco Forex. Goldman
Sachs subsequently confirmed its oral opinion by delivery of its written opinion
dated August 19, 2000.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED AUGUST 19,
2000, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX C AND
IS INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/ PROSPECTUS. YOU
SHOULD READ THE OPINION IN ITS ENTIRETY.
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<PAGE> 49
In connection with its opinion, Goldman Sachs reviewed, among other things,
- the merger agreement;
- annual reports to shareholders and annual reports on Form 10-K of
Transocean Sedco Forex (and certain of its predecessors) for the five
years ended December 31, 1999;
- annual reports to shareholders and annual reports on Form 10-K of R&B
Falcon (and certain of its predecessors) for the five years ended
December 31, 1999;
- interim reports to shareholders and quarterly reports on Form 10-Q of
Transocean Sedco Forex and R&B Falcon;
- other communications from Transocean Sedco Forex and R&B Falcon to their
respective shareholders;
- internal financial analyses and forecasts for R&B Falcon prepared by its
management;
- internal financial analyses and forecasts for Transocean Sedco Forex
prepared by its management;
- financial analyses and forecasts for R&B Falcon prepared by the
management of Transocean Sedco Forex; and
- financial analyses and forecasts for Transocean Sedco Forex and R&B
Falcon on a pro forma combined basis prepared by Transocean Sedco Forex's
management including certain cost savings and other synergies projected
by Transocean Sedco Forex's management to result from the merger.
Goldman Sachs also held discussions with members of the senior management
of Transocean Sedco Forex and R&B Falcon regarding their assessment of the
strategic rationale for, and the potential benefits of, the merger and the past
and current business operations, financial condition and future prospects of
their respective companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for Transocean Sedco
Forex ordinary shares and R&B Falcon common shares;
- compared financial and stock market information for Transocean Sedco
Forex and R&B Falcon with similar information for other publicly-traded
companies;
- reviewed the financial terms of recent business combinations in the
offshore contract drilling services industry specifically and in the oil
field services industry generally; and
- performed other studies and analyses as Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed
such accuracy and completeness for purposes of rendering its opinion. Goldman
Sachs assumed, with the consent of Transocean Sedco Forex, that the financial
analyses and forecasts for Transocean Sedco Forex and R&B Falcon on a pro forma
combined basis prepared by Transocean Sedco Forex's management, including the
cost savings and synergies projected by Transocean Sedco Forex's management to
result from the merger, were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of Transocean Sedco Forex and that
such projected cost savings and other synergies would be realized in the amounts
and time periods contemplated thereby. Goldman Sachs also assumed that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the merger will be obtained without any adverse effect on
Transocean Sedco Forex or R&B Falcon or on the expected benefits of the merger.
Goldman Sachs did not make an independent evaluation or appraisal of the assets
and liabilities of Transocean Sedco Forex or R&B Falcon or any of their
respective subsidiaries and was not furnished with any such evaluation or
appraisal. The advisory services and opinion of Goldman Sachs were provided for
the information and assistance of the board of directors of Transocean Sedco
Forex in connection with its consideration of the merger, and the opinion does
not constitute a recommendation as to how any holder
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<PAGE> 50
of Transocean Sedco Forex ordinary shares should vote with respect to the
issuance of the Transocean Sedco Forex ordinary shares.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to the Transocean Sedco
Forex board of directors on August 18, 2000.
The following summaries of financial analyses include information presented
in tabular format. You should read these tables together with the text of each
summary.
(1) Historical Exchange Ratio Analysis. Goldman Sachs reviewed the daily
closing trading prices for Transocean Sedco Forex ordinary shares and R&B Falcon
common shares for various historical periods ending on August 15, 2000. Goldman
Sachs' analysis indicated the following high, low and average historical
exchange ratios as compared to the exchange ratio of 0.50 proposed in the
merger.
<TABLE>
<CAPTION>
PERIOD HIGH LOW AVERAGE
------ ----- ----- -------
<S> <C> <C> <C>
5 Years..................................................... 0.816 0.243 0.554
3 Years..................................................... 0.764 0.243 0.441
2 Years..................................................... 0.498 0.243 0.379
1 Year...................................................... 0.498 0.342 0.423
180 days.................................................... 0.498 0.371 0.429
90 days..................................................... 0.498 0.393 0.446
30 days..................................................... 0.452 0.393 0.420
</TABLE>
(2) Selected Companies Analysis. Goldman Sachs reviewed and compared
selected financial information, ratios and public market multiples for
Transocean Sedco Forex and R&B Falcon to corresponding financial information,
ratios and public market multiples for the following rig conglomerate companies
(i.e., companies with significant presence in deepwater through semisubmersible
rigs and drillships) and jackup companies (i.e., companies with large jackup
fleets and relatively little deepwater exposure).
Goldman Sachs reviewed the following rig conglomerate companies:
- Diamond Offshore Drilling, Inc.;
- Global Marine Inc.;
- Noble Drilling Corporation; and
- Pride International, Inc.
Goldman Sachs reviewed the following jackup companies:
- ENSCO International Incorporated;
- Marine Drilling Companies, Inc.;
- Rowan Companies, Inc.; and
- Santa Fe International Corporation.
The selected companies were chosen because they are publicly-traded
companies with operations that for purposes of analysis may be considered
similar to Transocean Sedco Forex and R&B Falcon. Goldman Sachs calculated and
compared various financial multiples and ratios. The multiples and ratios were
calculated for Transocean Sedco Forex, R&B Falcon and each of the selected
companies based on:
- the closing price for the common shares of each company on August 15,
2000;
- the most recent publicly available information; and
- estimated 2001 and 2002 earnings, cash flows and earnings before
interest, taxes, depreciation and amortization, or EBITDA, based on
Goldman Sachs Research estimates.
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<PAGE> 51
Goldman Sachs also calculated financial multiples and ratios for Transocean
Sedco Forex and R&B Falcon using:
- Institutional Brokers Estimates System (IBES) median estimates; and
- estimates for Transocean Sedco Forex and R&B Falcon provided by
Transocean Sedco Forex's management.
Goldman Sachs' analyses of the selected companies compared the following to
the results for Transocean Sedco Forex and R&B Falcon:
- closing share price on August 15, 2000 as a percentage of 52-week high
share price;
- net debt as a percentage of the enterprise value (i.e., the market value
of common shares plus the book value of preferred shares, total debt and
minority interest less the book amount of cash and cash equivalents);
- price as a multiple of estimated 2001 and estimated 2002 earnings per
share;
- price as a multiple of estimated 2001 and estimated 2002 cash flows per
share; and
- enterprise value as a multiple of estimated 2001 and estimated 2002
EBITDA.
The results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
RIG
CONGLOMERATES JACKUPS TRANSOCEAN SEDCO FOREX R&B FALCON
------------------- ------------------- ---------------------------------- ---------
RANGE MEAN RANGE MEAN
----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Share Price as a
percentage of
52-week high....... 90%-98% 94% 86%-98% 92% 98%
Net Debt as a
percentage of
Enterprise Value... 8%-41% 18% 5%-8% 7% 10%
<CAPTION>
R&B FALCON
----------------------
<S> <C> <C>
Share Price as a
percentage of
52-week high....... 93%
Net Debt as a
percentage of
Enterprise Value... 37%
</TABLE>
<TABLE>
<CAPTION>
GS IBES TRANSOCEAN GS IBES
RESEARCH MEDIAN MANAGEMENT RESEARCH MEDIAN
ESTIMATES ESTIMATES ESTIMATES ESTIMATES ESTIMATES
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Price as a multiple
of earnings per
share
2001 (estimated)... 21.3x-29.1x 24.3x 16.8x-23.4x 19.7x 35.5x 26.2x 30.6x 26.3x 27.9x
2002 (estimated)... 10.3x-15.1x 13.0x 10.9x-15.0x 12.8x 16.3x 16.1x 19.2x 9.7x 9.7x
Price as a multiple
of cash flows per
share
2001 (estimated)... 8.5x-16.3x 13.8x 11.4x-16.2x 13.4x 18.6x 15.0x 16.9x 11.8x 12.3x
2002 (estimated)... 5.7x-11.3x 9.3x 8.6x-11.1x 9.8x 11.4x 11.4x 12.5x 6.7x 6.8x
Enterprise Value as a
multiple of EBITDA
2001 (estimated)... 8.0x-13.4x 11.7x 8.7x-14.3x 10.8x 16.9x na 16.1x 9.8x na
2002 (estimated)... 5.9x-9.6x 8.0x 6.2x-8.8x 7.7x 10.3x na 12.1x 6.3x na
<CAPTION>
TRANSOCEAN
MANAGEMENT
ESTIMATES
----------
<S> <C>
Price as a multiple
of earnings per
share
2001 (estimated)... 24.4x
2002 (estimated)... 15.0x
Price as a multiple
of cash flows per
share
2001 (estimated)... 11.9x
2002 (estimated)... 9.0x
Enterprise Value as a
multiple of EBITDA
2001 (estimated)... 9.3x
2002 (estimated)... 7.5x
</TABLE>
(3) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses of
the financial impact of the merger using estimates provided by Transocean Sedco
Forex's management that assumed certain cost savings and other synergies.
Goldman Sachs compared the earnings per share, cash earnings per share and the
cash flow per share of Transocean Sedco Forex on a stand-alone basis to that of
the combined company on a pro forma basis.
Based on such analyses, the merger would be:
- dilutive to Transocean Sedco Forex's estimated earnings per share in 2001
but accretive to Transocean Sedco Forex's estimated earnings per share in
each of 2002, 2003 and 2004;
44
<PAGE> 52
- accretive to Transocean Sedco Forex's estimated cash earnings per share
in each of 2001, 2002, 2003 and 2004; and
- accretive to Transocean Sedco Forex's estimated cash flow per share in
each of 2001, 2002, 2003 and 2004.
(4) Implied Exchange Ratio based on Discounted Cash Flow Analysis. Using
estimates provided by Transocean Sedco Forex's management, Goldman Sachs
calculated a range of implied exchange ratios based on discounted cash flow
valuations of Transocean Sedco Forex and R&B Falcon. Using discount rates
ranging from 8.0% to 16.0% and estimated 2004 terminal value EBITDA multiples
ranging from 6.0x to 12.0x, this analysis produced implied exchange ratios
ranging from 0.609x to 0.718x, as compared to 0.50x in the merger.
(5) Implied Exchange Ratio based on Contribution Analysis. Goldman Sachs
analyzed implied exchange ratios based on each company's relative contributions
based on EBITDA, cash flow and net income estimates provided by Transocean Sedco
Forex's management for Transocean Sedco Forex and R&B Falcon. The results of
this analysis are summarized as follows:
<TABLE>
<CAPTION>
IMPLIED
EXCHANGE RATIO
--------------
<S> <C>
EBITDA
2000 (estimated).................................. 0.581x
2001 (estimated).................................. 0.866x
2002 (estimated).................................. 0.784x
2003 (estimated).................................. 0.702x
2004 (estimated).................................. 0.675x
Cash Flow
2000 (estimated).................................. 0.405x
2001 (estimated).................................. 0.598x
2002 (estimated).................................. 0.581x
2003 (estimated).................................. 0.558x
2004 (estimated).................................. 0.558x
Net Income
2000 (estimated).................................. not meaningful
2001 (estimated).................................. 0.528x
2002 (estimated).................................. 0.538x
2003 (estimated).................................. 0.521x
2004 (estimated).................................. 0.525x
</TABLE>
Goldman Sachs also calculated implied exchange ratios based on the relative
contributions of Transocean Sedco Forex and R&B Falcon based on:
- IBES median earnings estimates;
- Goldman Sachs Research estimates; and
- gross asset values based on third party market value and replacement
value estimates.
45
<PAGE> 53
The results of these calculations are summarized as follows:
<TABLE>
<CAPTION>
IMPLIED
EXCHANGE RATIO
--------------
<S> <C>
IBES Earnings
Estimates
2001 (estimated).................................... 0.395x
2002 (estimated).................................... 0.700x
GS Research Earnings Estimates
2001 (estimated).................................... 0.531x
2002 (estimated).................................... 0.650x
Gross Asset Value Estimates*
Market Value........................................ 0.613x
Replacement Value................................... 0.684x
</TABLE>
---------------
* Rig asset values were based on estimates as of June 2000 provided by Jeffries
& Company Equity Research, except for estimates of certain Transocean Sedco
Forex swamp barges, land rigs and a jackup rig which were provided by Simmons
& Company International and Bassoe Offshore Consultants International.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying the opinion of Goldman Sachs. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses and did
not attribute any particular weight to any factor or analysis considered by it;
rather, Goldman Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the results of all such
analyses. No company used in the above analyses as a comparison is directly
comparable to Transocean Sedco Forex or R&B Falcon.
Goldman Sachs prepared these analyses solely for purposes of providing an
opinion to the Transocean Sedco Forex board of directors. The analyses do not
purport to be appraisals, nor do they necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts of
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than suggested by these analyses.
Because these analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or their respective
advisors, none of Transocean Sedco Forex, R&B Falcon or Goldman Sachs assumes
responsibility if future results are materially different from those forecasted.
As described above, Goldman Sachs' opinion to the Transocean Sedco Forex
board of directors was one of many factors taken into consideration by the
Transocean Sedco Forex board of directors in making its determination to approve
the merger. The foregoing summary does not purport to be a complete description
of the analyses performed by Goldman Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.
Goldman Sachs is familiar with Transocean Sedco Forex having provided
certain investment banking services to Transocean Sedco Forex from time to time,
including, among other things, having acted as financial advisor to Sonat
Offshore Drilling Inc., a predecessor to Transocean Sedco Forex, in connection
with its merger with Transocean ASA in September 1996, having acted as
lead-managing underwriter of the public offerings of $100 million aggregate
principal amount of 7.45% Notes due April 15, 2027 of Transocean Sedco Forex and
$200 million aggregate principal amount of 8.00% Debentures due April 15, 2027
of Transocean Sedco Forex in April 1997, having acted as agent in connection
with Transocean
46
<PAGE> 54
Sedco Forex's repurchase program for Transocean Sedco Forex ordinary shares, and
having acted as a financial advisor in connection with, and having participated
in certain of the negotiations leading to, the merger agreement. Goldman Sachs
may also provide certain investment banking services to R&B Falcon including
acting as an underwriter in R&B Falcon's contemplated public offering of its
common shares and providing services in connection with R&B Falcon's
contemplated repurchase of its preferred shares (see "The Merger
Agreement -- Covenants -- Additional Agreements"). In the course of its
underwriting services, Goldman Sachs may hold for its own account common shares
of R&B Falcon until the completion of the public distribution of such shares.
Goldman Sachs has not and will not participate in or assist with the
solicitation of any proxies from shareholders of R&B Falcon in connection with
the matters described in this joint proxy statement/prospectus. Goldman Sachs
provides a full range of financial advisory and securities services and, in the
course of its normal trading activities, may from time to time effect
transactions and hold securities, including derivative securities, of Transocean
Sedco Forex or R&B Falcon for its own account and for the accounts of customers.
Pursuant to a letter agreement dated April 15, 2000, Transocean Sedco Forex
engaged Goldman Sachs to act as its financial advisor in connection with the
possible acquisition of the shares or assets of R&B Falcon. Pursuant to the
terms of this letter agreement, Transocean Sedco Forex has agreed to pay Goldman
Sachs a fee of $12,000,000 upon consummation of the merger. Transocean Sedco
Forex also has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorneys' fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
OPINION OF SIMMONS & COMPANY INTERNATIONAL
On August 18, 2000, Simmons delivered its oral opinion, which was
subsequently confirmed in writing as of the same date, to the effect that, as of
that date and based upon and subject to the various considerations set forth in
the opinion, the exchange ratio pursuant to the merger agreement is fair from a
financial point of view to Transocean Sedco Forex.
The full text of Simmons' opinion, setting forth the assumptions that were
made, factors that were considered and limitations placed upon Simmons' review
in rendering its opinion, is included as Annex D to this joint proxy
statement/prospectus. Simmons' opinion is incorporated by reference in the
following discussion. The following summary does not describe all aspects of
Simmons' opinion, and it is qualified in its entirety by reference to the full
text of the written opinion. Transocean Sedco Forex's shareholders should read
the opinion in its entirety.
Transocean Sedco Forex did not impose any limitations on the scope of
Simmons' investigation or the procedures to be followed in rendering the
opinion. Transocean Sedco Forex did not request Simmons to make any
recommendation, and Simmons did not make any recommendation, to Transocean Sedco
Forex's board of directors as to the form or amount of consideration to be
issued in the merger. In arriving at its opinion, Simmons did not ascribe a
specific range of values to Transocean Sedco Forex or R&B Falcon, but instead
made its determination as to the fairness of the merger exchange ratio on the
basis of the financial and comparative analyses described below. Simmons'
opinion is for the use and benefit of Transocean Sedco Forex's board of
directors and was rendered to that board of directors in connection with its
consideration of the merger. Simmons' opinion does not constitute a
recommendation to any shareholder of Transocean Sedco Forex regarding how to
vote with respect to the merger. Transocean Sedco Forex did not request that
Simmons opine as to, and its opinion does not address, Transocean Sedco Forex's
underlying business decision to proceed with or effect the merger. Simmons also
expressed no opinion as to the prices at which Transocean Sedco Forex ordinary
shares will trade following announcement or completion of the merger. Transocean
Sedco Forex's shareholders should not view Simmons' opinion as providing any
assurance that the market value of Transocean Sedco Forex ordinary shares to be
held by shareholders after the merger will be in excess of the market value of
the Transocean Sedco Forex ordinary shares owned by such shareholders at any
time before the announcement or completion of the merger.
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<PAGE> 55
In reaching its opinion, Simmons reviewed and analyzed, among other things:
- the drafts dated August 17, 2000 of the merger agreement and other
ancillary transaction agreements;
- the financial statements and other information concerning Transocean
Sedco Forex contained in Transocean Sedco Forex's annual reports to
shareholders and annual reports on Form 10-K for each of the three years
ended December 31, 1999, 1998 and 1997;
- certain interim reports to Transocean Sedco Forex's shareholders,
Transocean Sedco Forex's quarterly report on Form 10-Q for the quarter
ended June 30, 2000 and Transocean Sedco Forex's proxy statement for its
2000 regular annual meeting;
- the financial statements and other information concerning R&B Falcon
contained in R&B Falcon's annual reports to shareholders and annual
reports on Form 10-K for each of the three years ended December 31, 1999,
1998 and 1997;
- certain interim reports to R&B Falcon's shareholders, R&B Falcon's
quarterly report on Form 10-Q for the quarter ended June 30, 2000 and R&B
Falcon's proxy statement for its 2000 regular annual meeting;
- business and financial analyses and information relating to Transocean
Sedco Forex and R&B Falcon, including certain internal financial
forecasts prepared and provided to Simmons by the managements of
Transocean Sedco Forex and R&B Falcon;
- publicly available information concerning the trading of, and the trading
market for, Transocean Sedco Forex's and R&B Falcon's ordinary shares;
- publicly available information with respect to other companies that
Simmons believed to be comparable to Transocean Sedco Forex and R&B
Falcon and the trading markets for those companies' securities;
- publicly available information concerning estimates of the future
operating performance and asset values of Transocean Sedco Forex, R&B
Falcon and the comparable companies that were prepared by industry
analysts unaffiliated with either Transocean Sedco Forex or R&B Falcon
and that Simmons considered relevant to the analyses; and
- publicly available information concerning the nature and terms of certain
other transactions Simmons considered relevant to the analyses.
Additionally, Simmons:
- met with certain officers and employees of Transocean Sedco Forex and R&B
Falcon to discuss the assets, liabilities, operations and historical and
projected performance of Transocean Sedco Forex and R&B Falcon;
- discussed with those officers and employees of Transocean Sedco Forex and
R&B Falcon the cost savings and the strategic benefits expected to result
from a combination of Transocean Sedco Forex and R&B Falcon; and
- considered other information, financial studies, analyses and
investigations and other financial, economic and market criteria that it
deemed relevant.
Simmons, with Transocean Sedco Forex's consent, assumed and relied upon the
accuracy and completeness of all the information reviewed and analyzed and did
not independently verify any of that information. With respect to financial
forecasts, Simmons utilized certain information set forth in those forecasts and
assumed such information was reasonably prepared on bases reflecting the best
estimates and judgments, as available at the time of preparation, of the
respective managements of Transocean Sedco Forex and R&B Falcon regarding the
future financial performance of Transocean Sedco Forex and
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<PAGE> 56
R&B Falcon, respectively. Simmons did not conduct a physical inspection of any
of the assets, operations or facilities of Transocean Sedco Forex or R&B Falcon
and did not make or receive any independent evaluation or appraisal of any
assets or liabilities, contingent or otherwise, of Transocean Sedco Forex or R&B
Falcon. Upon advice of Transocean Sedco Forex, including its legal and
accounting advisors, Simmons assumed that the merger would qualify as a tax-free
transaction to the shareholders of Transocean Sedco Forex.
Described below are certain financial, comparative and other analyses
Simmons performed in connection with rendering its opinion. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial and comparative analysis and the application of
those methods to the particular circumstances. Therefore, such an opinion is not
easily reduced to a summary description. Furthermore, in reaching its opinion,
Simmons did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgements as to the significance
and relevance of each analysis and factor. Accordingly, Simmons believes that
its analyses must be considered as a whole and that considering any portion of
such analyses and the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
the opinion.
In performing its analyses, Simmons made numerous assumptions with respect
to industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Transocean Sedco Forex or R&B
Falcon. Estimates contained in the analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than as set forth therein. Moreover,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which those businesses might actually be sold.
THE FOLLOWING SUMMARIES INCLUDE INFORMATION PRESENTED IN TABULAR FORMAT.
TRANSOCEAN SEDCO FOREX'S SHAREHOLDERS SHOULD READ THESE TABLES TOGETHER WITH THE
TEXT OF EACH SUMMARY.
1. HISTORICAL TRADING ANALYSIS
Simmons analyzed the relationship between Transocean Sedco Forex's and R&B
Falcon's share prices over an extended period of time and noted various events
and trends that caused movement in the share price ratio. Simmons calculated the
ratio of the market price of R&B Falcon's share price to the market price of
Transocean Sedco Forex's share price over various periods of time and compared
those historical ratios to the merger ratio.
<TABLE>
<CAPTION>
IMPLIED HISTORICAL
PERIOD EXCHANGE RATIO
------ ------------------
<S> <C>
August 14, 2000 closing prices.............................. 0.420x
30 trading day average ending August 14, 2000............... 0.425x
60 trading day average ending August 14, 2000............... 0.446x
90 trading day average ending August 14, 2000............... 0.441x
Average since January 1, 1998............................... 0.427x
Average since January 1, 1999............................... 0.383x
Average since January 1, 2000............................... 0.419x
</TABLE>
Simmons noted that the merger exchange ratio of 0.5 Transocean Sedco Forex
shares per R&B Falcon share represented a 19% premium to the share price ratio
on August 14, 2000 and an 18%, 12% and 13% premium to the average share price
ratio over the preceding 30, 60 and 90 trading days, respectively.
2. RELATIVE VALUATION ANALYSIS
Relative Contribution Analysis Based On Transocean Sedco Forex
Forecasts. Simmons analyzed the relative contribution of Transocean Sedco Forex
and R&B Falcon to the combined company resulting from the merger based on
selected measures of forecasted operating and financial information for
Transocean
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<PAGE> 57
Sedco Forex and R&B Falcon. The analysis was based on Transocean Sedco Forex
management's forecasts for 2001 through 2004. Simmons calculated relative
contributions implied by the following measures, before taking into account any
of the possible benefits from cost savings or operating synergies that may be
realized following the merger:
- Earnings before depreciation, interest and taxes ("EBITDA");
- EBITDA less maintenance capital expenditures;
- unlevered net income (net income before after-tax interest expense);
- unlevered cash flow (net income before after-tax interest expense plus
depreciation and amortization); and
- unlevered adjusted cash flow (net income before after-tax interest
expense plus depreciation, amortization and deferred taxes).
The table below shows the implied merger exchange ratios based on relative
contributions:
<TABLE>
<CAPTION>
EBITDA, LESS
MAINTENANCE UNLEVERED
CAPITAL UNLEVERED UNLEVERED ADJUSTED
EBITDA EXPENDITURES NET INCOME CASH FLOW CASH FLOW
----------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Range....................... 0.65x-0.83x 0.66x-0.90x 0.52x-0.72x 0.48x-0.61x 0.63x-0.76x
Average (Mean).............. 0.73x 0.76x 0.60x 0.53x 0.70x
</TABLE>
Relative Discounted Cash Flow Analysis. Simmons performed a discounted cash
flow analysis of Transocean Sedco Forex and R&B Falcon using financial forecasts
from 2001 through 2004 provided by Transocean Sedco Forex. Simmons calculated
suggested enterprise values using terminal values based on forecasted year 2004
results using two methods: (1) the present value of cash flows achieved in
perpetuity growing at 0.0% to 3.0% per year and (2) multiples of EBITDA, ranging
from 5.0x to 7.0x. The 2001 through 2004 cash flows and the terminal values were
discounted to present values using discount rates ranging from 10.0% to 14.0%.
The discounted cash flow values implied merger exchange ratios of 0.44x to
0.65x. Simmons noted that using a 10 to 12 percent discount rate and terminal
values based on the growing perpetuity method, this range could be narrowed to
0.53x to 0.65x.
Relative Contribution Analysis Based On Analyst Estimates. Simmons analyzed
the relative contribution of Transocean Sedco Forex and R&B Falcon to the
combined company based on Wall Street research analyst earnings estimates for
both companies as reported by First Call and from Simmons & Company Research
financial models. Simmons used the Wall Street analyst earnings estimates and
Transocean Sedco Forex management estimates for depreciation, amortization, tax
rates and deferred taxes to derive estimated earnings, cash flow and adjusted
cash flow per share estimates for both companies on an unlevered (debt-free)
basis. Based on estimated debt amounts for both companies at merger closing,
Simmons calculated the exchange ratios implied by the relative contributions.
The analysis calculated relative contributions before taking into account any of
the possible benefits from cost savings or operating synergies that may be
realized following the merger.
The table below shows the implied merger exchange ratios indicated by the
analysis.
IMPLIED MERGER EXCHANGE RATIOS
<TABLE>
<CAPTION>
UNLEVERED EARNINGS UNLEVERED CASH FLOW UNLEVERED ADJUSTED
PER SHARE(1) PER SHARE(2) CASH FLOW PER SHARE(3)
------------------ ------------------- ----------------------
<S> <C> <C> <C>
2001 Range........................ 0.57x-0.59x 0.52x-0.53x 0.66x-0.67x
2002 Median....................... 0.82x 0.65x 0.83x
2003.............................. 0.67x 0.61x 0.72x
</TABLE>
---------------
(1) Earnings before after-tax interest expense per share.
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<PAGE> 58
(2) Earnings before after-tax interest expense plus depreciation and
amortization per share.
(3) Earnings before after-tax interest expense plus depreciation, amortization
and deferred taxes per share.
3. COMPARABLE COMPANIES ANALYSIS
Simmons reviewed and compared certain financial information relating to
Transocean Sedco Forex and R&B Falcon to corresponding financial information,
ratios and public market multiples for seven publicly traded corporations:
- Diamond Offshore Drilling, Inc.
- ENSCO International, Inc.
- Global Marine Inc.
- Marine Drilling Companies, Inc.
- Noble Drilling Corporation
- Rowan Companies, Inc.
- Santa Fe International Corporation
Simmons used Transocean Sedco Forex management's 2001 forecasts for
Transocean Sedco Forex and R&B Falcon and Wall Street analysts' 2001 median
earnings estimates for the seven comparable companies as reported by First Call.
Simmons calculated the multiples for Transocean Sedco Forex, R&B Falcon and the
comparable companies using balance sheets and market capitalizations based on
the most recent publicly available information. Simmons considered enterprise
value as a multiple of EBITDA, unlevered net income, unlevered cash flow and
adjusted unlevered cash flow. Enterprise value is calculated by adding the
market value of common equity, the estimated market value of debt and minority
interests and then subtracting investments in unconsolidated affiliates and
excess cash. Simmons also examined equity values as a multiple of estimated 2001
levered net income and levered cash flow.
The table below provides comparable company multiples compared to those of
Transocean Sedco Forex and the implied R&B Falcon transaction multiples:
<TABLE>
<CAPTION>
R&B
FALCON
TRANSOCEAN IMPLIED BY
FINANCIAL MEASURE RANGE(1) MEDIAN SEDCO FOREX TRANSACTION
----------------- ----------- ------ ----------- -----------
<S> <C> <C> <C> <C>
2001 EBITDA.............................. 9.5x-14.2x 12.1x 15.6x 10.7x
2001 Unlevered Net Income................ 18.6x-27.9x 22.9x 28.6x 22.6x
2001 Unlevered Cash Flow................. 13.3x-17.4x 15.7x 16.8x 14.8x
2001 Adj. Unlevered Cash Flow............ 12.3x-15.7x 14.6x 17.4x 12.9x
2001 Levered Net Income.................. 17.4x-27.4x 22.2x 30.0x 28.3x
2001 Levered Cash Flow................... 12.3x-16.3x 15.0x 16.7x 14.0x
</TABLE>
---------------
(1) Excludes Transocean Sedco Forex and R&B Falcon
4. SELECTED TRANSACTIONS ANALYSIS
Simmons reviewed certain information relating to selected transactions in
the oil service industry since 1994. Simmons calculated the offer premiums for
27 transactions based on the target companies' share prices one day prior to
announcement and 30 days prior to announcement. Simmons noted that the median
premium to market price one day prior to announcement was 21.3% compared to a
19.1% implied premium for R&B Falcon in the proposed merger with Transocean
Sedco Forex. The median premium compared to the average share price 30 days
prior to announcement was 27.0 percent, compared to 17.6 percent premium implied
by the R&B Falcon merger with Transocean Sedco Forex. Due to the limited number
of directly comparable transactions in the current operating environment,
Simmons did not
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<PAGE> 59
draw conclusions regarding the transaction multiples of the selected
transactions compared to implied transaction multiples for R&B Falcon.
5. ACCRETION/DILUTION ANALYSIS
Simmons prepared a pro forma merger model that incorporated Transocean
Sedco Forex management's financial projections for Transocean Sedco Forex and
R&B Falcon for the years 2001 through 2004 as well as the estimated pre-tax cost
savings and synergies resulting from the merger. Simmons then compared
Transocean Sedco Forex management's forecasts of the earnings, cash earnings and
cash flow per share for Transocean Sedco Forex on a stand-alone basis to the
earnings, cash earnings and cash flow per share following the completion of the
merger. Based on such analysis the proposed transaction would be dilutive to
earnings per share and accretive to cash earnings per share and cash flow per
share in 2001 and accretive to earnings per share, cash earnings per share and
cash flow per share thereafter. Simmons also conducted sensitivity analyses for
six additional scenarios developed by Transocean Sedco Forex management, using
varying assumptions as to the market conditions for various classes of offshore
rigs as well as for the occurrence of specific events and potential operational
benefits and risks not included in the forecasts prepared by Transocean Sedco
Forex and R&B Falcon.
Simmons prepared these analyses solely for purposes of providing an opinion
to the Transocean Sedco Forex board of directors. The analyses do not purport to
be appraisals, nor do they necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts of future results
are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by these analyses. Because
these analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of Transocean Sedco Forex, R&B Falcon or Simmons assumes
responsibility if future results are materially different from those forecasted.
As a specialized, energy-related investment banking firm, Simmons is
engaged, among other things, in the valuation of businesses and their securities
in connection with mergers and acquisitions, in the management and underwriting
and sales of equity and debt securities to the public and in private placements
of equity and debt securities. The Transocean Sedco Forex board selected Simmons
because of its expertise, reputation and familiarity with Transocean Sedco Forex
and because its investment banking professionals have substantial experience in
transactions comparable to the merger.
Simmons has previously rendered certain financial advisory and investment
banking services to Transocean Sedco Forex, for which it received customary
compensation, including acting as a co-manager in its initial public offering in
June 1993 and a follow-on offering of Transocean Sedco Forex common stock in
July 1995, as well as providing corporate finance advisory services in
conjunction with the merger of Transocean Sedco Forex and Transocean ASA in 1996
and Transocean Sedco Forex and Sedco Forex Holdings Limited in 1999.
Pursuant to the terms of an engagement letter agreement, dated April 15,
2000, between Simmons and Transocean Sedco Forex, Transocean Sedco Forex has
agreed to pay Simmons $10,000,000 upon closing of the merger.
In addition, Transocean Sedco Forex has agreed to reimburse Simmons for its
reasonable expenses (including, without limitation, professional and legal fees
and disbursements) incurred in connection with its engagement, and to indemnify
Simmons and certain related persons against certain liabilities in connection
with its engagement, including certain liabilities that may arise under the
federal securities laws.
Simmons may also actively trade the securities of Transocean Sedco Forex
and R&B Falcon in the ordinary course of its business for its own account and
for the accounts of its customers. Accordingly, Simmons may at any time hold a
long or short position in such securities.
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<PAGE> 60
OPINION OF MORGAN STANLEY & CO. INCORPORATED
R&B Falcon retained Morgan Stanley to provide it with financial advisory
services and a financial fairness opinion in connection with the merger. Morgan
Stanley was selected to act as R&B Falcon's financial advisor based on Morgan
Stanley's qualifications, expertise and reputation and its knowledge of the
business and affairs of R&B Falcon. At the meeting of the R&B Falcon board on
August 18, 2000, Morgan Stanley rendered its oral opinion that as of that date,
and subject to and based on the various considerations set forth in its opinion,
the exchange ratio pursuant to the merger agreement was fair from a financial
point of view to the holders of R&B Falcon common shares. Morgan Stanley
subsequently confirmed its oral opinion by delivery of its written opinion dated
August 19, 2000.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION, DATED AS OF AUGUST 19,
2000, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX B TO
THIS JOINT PROXY STATEMENT/PROSPECTUS. HOLDERS OF R&B FALCON COMMON SHARES ARE
URGED TO, AND SHOULD, READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN
STANLEY'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF R&B FALCON, ADDRESSES
ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF R&B FALCON
COMMON SHARES OF THE EXCHANGE RATIO PURSUANT TO THE MERGER AGREEMENT, AND DOES
NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR CONSTITUTE A RECOMMENDATION TO ANY
R&B FALCON SHAREHOLDER AS TO HOW TO VOTE AT THE SPECIAL MEETING. THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of R&B Falcon and Transocean Sedco Forex;
- reviewed certain internal financial statements and other financial and
operating data concerning R&B Falcon and Transocean Sedco Forex prepared
by the respective managements of R&B Falcon and Transocean Sedco Forex;
- reviewed certain financial forecasts prepared by the respective
managements of R&B Falcon and Transocean Sedco Forex;
- discussed the past and current operations and financial condition and the
prospects of R&B Falcon and Transocean Sedco Forex, including information
relating to certain strategic, financial and operational benefits
anticipated from the merger, with senior executives of R&B Falcon and
Transocean Sedco Forex;
- reviewed the pro forma impact of the merger on Transocean Sedco Forex's
earnings per share, cash flow, consolidated capitalization and financial
ratios;
- reviewed the reported prices and trading activity for R&B Falcon common
shares and Transocean Sedco Forex ordinary shares;
- compared the financial performance of R&B Falcon and Transocean Sedco
Forex and the prices and trading activity of R&B Falcon common shares and
Transocean Sedco Forex ordinary shares with that of certain other
publicly-traded companies that are comparable with R&B Falcon and
Transocean Sedco Forex, respectively, and their securities;
- reviewed the financial terms, to the extent publicly available, of
certain comparable business combination transactions deemed relevant;
- discussed the strategic rationale for the merger with the management and
the board of directors of R&B Falcon;
- participated in discussions and negotiations among representatives of R&B
Falcon and Transocean Sedco Forex and their advisors;
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<PAGE> 61
- reviewed the draft of the merger agreement and certain related documents;
and
- performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
forecasts, including information relating to certain strategic, financial and
operational benefits anticipated from the merger, Morgan Stanley assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of R&B Falcon and
Transocean Sedco Forex, respectively. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities of R&B Falcon or
Transocean Sedco Forex; nor was Morgan Stanley furnished with any such
appraisals. In addition, Morgan Stanley assumed that the merger would be
consummated in accordance with the terms set forth in the merger agreement,
including that the merger would be treated as a tax-free reorganization pursuant
to the Internal Revenue Code of 1986, as amended. The opinion of Morgan Stanley
is necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to Morgan Stanley, as of August
19, 2000.
The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion and the
preparation of its written opinion dated August 19, 2000. This summary of Morgan
Stanley's financial analyses includes information presented in tabular format.
In order to fully understand the financial analyses performed by Morgan Stanley,
the tables must be read together with the text of each summary. The tables alone
do not constitute a complete description of the financial analyses.
Historical Share Price Performance. R&B Falcon common shares closed at a
price of $23.81 per share on August 15, 2000. Based on the exchange ratio of 0.5
and Transocean Sedco Forex's ordinary share closing price of $56.38 per share on
August 15, 2000, the implied acquisition price per R&B Falcon common share of
$28.19 represented a premium of approximately 18.4%.
Morgan Stanley also compared historical closing prices of the R&B Falcon
common shares and Transocean Sedco Forex shares to an index of comparable
companies for the seven day, six month, one year, and three year periods ended
August 15, 2000. Diamond Offshore Drilling, Inc., Global Marine, Inc. and Noble
Drilling Corporation were included in the index based on their shared
characteristics with R&B Falcon and Transocean Sedco Forex. The following table
presents the share price appreciation of R&B Falcon, Transocean Sedco Forex and
the index of comparable companies for the three year, one year, six month and
seven day periods prior to August 15, 2000.
<TABLE>
<CAPTION>
SHARE PRICE APPRECIATION
---------------------------------------------------
TRANSOCEAN SEDCO INDEX OF COMPARABLE
TRADING PERIOD ENDED AUGUST 15, 2000 R&B FALCON FOREX COMPANIES
------------------------------------ ---------- ---------------- -------------------
<S> <C> <C> <C>
Last 3 years............................ (8.4)% 39.3% 25.0%
Last 1 year............................. 97.4% 62.2% 45.1%
Last 6 months........................... 70.9% 52.4% 42.7%
Last 7 days............................. 9.2% 11.2% 5.5%
</TABLE>
Historical Exchange Ratio Analysis. Morgan Stanley also reviewed the ratio
of the daily closing prices of R&B Falcon common shares divided by the
corresponding closing price of Transocean Sedco Forex ordinary shares over
various periods ended August 15, 2000. Morgan Stanley calculated the average of
the historical ratios and computed the premium represented by the common share
exchange ratio of 0.5 over the average of the historical ratios for various
periods. The following table presents the range of historical ratios over the
periods covered compared to the exchange ratio in the merger.
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<PAGE> 62
<TABLE>
<CAPTION>
PERCENTAGE PREMIUM
AVERAGE REPRESENTED BY THE
HISTORICAL EXCHANGE RATIO OF
TRADING PERIOD ENDED AUGUST 15, 2000 RATIO 0.5 VS. THE HISTORICAL RATIO
------------------------------------ ---------- ----------------------------
<S> <C> <C>
Last 3 years......................................... 0.460 8.7%
Last 1 year.......................................... 0.424 17.9%
Last 6 months........................................ 0.428 16.8%
Last 7 days.......................................... 0.429 16.6%
As of August 15, 2000................................ 0.422 18.4%
</TABLE>
Comparable Publicly-Traded Company Analysis. As part of its analysis,
Morgan Stanley compared certain financial information of R&B Falcon and
Transocean Sedco Forex with that of a group of publicly-traded offshore drilling
companies as set forth in the table below. This financial information included
price to forecasted 2001 earnings per share ("EPS") multiples, price to
forecasted 2001 cash flow per share ("CFPS") multiples, firm value (defined as
equity value plus total debt and preferred stock less cash) to forecasted 2001
EBITDA (defined as earnings before interest, taxes, depreciation and
amortization) multiples, price to net asset value ("NAV," defined as the
estimated current market value of the assets less debt and preferred stock plus
cash divided by the shares outstanding) and price to replacement value of assets
("RVA," defined as the estimated replacement value of the assets less debt and
preferred stock plus cash divided by the shares outstanding). This analysis was
based on a compilation of estimates by securities research analysts. The
following table presents, as of August 15, 2000, the range of multiples for the
comparable companies of each of price to projected 2001 EPS, price to projected
2001 CFPS, firm value to projected 2001 EBITDA, price to NAV and price to RVA:
<TABLE>
<CAPTION>
PRICE TO PRICE TO FIRM VALUE TO PRICE TO PRICE TO
COMPARABLE COMPANIES 2001 EPS 2001 CFPS 2001 EBITDA NAV RVA
-------------------- -------- --------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
Diamond Offshore Drilling, Inc. .......... 26.3x 15.0x 12.0x 120% 76%
Global Marine Inc. ....................... 23.1x 13.8x 14.0x 199% 138%
Noble Drilling Corporation................ 22.3x 14.7x 14.5x 254% 128%
ENSCO International Incorporated.......... 21.0x 14.2x 12.7x 223% 137%
Santa Fe International Corporation........ 21.0x 14.8x 13.1x 179% 126%
Atwood Oceanics, Inc. .................... 18.9x 9.0x 6.8x NA NA
Rowan Companies, Inc. .................... 17.6x 11.8x 11.5x NA NA
Marine Drilling Companies, Inc. .......... 17.2x 10.3x 9.2x 180% 112%
Transocean Sedco Forex Stand-alone........ 26.2x 15.1x 14.0x 186% 116%
R&B Falcon Stand-alone.................... 27.1x 12.1x 9.2x 196% 74%
</TABLE>
---------------
NA: Not available
No company utilized in Morgan Stanley's peer group comparison analysis as a
comparable company is identical to R&B Falcon or Transocean Sedco Forex.
Accordingly, an analysis of the above results necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of companies to which they are being compared. In evaluating the
comparable companies, Morgan Stanley made judgments and assumptions with regard
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of R&B Falcon
or Transocean Sedco Forex, as well as the assumed absence of any material
adverse change in the financial condition and prospects of R&B Falcon,
Transocean Sedco Forex or the industry or in the financial markets in general.
Mathematical analysis, such as determining the mean or median, is not, in
itself, a meaningful method of using comparable publicly-traded company data.
Contribution Analysis. Morgan Stanley reviewed certain projected operating
and financial information, including, among other things, net income and cash
flow, for R&B Falcon, Transocean Sedco Forex and the pro forma combined entity
resulting from the merger, without giving effect to any potential synergies that
may result from the transaction and excluding non-recurring integration related
costs or
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charges. Morgan Stanley also analyzed and reviewed certain estimates of NAVs and
discounted cash flow ("DCF") values. The analysis was performed utilizing
information for R&B Falcon and Transocean Sedco Forex based on estimates from
the management of R&B Falcon and Transocean Sedco Forex for the fiscal years
ended 2001 through 2004 and based on various scenarios. The following table
represents the range of implied exchange ratios based on the equity contribution
of R&B Falcon to the combined company on a pro forma basis:
<TABLE>
<CAPTION>
FINANCIAL STATISTIC RANGE OF IMPLIED EXCHANGE RATIOS
------------------- --------------------------------
<S> <C>
Net Income............................... 0.330-0.592
Cash Flow................................ 0.438-0.621
NAV...................................... 0.411-0.491
DCF...................................... 0.360-0.594
</TABLE>
Analysis of Selected Precedent Transactions. Using publicly available
information, Morgan Stanley performed an analysis of the following precedent
transactions that were comparable to the merger in certain respects:
- Transocean Offshore Inc./Sedco Forex Holdings Limited
- Cliffs Drilling Company/R&B Falcon Corporation
- Reading & Bates Corporation/Falcon Drilling Company
- Transocean ASA/Sonat Offshore Drilling
- Royal Nedlloyd N.V.'s offshore drilling division, Neddrill/Noble Drilling
Corporation
- Dual Drilling Company/ENSCO International Incorporated
- Arethusa (Offshore) Limited/Diamond Offshore Drilling
- Wilrig AS/Transocean ASA
- Reading & Bates Corporation/Sonat Offshore Drilling (Terminated)
- Chiles Offshore Corporation/Noble Drilling Corporation
Morgan Stanley compared certain financial and market statistics of the
precedent transactions. The firm value to next twelve months EBITDA multiple
ranged from 4.4 to 13.4 times. The price to next twelve months cash flow
multiple ranged from 4.8 to 15.2 times. The premium to unaffected stock price
ranged from 7.7% to 39.0%. Based on a compilation of estimates by securities
research analysts, the common share exchange ratio implied a firm value to next
twelve months EBITDA multiple of 13.4 times, a price to next twelve month cash
flow multiple of 20.4 times and a premium to unaffected stock price of 18.4% of
R&B Falcon, all as of August 15, 2000.
No transaction utilized as a comparison in the precedent transactions
analysis is identical to the merger. Accordingly, an analysis of the results of
the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of R&B Falcon
and Transocean Sedco Forex and other factors that would affect the transaction
value of the companies to which they are being compared. In evaluating the
transactions listed above, Morgan Stanley made judgments and assumptions with
regard to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of R&B Falcon
or Transocean Sedco Forex and assumed the absence of any material adverse change
in the financial condition and prospects of R&B Falcon, Transocean Sedco Forex
or the industry or in the financial markets in general. Mathematical analysis,
such as determining the mean or median, is not, in itself, a meaningful method
of using precedent transactions data.
Pro Forma Merger Analysis. Morgan Stanley analyzed the pro forma impact of
the merger on Transocean Sedco Forex's projected EPS, cash earnings per share
("CEPS," defined as EPS plus goodwill
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<PAGE> 64
amortization per share), and CFPS for the fiscal years ended 2001 and 2002 and
peak earnings results, which assumes that all of the combined company's capacity
is utilized at day rates as high as those achieved during the last industry
peak, while giving effect to $45 million of expected synergies in 2001,
increasing by 3% annually, and the impact of a reduction in R&B Falcon's
effective income tax rate resulting from the merger. The analysis was performed
utilizing estimates prepared by the respective managements of R&B Falcon and
Transocean Sedco Forex for the fiscal years ended 2001 and 2002 and peak
earnings results for R&B Falcon and Transocean Sedco Forex. Based on these
forecasts, the merger would be expected to be dilutive to Transocean Sedco
Forex's EPS and accretive to CFPS in 2001 and 2002, dilutive to CEPS in 2001 and
accretive in 2002, and accretive to Transocean Sedco Forex's peak earnings, cash
earnings and cash flow results excluding non-recurring integration related
costs.
As part of its analysis, Morgan Stanley calculated the pro forma 2001 EPS,
2001 CFPS, 2001 EBITDA and NAV of the combined company. Morgan Stanley applied
those results to corresponding valuation multiples of a group of comparable
publicly-traded companies, including certain offshore drilling companies and
selected large capitalization oil services companies, in order to illustrate the
range of values which the combined company might trade after the completion of
the merger. The comparable publicly-traded companies included Diamond Offshore
Drilling, Inc., Global Marine Inc., Noble Drilling Corporation, Schlumberger
N.V., Halliburton Company and Baker Hughes Incorporated. The analysis indicated
that the combined company would likely trade at higher valuation multiples than
R&B Falcon would trade on a stand-alone basis.
In connection with the review of the merger by the R&B Falcon board, Morgan
Stanley performed a variety of financial and comparative analyses for purposes
of its opinion given in connection therewith. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did not attribute
any particular weight to any particular analysis or factor considered by it.
Furthermore, Morgan Stanley believes that selecting any portion of its analyses
or factors considered by it, without considering all analyses and factors as a
whole, would create an incomplete view of the process underlying its opinion. In
addition, Morgan Stanley may have given various analyses and factors more or
less weight than other analyses and factors and may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting from any particular analysis described above should
therefore not be taken to be Morgan Stanley's view of the actual value of R&B
Falcon or Transocean Sedco Forex.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of R&B Falcon or Transocean
Sedco Forex. Any estimates contained in Morgan Stanley's analysis are not
necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by such estimates. The
analyses were prepared solely as part of Morgan Stanley's analysis of the
fairness from a financial point of view of the common share exchange ratio,
pursuant to the merger agreement, to the holders of R&B Falcon common shares and
were conducted in connection with the delivery by Morgan Stanley of its opinion
dated August 19, 2000 to the R&B Falcon board of directors. The analyses do not
purport to be appraisals or to reflect the prices at which R&B Falcon common
shares or Transocean Sedco Forex ordinary shares actually may be valued or the
prices at which their shares may actually trade in the marketplace. Accordingly,
such analyses and estimates are inherently subject to substantial uncertainty.
In addition, as described above, Morgan Stanley's opinion and presentation
to the R&B Falcon board of directors was one of many factors taken into
consideration by the R&B Falcon board of directors in making its decision to
approve the merger. Consequently, the Morgan Stanley analyses as described above
should not be viewed as determinative of the opinion of the R&B Falcon board of
directors with respect to the value of R&B Falcon or of whether the R&B Falcon
board of directors would have been willing to agree to a different exchange
ratio. The common stock exchange ratio pursuant to the merger agreement and
other terms of the merger agreement were determined through arm's-length
negotiations between R&B Falcon and Transocean Sedco Forex and were approved by
the R&B Falcon board of directors.
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Morgan Stanley did not recommend any specific exchange ratio to R&B Falcon or
that any given exchange ratio constituted the only appropriate exchange ratio
for the merger.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition of
R&B Falcon or any of its assets, nor did it negotiate with any of the parties,
other than Transocean Sedco Forex, which expressed interest to it in the
possible acquisition of or merger with R&B Falcon or certain of its constituent
businesses.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with the mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the ordinary course of Morgan Stanley's trading, brokerage and
financing activities, Morgan Stanley or its affiliates may at any time hold long
or short positions, trade or otherwise effect transactions, for its own account
or for the account of customers, in the equity or debt securities or senior
loans of R&B Falcon or Transocean Sedco Forex.
Morgan Stanley may also provide certain investment banking services to R&B
Falcon including providing services in connection with R&B Falcon's contemplated
public offering of its common shares and providing services in connection with
R&B Falcon's contemplated repurchase of its preferred shares (see "The Merger
Agreement -- Covenants -- Additional Agreements"). Morgan Stanley has not and
will not participate in or assist with the solicitation of any proxies from
shareholders of R&B Falcon in connection with the matters described in this
joint proxy statement/prospectus.
Pursuant to an engagement letter, dated August 17, 2000 between Morgan
Stanley and R&B Falcon, Morgan Stanley provided financial advisory services and
a financial opinion in connection with the merger, and R&B Falcon agreed to pay
Morgan Stanley a fee between 0.200% to 0.295% of the aggregate value of R&B
Falcon at the time of the closing of the merger. R&B Falcon has also agreed to
reimburse Morgan Stanley for its expenses incurred in performing its services.
In addition, R&B Falcon has agreed to indemnify Morgan Stanley and its
affiliates, their respective directors, officers, agents and employees and each
person, if any, controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities under the
federal securities laws, related to or arising out of Morgan Stanley's
engagement and any related transactions. In the past, Morgan Stanley and its
affiliates have provided financial advisory services to R&B Falcon and have
received fees for the rendering of these services.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Transocean Sedco Forex
Transocean Sedco Forex does not believe that any of the Transocean Sedco
Forex directors or executive officers have interests in the merger that are
different from the interests of Transocean Sedco Forex shareholders generally.
R&B Falcon
In considering the recommendation of the board of directors of R&B Falcon
to vote for the proposal to adopt the merger agreement, shareholders of R&B
Falcon should be aware that members of the R&B Falcon board of directors and
members of R&B Falcon's management team have agreements or arrangements that
provide them with interests in the merger that differ from those of R&B Falcon
shareholders generally. The R&B Falcon board of directors was aware of these
agreements and arrangements during its deliberations of the merits of the merger
and in determining to recommend to the shareholders of R&B Falcon that they vote
for the proposal to adopt the merger agreement and the proposal to amend R&B
Falcon's certificate of incorporation.
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New Directors of Transocean Sedco Forex. The maximum number of directors
constituting the Transocean Sedco Forex board of directors is currently 12 and
there are 10 directors currently serving on the board. The R&B Falcon board of
directors, in consultation with Transocean Sedco Forex, will designate two
persons to become members of the Transocean Sedco Forex board of directors upon
completion of the merger. If Transocean Sedco Forex's proposal to amend its
memorandum of association and articles of association is approved, the maximum
number of directors will be increased to 13. The R&B Falcon board of directors,
in consultation with Transocean Sedco Forex, will designate an additional
director.
Employment and Change in Control Agreements. R&B Falcon is a party to
Employment and Change in Control Agreements with each of its seven executive
officers:
- Paul B. Loyd, Jr., Chairman and Chief Executive Officer
- Tim W. Nagle, Executive Vice President and Chief Financial Officer
- Andrew Bakonyi, President and Chief Operating Officer
- Wayne K. Hillin, Senior Vice President, General Counsel and Secretary
- Charles R. Ofner, Senior Vice President, Business Development and
Investor Relations
- Ron Toufeeq, Senior Vice President -- Operations, International and
Deepwater Division
- Bernie W. Stewart, Senior Vice President -- Operations, Shallow Water and
Transition Zone Division
These Employment and Change in Control Agreements provide that in the event
of the executive's termination of employment that is treated as a Qualifying
Termination within the Window Period (as defined in the Employment and Change in
Control Agreements), then in lieu of all other benefits provided to the
executive under his Employment and Change in Control Agreement, R&B Falcon will
pay the executive a lump sum amount and provide him with the following severance
benefits:
(1) an amount equal to three times the highest rate of the executive's
annualized base salary in effect at any time up to and including the
effective date of termination;
(2) an amount equal to three times the executive's highest annual
bonus, which is the greater of (a) the highest annual bonus earned over the
fiscal years, beginning with the 1998 fiscal year, prior to a change in
control of R&B Falcon and (b) the executive's targeted annual bonus for the
fiscal year of his termination of employment;
(3) an amount equal to the executive's unpaid base salary and accrued
vacation pay through the date of termination;
(4) an amount equal to the executive's highest annual bonus multiplied
by a fraction, the numerator of which is the number of completed days in
the then-existing fiscal year through the effective date of termination,
and the denominator of which is 365;
(5) a continuation of medical, dental and group term life insurance
for three full years after the effective date of termination, provided at
the same premium cost and coverage level as in effect as of the date of
termination (subject to any adjustments in such costs and coverage that are
applicable to all R&B Falcon employees); provided, that such coverage shall
be discontinued if the executive obtains substantially similar benefits
from a subsequent employer; provided, further, that the executive shall
receive COBRA continuation coverage upon the termination of such continued
coverages;
(6) a lump-sum cash payment in an amount equal to the actuarial
present value of the aggregate benefits accrued by the executive as of his
date of termination under the terms of any and all supplemental retirement
plans in which he participates, calculated assuming that the executive's
employment continued following the date of termination for three full years
(i.e., three additional
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years of service credits); provided, that for purposes of determining
"final average pay" under such programs, the executive's actual pay history
as of his date of termination shall be used;
(7) reimbursement for outplacement services obtained by the executive
within the two-year period after the date of termination; provided, that
such reimbursement shall be limited to an amount equal to 15% of his base
salary as of the date of termination; and
(8) immediate vesting of all outstanding long-term incentive awards.
The Employment and Change in Control Agreements also provide that if the
executive receives any payments or benefits under his Employment and Change in
Control Agreement (or any other agreement with or plan of R&B Falcon) that would
be subject to the excise tax imposed under Section 4999 of the Internal Revenue
Code, the company shall pay the executive an additional payment so that the
executive will be placed in the same after-tax position he would have been in
had the excise tax not been imposed.
Pursuant to the merger agreement, Transocean Sedco Forex will cause R&B
Falcon to take all actions on its part to amend the Employment and Change in
Control Agreements immediately following the effective time of the merger to
provide that each such executive will have the right, for a 30-day period
commencing on the first anniversary of the effective time of the merger, to
voluntarily terminate employment for any reason, and that such termination will
be deemed to be a Qualifying Termination within the Window Period. Pursuant to
the merger agreement, Transocean Sedco Forex has also agreed that, solely for
purposes of the Employment and Change in Control Agreements, Good Reason (as
defined in the Employment and Change in Control Agreements) will exist if the
executive is not assigned, immediately following the effective time of the
merger, to a position with Transocean Sedco Forex with duties that are not
materially inconsistent with the authorities, duties, responsibilities and
status (including offices, titles, and reporting relationships) that the
executive held with R&B Falcon immediately prior to the effective time of the
merger, or if there is a reduction or alteration in the nature or status of the
executive's authorities, duties or responsibilities from those in effect during
the fiscal year immediately preceding the fiscal year in which the effective
time of the merger occurs.
Notwithstanding and in addition to the foregoing, if Transocean Sedco Forex
has not notified the executive in writing by the date that is 30 days
immediately prior to the effective time of the merger whether or not the
executive's employment will be continued on terms that would not give rise to
Good Reason (as defined in the Employment and Change in Control Agreements),
then the executive will be treated as if he had incurred immediately following
the effective time of the merger a Qualifying Termination within the Window
Period, and R&B Falcon will pay the severance amounts described in items (1)
through (4) above to the executive by the close of the day on which the
effective time of the merger occurs, and all other cash amounts payable under
the terms of the Employment and Change in Control Agreements will be paid as
soon as practicable but in no event later than 30 days following the completion
of the effective time of the merger; provided that the foregoing provisions of
this sentence will not apply if an event occurs after the date notice is given
and prior to the completion of the effective time of the merger that was
unanticipated by Transocean Sedco Forex and is considered, in the good faith
determination of Transocean Sedco Forex's chief executive officer or board of
directors, to materially change Transocean Sedco Forex's determination not to
continue the executive's employment on such terms, and Transocean Sedco Forex in
fact promptly following such event notifies the executive of its decision to
continue and in fact continues the executive's employment on terms that would
not give rise to Good Reason.
Pursuant to the merger agreement, Transocean Sedco Forex has also agreed
that following the completion of the effective time of the merger, the
executives will not be bound by any of the noncompetition provisions of the
Employment and Change in Control Agreements.
Assuming that each of the executives were to incur a Qualifying Termination
within the Window Period on December 31, 2000, then Messrs. Loyd, Nagle,
Bakonyi, Toufeeq, Stewart, Hillin and Ofner would receive aggregate cash
payments (excluding any additional amounts that would be payable if an
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excise tax were imposed under Section 4999 of the Code) of approximately
$9,620,000, $4,270,000, $3,670,000, $2,410,000, $2,420,000, $2,960,000 and
$2,850,000, respectively.
Devco. In April 1999, Reading & Bates Development Co., a Delaware
corporation and a subsidiary of R&B Falcon ("Devco"), issued shares of
restricted stock, representing approximately 13.6% of Devco, to executive
officers, directors and other employees of Devco and R&B Falcon under the
applicable award agreements. Under those agreements, Devco has the right to
repurchase those shares at an appraised value. Devco is considering exercising
this right or assigning it to an affiliated assignee that would exercise the
right. If Devco or its assignee elects to repurchase these shares, the total
amount payable is currently estimated to be approximately $37,000,000 and the
amounts payable to the officers and directors of R&B Falcon are currently
estimated to be as follows: Mr. Loyd, approximately $9,800,000; Mr. Nagle,
approximately $2,800,000; Mr. Bakonyi, approximately $1,400,000; Mr. Ofner,
approximately $700,000; Mr. Toufeeq, approximately $700,000; all the officers as
a whole, approximately $15,800,000; and all the directors as a whole (excluding
Mr. Loyd), approximately $10,400,000.
Consulting Agreement with Paul B. Loyd, Jr. The merger agreement provides
that at the effective time of the merger, Transocean Sedco Forex will cause R&B
Falcon to execute and deliver a consulting agreement with Mr. Loyd, and use
commercially reasonable efforts to cause Mr. Loyd to enter into the consulting
agreement. The consulting agreement provides for consulting services to be
provided by Mr. Loyd for a period of three years following the date of Mr.
Loyd's termination of employment from R&B Falcon. If Mr. Loyd becomes a member
of the Transocean Sedco Forex board of directors, the consulting agreement's
term will be reduced to two years. Mr. Loyd may terminate the consulting
agreement at any time on 30 days' advance written notice.
The consulting agreement provides that R&B Falcon will retain Mr. Loyd to
provide consulting services with respect to strategies, policies, special
projects, incentives, goals and other matters related to the development and
growth of R&B Falcon, as directed by R&B Falcon's chief executive officer or his
designee. Mr. Loyd must provide such consulting services for a minimum of 30
hours per month. Mr. Loyd agrees not to perform substantially similar services
during the term of the consulting agreement for any other company that provides
offshore contract drilling services. Pursuant to the consulting agreement, Mr.
Loyd will receive an annual retainer of $300,000, payable monthly. If Mr. Loyd
becomes a member of the Transocean Sedco Forex board of directors, the annual
retainer is increased to $360,000, in which case Mr. Loyd will waive all
director's fees or other remuneration. Mr. Loyd is also entitled to
reimbursement of expenses incurred in providing the consulting services under
the agreement. Mr. Loyd may assign his rights and obligations under the
consulting agreement to an entity wholly owned by him.
Stock Options and Restricted Stock. Under the merger agreement, each option
to acquire R&B Falcon common shares that is outstanding at the effective time of
the merger will remain outstanding and be assumed by Transocean Sedco Forex.
Each option to acquire R&B Falcon common shares will, to the extent provided by
the merger agreement (as described below), the R&B Falcon stock plan under which
the option was issued and the related option agreement, be fully vested and
exercisable as of the effective time of the merger and will otherwise be subject
to the same terms and conditions as under the applicable R&B Falcon stock plan
and option agreement, except that:
- immediately following the effective time of the merger, each such option
will be exercisable for the number of Transocean Sedco Forex ordinary
shares that is equal to the product (rounded to the nearest whole share)
of the number of R&B Falcon common shares subject to the option
immediately prior to the effective time of the merger, multiplied by 0.5,
and the exercise price per Transocean Sedco Forex ordinary share (rounded
down to the nearest whole cent) will be an amount equal to the exercise
price per R&B Falcon common share subject to the option immediately prior
to the effective time of the merger, divided by 0.5; and
- if the holder of an option to acquire R&B Falcon common shares granted
under some of the designated stock plans of R&B Falcon and its
subsidiaries is involuntarily terminated for any reason other than cause
(within the meaning of R&B Falcon's Involuntary Termination Policy as in
effect
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on the date of the execution of the merger agreement) within 12 months
after the effective time of the merger, such option will be deemed
modified to remain exercisable for its full scheduled term.
Under the merger agreement, R&B Falcon will cause to vest and become
exercisable effective 48 hours prior to the effective time of the merger, but
conditioned on the subsequent completion of the merger, any portion of unvested
options to acquire R&B Falcon common shares and restricted stock, other than
those options and shares of restricted stock granted after the date of the
merger agreement that would not otherwise become vested and exercisable as a
result of the merger. As of the date hereof, Messrs. Loyd, Nagle, Bakonyi,
Toufeeq, Stewart, Hillin and Ofner hold options to acquire 758,334, 338,334,
313,334, 180,000, 197,500, 144,000 and 129,000 R&B Falcon common shares,
respectively, that are either unvested or not exercisable. As of the date
hereof, Messrs. Chatterjee, Chavkin, Donabedian, Hamilton, Laqueur, Porter,
Sandmeyer and Ziegler each hold options to acquire 25,501 R&B Falcon common
shares that are either unvested or not exercisable. As of the date hereof,
Messrs. Pattarozzi, Swanson and Webster hold options to acquire 60,000, 5,500
and 5,500 R&B Falcon common shares that are either unvested or not exercisable.
Bonuses. Under the merger agreement, R&B Falcon will pay the bonuses for
the 2000 fiscal year to R&B Falcon's executive officers on or before December
31, 2000, in an amount equal to such executive's target bonuses for the 2000
fiscal year. In addition, the bonuses in respect of R&B Falcon's 2001 fiscal
year for R&B Falcon's executive officers will be a pro-rated amount of their
bonuses in respect of R&B Falcon's 2000 fiscal year, payable in cash, and any
such bonuses due under the merger agreement to such individuals will be applied
toward any pro-rata bonus awards the individuals become entitled to receive for
the 2001 fiscal year under the terms of the Employment and Change in Control
Agreements.
Indemnification and Insurance. The merger agreement provides that, after
the merger, each person who had been an officer or director of R&B Falcon before
the merger will be indemnified by Transocean Sedco Forex and R&B Falcon to the
fullest extent under applicable law. The rights of these officers and directors
will be in addition to any rights they may have under R&B Falcon's certificate
of incorporation and bylaws. The merger agreement further provides that, for six
years after the merger, Transocean Sedco Forex and R&B Falcon will maintain
directors' and officers' liability insurance policies that provide coverage to
the R&B Falcon officers and directors that are substantially no less
advantageous than R&B Falcon's existing insurance policies, provided that
Transocean Sedco Forex and R&B Falcon will not have to pay annual premiums in
excess of $482,100, which is 150% of the last annual premium paid by R&B Falcon
before the execution of the merger agreement.
TRANSOCEAN SEDCO FOREX AFTER THE MERGER
After completion of the merger, Victor E. Grijalva, the current Chairman of
the Board, and J. Michael Talbert, the current President and Chief Executive
Officer of Transocean Sedco Forex, will remain in their current positions with
Transocean Sedco Forex. The other executive officers of Transocean Sedco Forex
are also expected to continue to serve as executive officers of Transocean Sedco
Forex.
The board of directors of R&B Falcon will, in consultation with Transocean
Sedco Forex, designate two persons to serve as directors of Transocean Sedco
Forex upon completion of the merger. Under Transocean Sedco Forex's charter
documents, the maximum number of directors is 12. Currently, there are 10
directors serving on the board. If the proposal to increase the maximum number
of persons constituting the board of directors of Transocean Sedco Forex to 13
is approved, then the board of directors of R&B Falcon, in consultation with
Transocean Sedco Forex, will also designate one additional person to serve on
the Transocean Sedco Forex board of directors. Transocean Sedco Forex will
allocate those directors to the three staggered board classes as evenly as
possible. The merger does not affect the status of any of the current directors
of Transocean Sedco Forex.
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EXCHANGE OF R&B FALCON COMMON SHARE CERTIFICATES FOR TRANSOCEAN SEDCO FOREX
ORDINARY SHARE CERTIFICATES
Each R&B Falcon common share outstanding immediately before the time of the
merger will be converted into the right to receive 0.5 Transocean Sedco Forex
ordinary shares at the time of the merger. Before the merger, Transocean
Holdings will purchase from Transocean Sedco Forex, for a promissory note of
Transocean Holdings, a portion of the Transocean Sedco Forex ordinary shares
which Transocean Holdings is required to deliver to the common shareholders of
R&B Falcon in the merger, and Transocean Sedco Forex will contribute to
Transocean Holdings the remaining Transocean Sedco Forex ordinary shares which
Transocean Holdings is required to deliver. To allow holders of R&B Falcon
common shares to exchange their certificates for certificates of Transocean
Sedco Forex ordinary shares, Transocean Holdings will deposit with an exchange
agent certificates representing Transocean Sedco Forex ordinary shares (plus
cash in lieu of fractional shares and unpaid distributions, if any) that will be
issued in exchange for the R&B Falcon common share certificates. The exchange
agent will then mail to each holder of R&B Falcon common shares a transmittal
form that will contain instructions for the surrender of R&B Falcon common share
certificates to be exchanged in the merger. Holders of R&B Falcon common shares
who surrender to the exchange agent their R&B Falcon common share certificates,
along with the transmittal form, will receive a certificate representing the
number of whole Transocean Sedco Forex ordinary shares that they are entitled to
receive. These R&B Falcon shareholders will also receive a check representing
cash in lieu of any fractional shares and any unpaid dividends and distributions
that the shareholders may have a right to receive.
The surrendered R&B Falcon certificates will be canceled. If any R&B Falcon
common share certificates are presented to Transocean Holdings or the exchange
agent after the merger, then those certificates will be canceled and exchanged
for certificates representing the Transocean Sedco Forex ordinary shares (plus
cash in lieu of fractional shares, if any) that the holder of the R&B Falcon
common share certificates is entitled to receive under the merger agreement.
None of Transocean Sedco Forex, the exchange agent or any other person will
be liable to any former R&B Falcon shareholder for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
CONVERSION OF STOCK OPTIONS AND ASSUMPTION OF STOCK PLANS
Pursuant to the merger agreement, each option to acquire R&B Falcon common
shares that is outstanding at the effective time of the merger will remain
outstanding and be assumed by Transocean Sedco Forex. Each option to acquire R&B
Falcon common shares will, to the extent provided by the merger agreement (as
described below), the R&B Falcon stock plan under which the option was issued
and the related option agreement, be fully vested and exercisable as of the
effective time of the merger and will otherwise be subject to the same terms and
conditions as under the applicable R&B Falcon stock plan and option agreement,
except that:
- immediately following the effective time of the merger, each such option
will be exercisable for the number of Transocean Sedco Forex ordinary
shares that is equal to the product (rounded to the nearest whole share)
of the number of R&B Falcon common shares subject to the option
immediately prior to the effective time of the merger, multiplied by 0.5,
and the exercise price per Transocean Sedco Forex ordinary share (rounded
down to the nearest whole cent) will be an amount equal to the exercise
price per R&B Falcon common share subject to the option immediately prior
to the effective time of the merger, divided by 0.5; and
- if the holder of an option to acquire R&B Falcon common shares granted
under certain designated stock plans of R&B Falcon and its subsidiaries
is involuntarily terminated for any reason other than cause (within the
meaning of R&B Falcon's Involuntary Termination Policy as in effect on
the date of the execution of the merger agreement) within twelve months
after the effective time of the merger, such option will be deemed
modified to remain exercisable for its full scheduled term.
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Pursuant to the merger agreement, R&B Falcon will cause to vest and become
exercisable effective 48 hours prior to the effective time of the merger
(conditioned on the subsequent completion of the merger) any portion of unvested
options to acquire R&B Falcon common shares and restricted stock, other than
those options and shares of restricted stock granted after the date of the
merger agreement that would not otherwise become vested and exercisable as a
result of the merger.
EFFECT OF THE MERGER ON THE R&B FALCON PREFERRED SHARES
Each R&B Falcon preferred share outstanding before the effective time of
the merger will remain outstanding and unaffected by the merger. These shares
will, however, effective immediately before the effective time of the merger, be
granted voting rights in the election of directors if the holders of R&B Falcon
common shares approve both the merger and the proposed amendment to R&B Falcon's
certificate of incorporation. Each R&B Falcon preferred share will have 0.1787
votes per share in the election of directors of R&B Falcon. These voting rights
are being granted in order for the merger to qualify as a tax-free
reorganization with no gain or loss recognizable by R&B Falcon's common
shareholders, except with respect to cash received in lieu of fractional shares
and except with respect to some shareholders of R&B Falcon who will hold 5% or
more of the shares of Transocean Sedco Forex after the merger. As a result of
the conversion in the merger of each of the one million TSF Delaware common
shares outstanding before the merger into one R&B Falcon common share and each
R&B Falcon common share outstanding before the merger into the right to receive
0.5 Transocean Sedco Forex ordinary shares, Transocean Holdings will hold all of
the one million outstanding common shares of R&B Falcon after the merger. These
shares will constitute more than a majority of the total voting power of R&B
Falcon after the merger. The certificate of incorporation of R&B Falcon does not
provide for cumulative voting. As a result, Transocean Holdings will be in a
position to elect all of the directors of R&B Falcon after the merger. The
merger agreement requires R&B Falcon to effect a partial redemption of the R&B
Falcon preferred shares and contemplates possible open market purchases of these
shares by R&B Falcon as described in "The Merger Agreement -- Covenants."
EMPLOYEE BENEFIT MATTERS
At the effective time of the merger, all employees of R&B Falcon and its
subsidiaries initially will continue to be employed by R&B Falcon as the
surviving entity in the merger at the same salaries and wages of such employees
immediately prior to the merger, subject to the right of the surviving entity
and its subsidiaries to subsequently alter such salaries and wages. With respect
to each employee of R&B Falcon and its subsidiaries, Transocean Sedco Forex will
cause R&B Falcon to deem the period of employment with R&B Falcon and its
subsidiaries to have been employment and service with Transocean Sedco Forex for
purposes of determining the 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 Transocean Sedco Forex and its subsidiaries in which the
employee is eligible to participate. Transocean Sedco Forex will waive, and to
the extent necessary to effect the provisions of the merger agreement, will 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 the merger of those employees and their
dependents who were covered immediately prior to the effective time of the
merger under a group health plan maintained by R&B Falcon, but only to the
extent that this medical condition would be covered by Transocean Sedco Forex's
or R&B Falcon'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 R&B
Falcon's group health plan prior to the effective time of the merger. Transocean
Sedco Forex will cause R&B Falcon to offer at the effective time of the merger
to each employee of R&B Falcon and its subsidiaries coverage under a group
health plan which credits such 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 of the merger (or such later date as the
employees participate in such group health plan) occurs, with any applicable
expenses already incurred during such year under R&B Falcon's group health plan.
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Pursuant to the merger agreement, Transocean Sedco Forex will cause R&B
Falcon to continue the R&B Falcon Severance Pay Benefit Plan for the benefit of
any employee of R&B Falcon and its subsidiaries who would be eligible for
severance benefits under that plan due to an involuntary termination of
employment within nine months after the effective time of the merger; provided,
that any employee of R&B Falcon and its subsidiaries 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 of the merger and ending twelve months following
the effective time of the merger will be treated as if such employee was
terminated within nine months after the effective time of the merger if in the
good faith determination of Transocean Sedco Forex such employee would have been
terminated within nine months following the effective time of the merger if the
integration of Transocean Sedco Forex's and R&B Falcon's operations in respect
of such employee had been completed at such earlier time.
Employees of R&B Falcon and its subsidiaries immediately prior to the
effective time of the merger 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 Transocean Sedco Forex's discretion,
either (i) not less favorable than those provided to such employees immediately
prior to the effective time of the merger, or (ii) not less favorable than those
provided to similarly situated employees of Transocean Sedco Forex and its
subsidiaries; provided, that employees who retired from R&B Falcon and its
subsidiaries prior to the effective time of the merger will continue to be
provided through December 31, 2001 with the retiree health and life insurance
benefits provided to such retirees immediately prior to the merger without
adverse changes during such period.
R&B Falcon will be permitted to continue to accrue its annual bonuses for
employees of R&B Falcon and its subsidiaries in respect of R&B Falcon's 2000
fiscal year consistent with the level of bonuses actually paid to employees for
R&B Falcon's 1999 fiscal year, subject to such discretionary determinations as
were made consistent with the practices of R&B Falcon for the 1999 fiscal year;
provided, however, that R&B Falcon will be permitted to continue to accrue
bonuses in respect of R&B Falcon's 2000 fiscal year for R&B Falcon's executive
officers in an amount equal to each such officer's target bonus for R&B Falcon's
2000 fiscal year. R&B Falcon agrees to pay the bonuses for the 2000 fiscal year
to R&B Falcon's executive officers on or before December 31, 2000, in an amount
equal to such executive's target bonuses for the 2000 fiscal year. If the
bonuses in respect of R&B Falcon's 2000 fiscal year have not been paid prior to
the effective time of the merger, Transocean Sedco Forex will cause R&B Falcon
to pay such 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 R&B Falcon management as constituted prior to the merger. In
addition, if the merger has not occurred by March 31, 2001, R&B Falcon will be
permitted to accrue a pro-rated bonus during the period from January 1, 2001
through the effective time of the merger in respect of R&B Falcon's 2001 fiscal
year in accordance with the foregoing. Transocean Sedco Forex will cause R&B
Falcon to pay the bonuses in respect of R&B Falcon's 2001 fiscal year consistent
with the practices of R&B Falcon for the 1999 fiscal year; provided, however,
that the bonuses in respect of R&B Falcon's 2001 fiscal year for R&B Falcon's
executive officers will be a pro-rated amount of their bonuses in respect of R&B
Falcon's 2000 fiscal year, payable in cash, and any such bonuses due under the
merger agreement to such individuals will be applied toward any pro-rata bonus
awards the individuals become entitled to receive under the terms of their
Change in Control Agreements with R&B Falcon for the 2001 fiscal year (as
described in "-- Interests of Certain Persons in the Merger").
The matters described in this section are summaries of provisions of the
merger agreement that are subject to waiver or amendment by the parties to the
merger agreement. These provisions are not intended to grant third party
beneficiary rights to any person that is not a party to the merger agreement.
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DIVIDENDS
The Transocean Sedco Forex board makes a determination each quarter as to
the payment of dividends. Transocean Sedco Forex has paid quarterly cash
dividends of $0.03 per ordinary share since the fourth quarter of 1993. Any
future declaration and payment of dividends will be:
- dependent upon Transocean Sedco Forex's results of operations, financial
condition, cash requirements and other relevant factors;
- subject to the discretion of the Board of Directors of Transocean Sedco
Forex;
- subject to restrictions contained in Transocean Sedco Forex's bank credit
agreements and note purchase agreement; and
- payable only out of Transocean Sedco Forex's profits or share premium
account in accordance with Cayman Islands law.
ACCOUNTING TREATMENT AND CONSIDERATIONS
Transocean Sedco Forex will account for the merger using the purchase
method of accounting, with Transocean Sedco Forex treated as the acquiror. As a
result, the assets and liabilities of Transocean Sedco Forex will be recorded at
historical amounts, without restatement to fair values. The assets and
liabilities of R&B Falcon will be recorded at their estimated fair values at the
date of the merger, with the excess of the purchase price over the sum of such
fair values recorded as goodwill. The $6.3 billion purchase price is calculated
using the estimated number of Transocean Sedco Forex ordinary shares to be
issued in the merger and a $57.2313 per share average trading price of
Transocean Sedco Forex ordinary shares for a period of time immediately before
and after the merger was announced, plus estimated direct merger costs and
expenses and the estimated fair value of R&B Falcon stock options and warrants
to be assumed by Transocean Sedco Forex. The calculated purchase price is for
accounting purposes only and is not indicative of the price at which Transocean
Sedco Forex ordinary shares will trade immediately before the completion of the
merger or the value of the Transocean Sedco Forex ordinary shares to be received
by common shareholders of R&B Falcon in connection with the merger.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Scope of Discussion
The following discussion summarizes the material U.S. tax consequences to
R&B Falcon shareholders of (1) the exchange of R&B Falcon common shares for
Transocean Sedco Forex ordinary shares in the merger and (2) the subsequent
ownership and disposition of Transocean Sedco Forex ordinary shares. For a
description of the manner in which the merger will be carried out, see
"-- Exchange of R&B Falcon Common Share Certificates for Transocean Sedco Forex
Ordinary Share Certificates" and "The Merger Agreement." This discussion is
based upon existing U.S. tax law, including legislation, regulations,
administrative rulings and court decisions, as in effect on the date of this
proxy statement/prospectus, all of which are subject to change, possibly with
retroactive effect.
For purposes of this discussion:
- a "U.S. holder" is a beneficial owner of R&B Falcon common shares that is
(1) an individual citizen or resident of the United States, (2) a
corporation or any other entity taxable as a corporation created or
organized in or under the laws of the United States or of a state of the
United States or the District of Columbia, or (3) a trust or estate
treated, for U.S. tax purposes, as a domestic trust or estate;
- a non-U.S. holder is any holder of R&B Falcon common shares other than a
U.S. holder; and
- the term "U.S. tax" means U.S. federal income tax under the Internal
Revenue Code.
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The discussion assumes that U.S. holders hold their R&B Falcon common
shares and the Transocean Sedco Forex ordinary shares which they will receive in
the merger as capital assets. Tax consequences which are different from or in
addition to those here described may apply to U.S. holders who are subject to
special treatment under U.S. tax law, such as:
- tax exempt organizations;
- financial institutions, insurance companies, broker-dealers;
- persons who hold their R&B Falcon common shares as part of a hedge,
straddle, wash sale, synthetic security, conversion transaction or other
integrated investment comprised of R&B Falcon common shares and one or
more other investments;
- persons who acquired their shares in compensatory transactions;
- non-U.S. holders who are or have previously been engaged in the conduct
of a trade or business in the United States; or
- persons that, after the merger, will own, directly or indirectly, stock
possessing at least 10% of the total combined voting power of all
Transocean Sedco Forex stock.
In the case of a shareholder that is a partnership, determinations as to
tax consequences will generally be made at the partner level, but special
considerations not here set forth may apply. The discussion is limited to U.S.
federal income tax considerations and does not address other U.S. federal tax
considerations or state, local or foreign tax considerations.
This summary is not a substitute for an individual analysis of the tax
consequences of the merger to an R&B Falcon shareholder. Each R&B Falcon
shareholder should consult a tax adviser as to the U.S. federal income tax
consequences of the transaction, including any such consequences arising from
the particular facts and circumstances of the R&B Falcon shareholder, and as to
any estate, gift, state, local or foreign tax consequences of the transaction.
Certain U.S. Tax Consequences of the Merger to U.S. Holders
The merger is intended to qualify as a tax-free reorganization under
section 368(a)(1)(B) of the Internal Revenue Code. The obligation of R&B Falcon
and of Transocean Sedco Forex to carry out the merger is conditioned upon their
receipt on the closing date of the merger of opinions from their counsel,
Cravath, Swaine & Moore and Baker Botts L.L.P., respectively, that the merger
will so qualify. The opinions of counsel which are summarized in this joint
proxy statement/prospectus are and will be subject to qualifications and
limitations, including those described in the discussion below.
In the opinion of Cravath, Swaine & Moore and of Baker Botts L.L.P.,
subject to the assumptions and limitations set forth in "-- Scope of
Discussion," above, and other than with respect to certain U.S. holders who are
"5% shareholders" of Transocean Sedco Forex after the merger, as described
below:
- U.S. holders will recognize no gain or loss on the exchange in the merger
of R&B Falcon common shares for Transocean Sedco Forex ordinary shares
(except as discussed below with respect to cash received in lieu of
fractional shares of Transocean Sedco Forex);
- the basis of the Transocean Sedco Forex ordinary shares received by each
U.S. holder in the merger will be the same as the basis of the R&B Falcon
common shares surrendered in exchange for the Transocean Sedco Forex
ordinary shares, adjusted for any portion of the holder's basis in the
R&B Falcon common shares which is allocable to a fractional share of
Transocean Sedco Forex; and
- the holding period of such Transocean Sedco Forex ordinary shares will
include the U.S. holder's holding period in the R&B Falcon common shares.
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A U.S. holder will recognize capital gain or loss on a cash payment for a
fractional share of Transocean Sedco Forex in an amount equal to the difference
between the amount of cash received and the portion of the holder's basis in the
R&B Falcon common shares surrendered that is allocable to the fractional share.
Such capital gain or loss will constitute long-term capital gain or loss if the
U.S. holder's holding period is greater than one year as of the date of the
merger. For U.S. holders who are individuals, any such long-term capital gain
generally will be taxed at a maximum U.S. federal income tax rate of 20%. The
deductibility of capital losses is subject to limitations.
Since Transocean Sedco Forex is not a U.S. corporation, the merger is
subject to special rules under section 367 of the Internal Revenue Code.
However, except with respect to "5% shareholders" of Transocean Sedco Forex, as
described below, it is not expected that these rules will change the results
which would apply if Transocean Sedco Forex were a U.S. corporation. Moreover,
U.S. holders other than "5% shareholders" are not subject to any separate
reporting requirements with respect to the merger under section 367. However,
all U.S. holders should comply with the normal reporting requirements applicable
to any reorganization under section 368 of the Internal Revenue Code.
A U.S. holder who is a "5% shareholder" of Transocean Sedco Forex by vote
or value after the merger in accordance with applicable Treasury regulations
under section 367(a) of the Internal Revenue Code will qualify for tax-free
treatment in the merger, as described above, only if the U.S. holder files a
"gain recognition agreement" with the Internal Revenue Service. The general
effect of a gain recognition agreement would be to require the U.S. holder to
retroactively recognize gain, with interest, on the exchange of R&B Falcon
common shares for Transocean Sedco Forex ordinary shares if, at any time prior
to the close of the fifth full calendar year following the year in which the
merger occurs, there is a triggering event. Such triggering events would
include, among other transactions, the disposition by Transocean Holdings of
part or all of the R&B Falcon common shares it acquired in the merger or the
disposition by R&B Falcon of substantially all of its assets. Any U.S. holder
who will be a "5% shareholder" of Transocean Sedco Forex after the merger should
consult the holder's own tax adviser concerning the decision to file a gain
recognition agreement and the procedures to be followed in connection with such
filing.
The opinions of counsel referred to above are and will be based on present
law, which is subject to change, possibly with retroactive effect. In providing
their opinions, counsel have relied and will rely upon the accuracy of certain
representations made to them by R&B Falcon, Transocean Sedco Forex and
Transocean Holdings in officers' certificates. In addition, counsel have relied
and will rely upon the accuracy of the information in this joint proxy
statement/prospectus and in other documents filed by R&B Falcon, Transocean
Sedco Forex and Transocean Holdings with the SEC. Any change in present law, or
the failure of factual assumptions or representations to be true, correct and
complete in all material respects, could affect the continuing validity of
counsel's tax opinions. No ruling will be requested from the Internal Revenue
Service on any aspect of the merger. The opinions of counsel are not binding
upon the Internal Revenue Service or a court and will not preclude the Internal
Revenue Service or a court from adopting a contrary position.
Certain U.S. Tax Consequences of Holding and Disposing of Transocean Ordinary
Shares
General. The following is a discussion of the material U.S. tax
consequences of the ownership and disposition of Transocean Sedco Forex ordinary
shares received by U.S. holders in the merger. The discussion is subject to the
assumptions and limitations set forth above in "-- Scope of Discussion."
Distributions on and Sale of the Transocean Sedco Forex Ordinary
Shares. U.S. holders will be required to include in gross income as ordinary
income the gross amount of any distribution on the Transocean Sedco Forex
ordinary shares, to the extent that the distribution is paid out of Transocean
Sedco Forex's current or accumulated earnings and profits as determined for U.S.
tax purposes (a "dividend"). These dividends will not be eligible for the
dividends received deduction, which is generally allowed to United States
corporate shareholders on dividends received from a domestic corporation, unless
such dividends are treated as having been paid out of earnings and profits
accumulated by a
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U.S. predecessor of Transocean Sedco Forex. Distributions in excess of current
and accumulated earnings and profits will be applied first to reduce the U.S.
holder's tax basis in the holder's shares. To the extent that the distribution
exceeds the U.S. holder's tax basis, the excess will constitute gain from a sale
or exchange of the shares.
Transocean Sedco Forex expects that, for foreign tax credit purposes,
dividends paid on the Transocean Sedco Forex ordinary shares will generally be
foreign source income and will be "passive income" or, in some cases, "financial
services income." Under section 904(g) of the Internal Revenue Code, however,
dividends paid by a foreign corporation that is treated as more than 50% owned
by United States persons may be treated as U.S. source income for foreign tax
credit purposes, to the extent that the foreign corporation itself has more than
an insignificant amount of U.S. source income. It is possible that a portion of
the dividends paid by Transocean Sedco Forex could be treated as U.S. source
income either under section 904(g) of the Code or under certain other applicable
source rules.
A U.S. holder of Transocean Sedco Forex ordinary shares will generally
recognize gain or loss for U.S. tax purposes upon the sale or exchange of such
shares in an amount equal to the difference between the amount realized from
such sale or exchange and the U.S. holder's tax basis in such shares. Such gain
or loss will be a capital gain or loss and, in the case of an individual U.S.
holder, any such gain would be subject to U.S. tax at a maximum rate of 20% if
the U.S. holder's holding period for the Transocean Sedco Forex ordinary shares
at the time of the sale or exchange exceeds one year.
Special Status of Certain Corporations for U.S. Tax Purposes. For U.S. tax
purposes, a foreign corporation, such as Transocean Sedco Forex, is classified
as a passive foreign investment company for each taxable year in which either
(1) 75% or more of its gross income is passive income (as defined for U.S. tax
purposes) or (2) on average for such taxable year, 50% or more in value of its
assets produce passive income or are held for the production of passive income.
For purposes of applying the tests in the preceding sentence, the foreign
corporation is deemed to own its proportionate share of the assets of and to
receive directly its proportionate share of the income of any other corporation
of which the foreign corporation owns, directly or indirectly, at least 25% by
value of the stock.
Classification of a foreign corporation as a passive foreign investment
company can have various adverse consequences to U.S. holders. These include
taxation of gain on a sale or other disposition of the shares of the corporation
at ordinary income rates and imposition of an interest charge on gain or on
distributions with respect to the shares.
Transocean Sedco Forex believes that it will not be a passive foreign
investment company following the merger. However, the tests for determining
passive foreign investment company status are applied annually, and it is
difficult to accurately predict future income and assets relevant to this
determination. Accordingly, Transocean Sedco Forex cannot assure U.S. holders
that it will not become a passive foreign investment company. If Transocean
Sedco Forex should determine in the future that it is a passive foreign
investment company, it will endeavor to so notify U.S. holders, although there
can be no assurance that it will be able to do so in a timely and complete
manner. U.S. holders should consult their own tax advisers about the passive
foreign investment company rules, including the availability of certain
elections.
United States Information Reporting and Backup Withholding. Dividends on
Transocean Sedco Forex ordinary shares paid within the United States or through
certain U.S.-related financial intermediaries are subject to information
reporting and may be subject to backup withholding at a 31% rate unless the
holder (1) is a corporation or other exempt recipient or (2) provides a taxpayer
identification number and certifies that no loss of exemption from backup
withholding has occurred. Information reporting requirements and backup
withholding may also apply to the cash proceeds of a sale of the Transocean
Sedco Forex ordinary shares. Backup withholding is not an additional tax.
Amounts withheld under the backup withholding rules may be credited against a
U.S. holder's U.S. tax liability, and a holder may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate
claim for refund with the Internal Revenue Service.
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Non-U.S. Holders
A non-U.S. holder of R&B Falcon common shares will not in any case be
subject to U.S. federal income or withholding tax on gain with respect to the
merger and will not be subject to U.S. federal income or withholding tax on any
gain recognized on a subsequent disposition of Transocean Sedco Forex ordinary
shares received in the merger, as long as:
- such gain is not effectively connected with the conduct by the holder of
a trade or business within the United States or, if a tax treaty applies,
is not attributable to a permanent establishment or fixed place of
business maintained by the holder in the United States;
- in the case of certain capital gains, the holder either is not present in
the United States for 183 days or more during the taxable year in which
the capital gain is recognized or otherwise qualifies for an exemption;
- the holder qualifies for an exemption from backup withholding, as
discussed below; and
- R&B Falcon is not and has not been a "U.S. real property holding
corporation" within the meaning of Section 897(c)(2) of the Code at any
time within the shorter of the five-year period preceding the merger or
such non-U.S. holder's holding period.
R&B Falcon does not believe that it is or has been a "U.S. real property
holding corporation" within the last five years.
Moreover, such a holder will not generally be subject to U.S. tax on
distributions made by Transocean Sedco Forex on the Transocean Sedco Forex
ordinary shares. However, it is possible that dividends, if any, paid by
Transocean Sedco Forex to non-U.S. holders out of earnings and profits
accumulated by a U.S. predecessor of Transocean Sedco Forex may be subject to
U.S. withholding tax. In order to qualify for an exemption from backup
withholding tax on dividends on and gain from dispositions of the Transocean
Sedco Forex ordinary shares, a non-U.S. holder may be required to provide a
taxpayer identification number, certify the holder's foreign status or otherwise
establish an exemption.
REGULATORY MATTERS
Transocean Sedco Forex and R&B Falcon must make filings and receive
clearances from various governmental agencies, both in the United States and
internationally, to complete the merger. These filings, notifications and
clearances relate primarily to antitrust and securities law issues. Transocean
Sedco Forex and R&B Falcon intend to pursue vigorously all required regulatory
clearances. Although the required clearances have not yet been received,
Transocean Sedco Forex and R&B Falcon anticipate that they will receive
regulatory clearances sufficient to complete the merger by the end of the first
quarter of 2001. However, neither Transocean Sedco Forex nor R&B Falcon can
assure you that it will obtain all required clearances by the time of its
shareholder meeting or at all. In addition, neither Transocean Sedco Forex nor
R&B Falcon can assure you that governmental authorities will not impose
unfavorable conditions for granting the required clearances.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the parties
cannot complete the merger until they have notified and furnished information to
the Federal Trade Commission and the Antitrust Division of the United States
Department of Justice and a specified waiting period expires or is terminated.
Transocean Sedco Forex and R&B Falcon made their filing under the
Hart-Scott-Rodino Act on September 5, 2000. The waiting period under the
Hart-Scott-Rodino Act has been extended by the issuance of a request for
additional information (a "second request") on October 5, 2000.
Each other country and U.S. state in which Transocean Sedco Forex or R&B
Falcon has operations also may review the merger under its antitrust laws. The
parties have voluntarily notified the U.K. Competition authorities of their
intent to enter into the merger, and have furnished information to the U.K.
authorities regarding the transaction and the relevant economic circumstances.
Transocean Sedco
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Forex and R&B Falcon made competition/antitrust filings in Brazil on September
11, 2000, in Ireland on September 19, 2000 and in the U.K. on September 25,
2000.
At any time before the completion of the merger, any of the relevant
governmental authorities or a private person or entity could seek under
antitrust laws, among other things, to enjoin the merger or to cause Transocean
Sedco Forex or R&B Falcon to divest assets or businesses as a condition to
completing the merger. Neither Transocean Sedco Forex nor R&B Falcon can assure
you that a challenge to the merger will not be made or, if a challenge is made,
that Transocean Sedco Forex or R&B Falcon will prevail.
Furthermore, any of the relevant governmental authorities or a private
person or entity could seek, under antitrust laws, to take action against
Transocean Sedco Forex or R&B Falcon after the completion of the merger.
Transocean Sedco Forex and R&B Falcon are unable to predict whether any action
will be taken or what the outcome of any action may be.
The parties' obligation to complete the merger is subject to the condition
that no decree, order or injunction of a court of competent jurisdiction
prohibits the completion of the merger. The parties agreed, however, that before
invoking this condition, they will comply with the provisions described in the
following paragraph. The parties agreed in all other cases to use commercially
reasonable best efforts to have the decree, order or injunction lifted or
vacated before invoking the condition. The parties also conditioned the
completion of the merger on the following:
- no statute, rule or regulation of a governmental authority prohibits the
merger or would make it unlawful;
- the absence of any pending or threatened in writing governmental claim,
proceeding or action of the government of the United States, the United
Kingdom or the European Union seeking to restrain, prohibit or rescind
the merger as a violation of antitrust laws or seeking to penalize a
party for completing the merger, or any final or preliminary
administrative order denying approval of or prohibiting the merger issued
by a governmental authority with jurisdiction to enforce non-U.S.
antitrust laws, either of which, in the reasonable judgment of Transocean
Sedco Forex, is reasonably likely to have a material adverse effect on
Transocean Sedco Forex or R&B Falcon, materially impair the benefits
Transocean Sedco Forex expects to receive from the merger, or have a
material adverse effect on Transocean Sedco Forex's business plan or
business strategy for the combined company;
- the receipt of indications reasonably satisfactory to Transocean Sedco
Forex and R&B Falcon that, 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, the merger will not be referred to the Competition
Commission of the U.K.; and
- the expiration or termination of any mandatory waiting period under any
applicable non-U.S. antitrust laws if the failure to observe the waiting
period is reasonably likely, in Transocean Sedco Forex's judgment, to
have a material adverse effect on Transocean Sedco Forex or R&B Falcon,
materially impair the benefits Transocean Sedco Forex expects to receive
from the merger, or have a material adverse effect on Transocean Sedco
Forex's business plan or business strategy for the combined company.
Under the merger agreement, the parties agreed to use their commercially
reasonable best efforts to cooperate in determining which filings need to be
made and which consents, approvals, permits or clearances will need to be
obtained prior to the completion of the merger. The parties also agreed to use
their commercially reasonable best efforts to make or obtain all material
filings, consents, approvals, permits or authorizations in a timely manner and
to furnish each other with necessary information and reasonable assistance in so
doing. Under the merger agreement, the parties must use their commercially
reasonable best efforts to take any and all steps necessary to gain any
consents, approvals, permits or clearances material to completing the merger or
to eliminate any impediments that would restrain, prevent
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or delay that completion. The merger agreement also provides that, at the
request of Transocean Sedco Forex, R&B Falcon will agree to divest, hold
separate or otherwise take or commit to take any action to limit its freedom of
action with respect to, or its ability to retain, any of the businesses, product
lines or assets, provided that R&B Falcon may condition this action on the
completion of the merger. However, R&B Falcon may not without Transocean Sedco
Forex's consent recommend, suggest or commit to any divestiture of assets or
businesses. Transocean Sedco Forex is required to reimburse R&B Falcon for some
expenses relating to these matters if the merger agreement is terminated before
the effective time. Under the merger agreement, Transocean Sedco Forex is not
required to dispose of any assets or to consent to the disposition of R&B
Falcon's assets, limit its freedom of action with respect to any of its
businesses or consent to such limits on R&B Falcon's freedom of action, or
obtain any consents or approvals to remove any antitrust-related impediments to
the completion of the merger, unless the action to be taken, in Transocean Sedco
Forex's reasonable judgment, would not have a material adverse effect on
Transocean Sedco Forex or R&B Falcon, materially impair the benefits Transocean
Sedco Forex expects to receive from the merger, or have a material adverse
effect on Transocean Sedco Forex's business plan or business strategy for the
combined company.
FEDERAL SECURITIES LAWS CONSEQUENCES; RESALE RESTRICTIONS
All of the following securities will be freely transferable, except for
restrictions applicable to "affiliates" of R&B Falcon under the Securities Act
of 1933:
- all Transocean Sedco Forex ordinary shares issued to R&B Falcon's common
shareholders in connection with the merger,
- all warrants to purchase Transocean Sedco Forex ordinary shares deemed to
be issued to holders of warrants to purchase R&B Falcon common shares as
a result of Transocean Sedco Forex's assumption of those warrants in the
merger, and
- all Transocean Sedco Forex ordinary shares issued upon exercise of those
warrants and options to purchase R&B Falcon common shares outstanding at
the effective time of the merger.
Affiliates may resell those shares or warrants they receive only in
transactions permitted by Rule 145 under the Securities Act or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of R&B Falcon for these purposes generally include individuals or entities that
control, are controlled by, or are under common control with, R&B Falcon, and
would not include securityholders who are not executive officers, directors or
significant shareholders of R&B Falcon.
The merger agreement requires R&B Falcon to prepare and deliver a list that
identifies all persons whom R&B Falcon believes may be deemed to be affiliates
of R&B Falcon prior to the completion of the merger. R&B Falcon is also
required, pursuant to the merger agreement, to use its commercially reasonable
best efforts to cause each person it identifies on the list as a potential
affiliate to deliver to Transocean Sedco Forex, at or prior to the completion of
the merger, a written agreement that the affiliate will not sell, pledge,
transfer or otherwise dispose of any of the Transocean Sedco Forex ordinary
shares issued to the affiliate pursuant to the merger unless the sale, pledge,
transfer or other disposition meets one of the following criteria:
- it is made pursuant to an effective registration statement filed under
the Securities Act;
- it is in compliance with Rule 145; or
- it is in the opinion of counsel otherwise exempt from the registration
requirements of the Securities Act.
Transocean Sedco Forex's receipt of the agreement described above from each
potential Rule 145 affiliate is a condition to its obligation to complete the
merger.
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This joint proxy statement/prospectus does not cover any resales of
Transocean Sedco Forex ordinary shares or warrants to purchase Transocean Sedco
Forex ordinary shares, and no person is authorized to make any use of this joint
proxy statement/prospectus in connection with any resale.
RIGHTS OF DISSENTING SHAREHOLDERS
R&B Falcon Shareholders
R&B Falcon shareholders will not be entitled to any appraisal rights under
the General Corporation Law of Delaware or any other applicable law in
connection with the merger.
Transocean Sedco Forex Shareholders
Transocean Sedco Forex shareholders will not be entitled to any appraisal
rights under the Companies Law (2000 Revision) of the Cayman Islands or any
other applicable law in connection with the merger.
STOCK EXCHANGE LISTING
The Transocean Sedco Forex ordinary shares to be issued to R&B Falcon's
common shareholders in the merger will be listed on the NYSE, subject to
official notice of issuance. The completion of the merger is conditioned upon
the NYSE's authorization for listing.
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THE MERGER AGREEMENT
At the effective time of the merger, TSF Delaware, a direct wholly owned
subsidiary of Transocean Holdings organized under the laws of Delaware, will
merge into R&B Falcon with R&B Falcon surviving as a direct subsidiary of
Transocean Holdings, which is a direct wholly owned subsidiary of Transocean
Sedco Forex organized under the laws of Delaware. As a result, following the
merger, R&B Falcon will be an indirect subsidiary of Transocean Sedco Forex. The
closing of the merger will take place promptly after all of the conditions to
the merger described in "-- Conditions to the Merger" are fulfilled or waived.
The merger will be effective at the time Transocean Sedco Forex and R&B Falcon
file the certificate of merger with the Secretary of State of the State of
Delaware or at a later time as they agree and specify in the certificate of
merger.
In the merger, each holder of R&B Falcon common shares will receive, for
each R&B Falcon common share held, a number of Transocean Sedco Forex ordinary
shares equal to 0.5 times the number of R&B Falcon common shares held. The
parties expect there will be approximately 211 million issued Transocean Sedco
Forex ordinary shares and approximately 199 million outstanding R&B Falcon
shares immediately before the effective time of the merger.
Each outstanding R&B Falcon preferred share will remain outstanding and
unaffected by the merger. Each option to purchase R&B Falcon common shares
granted to R&B Falcon employees and directors under R&B Falcon's stock option
plans that is outstanding and not yet exercised before completing the merger
will become an option to purchase Transocean Sedco Forex ordinary shares. Each
warrant to purchase R&B Falcon common shares will be assumed by Transocean Sedco
Forex and become a warrant to purchase a number of Transocean Sedco Forex
ordinary shares equal to 0.5 multiplied by the number of R&B Falcon common
shares into which the warrant is exercisable immediately before the merger, in
accordance with the terms of the warrant agreement dated April 22, 1999 between
R&B Falcon and American Stock Transfer and Trust Company.
If Transocean Sedco Forex changes the number of its ordinary shares or R&B
Falcon changes the number of its shares that are issued and outstanding, in
either case as a result of a stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction, before the effectiveness of the
merger, Transocean Sedco Forex and R&B Falcon will adjust the exchange ratio
appropriately.
COVENANTS
Interim Operations
Transocean Sedco Forex and R&B Falcon agreed to take or refrain from taking
the actions described below from the date of the merger agreement, August 19,
2000, until the merger is completed or the merger agreement is terminated or
except as permitted by the merger agreement. Compliance with these covenants may
be modified to allow the transactions contemplated by the merger agreement or by
the written consent of Transocean Sedco Forex and R&B Falcon.
Each of Transocean Sedco Forex and R&B Falcon will:
- use its commercially reasonable best efforts to:
- preserve its business organization and goodwill;
- keep available the services of its officers and employees; and
- maintain satisfactory business relationships;
- promptly notify the other party of any material change in its condition
or business, any termination or material breach of material contracts or
any material litigation or material governmental complaints,
investigations or hearings, or the material breach of any of its
representations and warranties in the merger agreement;
- promptly deliver to the other party any SEC filings it makes;
- not change any material accounting principle or practice except as
required by a change in generally accepted accounting principles;
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- maintain insurance in such amounts and against such risks and losses as
is customary for it;
- not take any action reasonably likely to delay materially or adversely
affect the ability of any of the parties to obtain required consents,
authorizations, orders or approvals of governmental or other regulatory
authorities; and
- not agree to take any action inconsistent with the foregoing or with the
covenants described below applicable to it.
In addition to the covenants that apply to both Transocean Sedco Forex and
R&B Falcon, R&B Falcon will:
- conduct its operations in the usual, regular and ordinary course in
substantially the same manner as previously conducted;
- not amend its charter documents;
- not issue any shares of its capital stock, effect any stock split or
otherwise change its capitalization, except upon exercise of options,
warrants and other rights that exist on the date of the merger agreement
or that the merger agreement permits to be issued;
- not grant any new options, warrants or other rights not existing on the
date of the merger agreement to acquire shares of its capital stock,
except for grants to newly hired employees or to existing employees as
the result of promotions who are not officers or directors, in the
ordinary course of business consistent with past practices, and other
specified option grants;
- not amend or modify any options, warrants or other rights existing on the
date of the merger agreement to acquire shares of its capital stock;
- not increase any compensation or benefits or enter into, amend or extend
any employment or consulting agreement with any former, present or future
employees, except in the ordinary course of business consistent with past
practice;
- not increase any compensation or benefits or enter into, amend or extend
any employment agreement with any former, present or future officer or
director;
- not adopt any new employee benefit plan or agreement (including any stock
option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes that
are less favorable to the plan participants;
- not terminate any executive officer without cause or give any executive
officer a right to terminate employment if the termination would require
enhanced separation payments at the time of the merger, except as
permitted by the merger agreement and except as approved by good faith
action of its board of directors after Transocean Sedco Forex has
received advance written notice of the proposed action and R&B Falcon has
consulted in advance with Transocean Sedco Forex regarding the action;
- not permit any holder of an option to acquire shares of its capital stock
to have shares withheld upon exercise for tax purposes in excess of the
minimum number needed to satisfy federal and state tax withholding
requirements;
- not declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock and not redeem,
purchase or otherwise acquire any shares of its capital stock, except for
payment of dividends on its preferred shares as permitted by the merger
agreement;
- not sell, lease or otherwise dispose of any material assets, except sales
of surplus equipment or sales of other assets in the ordinary course of
business;
- not acquire or agree to acquire in any manner any business entity or
assets for an aggregate consideration in excess of $10 million or where a
filing under the U.S. Hart-Scott-Rodino Antitrust
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Improvements Act of 1976 or any non-U.S. competition, antitrust or
premerger notification law is required;
- not make or rescind any material tax election;
- not settle or compromise any material tax claim or controversy;
- not materially change any of its methods of reporting relating to taxes,
except as may be required by applicable law;
- not incur or guarantee any indebtedness for borrowed money;
- not issue or sell any debt securities, warrants or rights to acquire any
debt securities, or guarantee any debt securities of others;
- not enter into any material lease or create any material encumbrance on
any of its property in connection with any indebtedness, except in the
ordinary course of business;
- not make capital expenditures in excess of $3 million per month over its
previously disclosed capital expenditure forecast, except for specified
capital expenditures covered by insurance;
- not purchase any Transocean Sedco Forex ordinary shares, R&B Falcon
common shares or R&B Falcon preferred shares, except the partial
redemption and repurchase of the R&B Falcon preferred shares contemplated
by the merger agreement; and
- not terminate, amend, modify or waive any provision of any agreement with
a standstill covenant to which it is a party; and enforce, to the fullest
extent permitted under applicable law, the provisions of these standstill
agreements, including obtaining injunctions to prevent any breaches of
the agreements and enforcing specifically the terms and provisions of the
agreements, unless the board of directors consults with outside legal
counsel and concludes in good faith that doing so would be inconsistent
with the board's fiduciary duties.
In addition to the covenants that apply to both Transocean Sedco Forex and
R&B Falcon, Transocean Sedco Forex will:
- conduct its operations in accordance with the primary business focus of
Transocean Sedco Forex and its subsidiaries taken as a whole;
- not propose any shareholder resolution to amend its charter documents,
except in connection with transactions permitted under the merger
agreement;
- not declare, set aside or pay any dividends on or make other
distributions in respect of any of its shares and not redeem, purchase or
otherwise acquire any of its shares, except to declare and pay regular,
quarterly dividends, consistent with past practice, not to exceed $0.03
per ordinary share per quarter;
- not sell, lease or otherwise dispose of all or substantially all of its
and its subsidiaries' assets, taken as a whole, except for dispositions
between it and its subsidiaries or among its subsidiaries;
- not purchase or otherwise acquire any Transocean Sedco Forex ordinary
shares or R&B Falcon common shares, except for acquisitions by one of its
subsidiaries of Transocean Sedco Forex ordinary shares from it or another
of its subsidiaries; and
- not terminate, amend, modify or waive any provision of any agreement with
a standstill covenant to which it is a party; and enforce, to the fullest
extent permitted under applicable law, the provisions of these
agreements, including obtaining injunctions to prevent any breaches of
the agreements and enforcing specifically the terms and provisions of the
agreements, except in connection with a transaction permitted by the
merger agreement.
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Additional Agreements
Pursuant to the merger agreement, Transocean Sedco Forex and R&B Falcon
also agreed that:
- the parties will promptly make their respective filings and make any
other required submissions under the U.S. Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and any applicable non-U.S. competition,
antitrust or premerger notification laws with respect to the merger;
- the parties will use their commercially reasonable best efforts to
cooperate with one another in:
- determining which filings the parties must make before the effective
time of the merger with, and which consents, approvals, permits or
authorizations the parties must obtain before the effective time of the
merger from, governmental or regulatory authorities of the United States
and other jurisdictions in connection with the merger and the related
transactions; and
- making all such filings and seeking all such consents, approvals,
permits or authorizations in a timely manner without causing a material
adverse effect on Transocean Sedco Forex or R&B Falcon;
- the parties will promptly notify each other of any communication from any
governmental authority concerning the merger agreement or related
transactions and permit the other party to review in advance any proposed
communication to any governmental entity;
- the parties will not agree to participate in any meeting or discussion
with any governmental entity regarding any filing, investigation or other
inquiry about the merger agreement or related transactions unless the
other party is consulted in advance and given the opportunity to attend
and participate;
- the parties will furnish each other with copies of all correspondence,
filings and communications with any governmental or regulatory
authorities about the merger agreement and related transactions;
- the parties will furnish each other with such necessary information and
reasonable assistance that the other parties reasonably request in
connection with their preparation of necessary filings, registrations or
submissions of information to any governmental or regulatory authorities;
- the parties will use commercially reasonable best efforts to cause the
merger to qualify as a reorganization within the meaning of Section
368(a) and will not take actions, cause actions to be taken, or fail to
take actions to prevent the merger from qualifying as a reorganization
within the meaning of Section 368(a) or cause eligible R&B Falcon
shareholders who exchange R&B Falcon common shares solely for Transocean
Sedco Forex ordinary shares to recognize taxable gain under Section
367(a) of the Internal Revenue Code;
- immediately before the effective time of the merger, R&B Falcon will file
with the Secretary of State of the State of Delaware the amendment to its
certificate of incorporation regarding voting rights granted to its
outstanding preferred shares and Transocean Sedco Forex will file in the
Cayman Islands resolutions increasing its authorized ordinary share
capital and, if the proposal to amend its memorandum of association and
articles of association is approved, increasing the maximum number of
directors constituting its board of directors;
- each party will provide to the other access to its properties, records,
files and other information as the other party may reasonably request;
- the parties will consult with one another and mutually agree upon any
press releases and other announcements regarding the merger;
- Transocean Sedco Forex will prepare and submit to the New York Stock
Exchange a listing application covering its ordinary shares issuable in
the merger and will use commercially reasonable best efforts to obtain,
before the effective time, the NYSE's approval for the listing of those
shares;
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- R&B Falcon will prepare and submit to the New York Stock Exchange,
another national securities exchange or the Nasdaq National Market System
a listing application covering its outstanding preferred shares and will
use commercially reasonable best efforts to obtain, before the record
date for the special meeting of R&B Falcon shareholders, approval for the
listing of those shares;
- each party will use its commercially reasonable best efforts to have
timely delivered to the other party a "comfort" letter from its
independent public accountants;
- R&B Falcon will provide Transocean Sedco Forex, before the effective
time, a list of persons who may be its Rule 145 affiliates, and R&B
Falcon will use commercially reasonable best efforts to obtain from each
Rule 145 affiliate an undertaking not to transfer Transocean Sedco Forex
ordinary shares issued to such person pursuant to the merger except (1)
pursuant to an effective registration statement, (2) in compliance with
Rule 145 under the Securities Act or (3) pursuant to an exemption from
the registration requirements under the Securities Act;
- each party will pay all costs and expenses incurred by it in connection
with the merger, regardless of whether the merger becomes effective,
other than costs that are specified to be shared or reimbursed under the
merger agreement;
- R&B Falcon will not take any action to terminate its shareholder rights
plan, redeem any of the rights, amend its shareholder rights plan in a
manner adverse to Transocean Sedco Forex or cause any person not to
trigger the issuance of rights, except for actions taken by R&B Falcon to
enter into an agreement that is superior to the merger;
- R&B Falcon will, at the request of Transocean Sedco Forex, (1) use its
commercially reasonable best efforts to dispose of all vessels involved
in the coastwise trade before the effective time of the merger, to
persons and on terms and conditions directed by Transocean Sedco Forex,
(2) cancel and refrain from extending any agreement that would require
operation of those vessels beyond the effective time of the merger and
(3) take action to terminate the operation of those vessels as of the
effective time of the merger;
- as promptly as practicable, the parties will request that Moody's
Investor Service, Inc. and Standard & Poor's Ratings Service rate
specified debt of R&B Falcon as "Investment Grade" or give that debt an
"Investment Grade Rating" (as those terms are used in R&B Falcon's debt
indentures) at or before the effective time. The parties must use
commercially reasonable best efforts as requested by the other party or
by the rating agencies in connection with the process of obtaining these
ratings; however, the actions requested by rating agencies or the two
companies may specifically not be those related to the financial
condition, business or operations of the two companies and their
respective subsidiaries. If these investment grade ratings are not
otherwise obtained at the time the conditions to the merger have
otherwise been fulfilled, then Transocean Sedco Forex will deliver a full
senior unsecured unconditional payment guarantee before the effective
time;
- R&B Falcon will file a registration statement with the SEC to complete a
public offering of its common shares with aggregate proceeds of at least
$105 million and will subsequently redeem its preferred shares having an
aggregate liquidation preference of up to $105 million at a price in cash
of 113.875% of the liquidation preference, plus accrued and unpaid
dividends, if any, to the redemption date, with the net proceeds from the
public offering. R&B Falcon will take any action reasonably directed by
Transocean Sedco Forex in connection with this offering, including the
setting of the price, number of shares to be sold and selection of
underwriters. R&B Falcon may repurchase preferred shares on terms
approved by Transocean Sedco Forex before the merger but will not pay
holders of the preferred shares with funds received from Transocean Sedco
Forex;
- 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 the
merger agreement, R&B Falcon will not make, and will not permit its
subsidiaries to make, any representations or promises, oral or written,
to employees of R&B Falcon and its
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subsidiaries concerning continued employment following the merger, or the
terms and conditions of that employment, except as requested by
Transocean Sedco Forex under the merger agreement or otherwise in writing
with the prior written consent of Transocean Sedco Forex; and
- to the extent allowed by applicable laws, before the effective time of
the merger, R&B Falcon will take any action reasonably requested by
Transocean Sedco Forex as part of Transocean Sedco Forex's preparation
for a prompt and efficient integration of the parties' operations
following the effective time of the merger.
See "The Merger -- Interests of Certain Persons in the Merger," "The
Merger -- Employee Benefit Matters" and "The Merger -- Regulatory Matters" for a
description of additional agreements between Transocean Sedco Forex and R&B
Falcon under the merger agreement.
No Solicitation
R&B Falcon will not permit any of its officers, directors, employees,
agents or representatives, directly or indirectly, to solicit, initiate or
encourage any inquiry, proposal or offer to merge, consolidate, purchase or
otherwise acquire:
- 15% or more of the consolidated assets, net revenues or net income of R&B
Falcon; or
- 15% or more of any class of capital stock of R&B Falcon.
Any such proposal, offer or transaction may be referred to in this joint
proxy statement/prospectus as an "R&B Falcon acquisition proposal."
R&B Falcon will not cooperate with, assist, participate or engage in any
discussions or negotiations concerning an R&B Falcon acquisition proposal. R&B
Falcon agreed to cease immediately and terminate any existing negotiations with
any parties with respect to any of the foregoing. However, nothing contained in
the merger agreement prevents R&B Falcon or the R&B Falcon board of directors
from:
- complying with Rule 14e-2 promulgated under the Securities Exchange Act
of 1934 with regard to an R&B Falcon acquisition proposal; or
- before R&B Falcon's shareholders approve the merger, providing
information to or engaging in any negotiations with any person who has
made an unsolicited bona fide written R&B Falcon acquisition proposal
with respect to all the outstanding R&B Falcon common shares or all or
substantially all the assets of R&B Falcon that, in the good faith
judgment of the board of directors of R&B Falcon, 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 is promptly
provided to Transocean Sedco Forex, is superior to the merger, if the
board of directors, after consultation with its outside legal counsel,
determines that the failure to do so would be inconsistent with its
fiduciary obligations. Any information so provided is required to be
provided pursuant to a confidentiality and standstill agreement at least
as favorable to R&B Falcon as the confidentiality and standstill
agreement entered into with Transocean Sedco Forex in connection with the
merger that does not contain terms that prevent R&B Falcon from complying
with its no-solicitation obligations under the merger agreement.
If R&B Falcon intends to participate in any discussions or negotiations or
to provide any information to any third party, R&B Falcon is required to:
- give prompt prior oral and written notice to Transocean Sedco Forex of
each such action;
- immediately notify Transocean Sedco Forex orally and in writing of any
requests for information or the receipt of any R&B Falcon acquisition
proposal or inquiry with respect to or that could lead to a R&B Falcon
acquisition proposal, including the identity of the person or group (1)
engaging in
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such discussions or negotiations, (2) requesting such information or (3)
making such R&B Falcon acquisition proposal, and the material terms and
conditions of any R&B Falcon acquisition proposal;
- keep Transocean Sedco Forex fully informed on a timely basis of the
status and details, including any changes or proposed changes to such
status or details, of any such requests, R&B Falcon acquisition proposals
or inquiries; and
- provide to Transocean Sedco Forex as soon as practicable after receipt or
delivery thereof, copies of all correspondence and other written material
sent or provided to R&B Falcon from any third party, or sent or provided
by R&B Falcon to any third party, in connection with any R&B Falcon
acquisition proposal.
Transocean Sedco Forex will not permit any of its officers, directors,
employees, agents or representatives, directly or indirectly, to solicit,
initiate or encourage any inquiry, proposal or offer to merge, consolidate,
purchase or otherwise acquire:
- 15% or more of the consolidated assets, net revenues or net income of
Transocean Sedco Forex; or
- 15% or more of any class of share capital of Transocean Sedco Forex.
Any such proposal, offer or transaction may be referred to in this joint
proxy statement/prospectus as a "Transocean Sedco Forex acquisition proposal."
Transocean Sedco Forex agreed not to cooperate with or engage in any
discussions or negotiations concerning a Transocean Sedco Forex acquisition
proposal. Transocean Sedco Forex agreed to cease immediately any existing
negotiations with any parties with respect to any of the foregoing. However,
nothing contained in the merger agreement prevents Transocean Sedco Forex or the
Transocean Sedco Forex board of directors from:
- complying with Rule 14e-2 promulgated under the Securities Exchange Act
of 1934 with regard to a Transocean Sedco Forex acquisition proposal; or
- before Transocean Sedco Forex obtains the shareholder votes required in
connection with the merger, providing information to or engaging in any
negotiations with any person who has made an unsolicited bona fide
written Transocean Sedco Forex acquisition proposal with respect to all
the issued Transocean Sedco Forex ordinary shares or all or substantially
all the assets of Transocean Sedco Forex that, in the good faith judgment
of a committee composed solely of the outside directors of Transocean
Sedco Forex, 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 is promptly provided to Transocean Sedco Forex,
is superior to the merger, if that committee, after consultation with its
outside legal counsel, determines that the failure to do so would be
inconsistent with its fiduciary obligations. Any information so provided
is required to be provided pursuant to a confidentiality and standstill
agreement at least as favorable to Transocean Sedco Forex as the
confidentiality and standstill agreement entered into with R&B Falcon in
connection with the merger that does not contain terms that prevent
Transocean Sedco Forex from complying with its no-solicitation
obligations under the merger agreement.
If Transocean Sedco Forex intends to participate in any discussions or
negotiations or provide any information to any third party, Transocean Sedco
Forex is required to:
- give prompt prior oral and written notice to R&B Falcon of each such
action;
- immediately notify R&B Falcon orally and in writing of any requests for
information or the receipt of any Transocean Sedco Forex acquisition
proposal or inquiry with respect to or that could lead to a Transocean
Sedco Forex acquisition proposal, including the identity of the person or
group (1) engaging in such discussions or negotiations, (2) requesting
such information or (3) making such Transocean Sedco Forex acquisition
proposal, and the material terms and conditions of any Transocean Sedco
Forex acquisition proposal;
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- keep R&B Falcon fully informed on a timely basis of the status and
details, including any changes or proposed changes to such status or
details, of any such requests, Transocean Sedco Forex acquisition
proposals or inquiries; and
- provide to R&B Falcon as soon as practicable after receipt or delivery
thereof, copies of all correspondence and other written material sent or
provided to Transocean Sedco Forex from any third party, or sent or
provided by Transocean Sedco Forex to any third party, in connection with
any Transocean Sedco Forex acquisition proposal.
REPRESENTATIONS AND WARRANTIES
R&B Falcon, on the one hand, and Transocean Sedco Forex, TSF Delaware and
Transocean Holdings, on the other hand, have made various representations and
warranties in the merger agreement which, in the cases of R&B Falcon and
Transocean Sedco Forex, are substantially reciprocal. Those representations and
warranties pertain to:
- the organization, good standing and foreign qualification of the parties
and their significant subsidiaries;
- the authorization, execution, delivery and enforceability of the merger
agreement and related matters;
- capitalization;
- compliance with laws and possession of permits;
- whether each party's execution and delivery of the merger agreement or
consummation of the transactions contemplated thereby causes any conflict
with charter documents, a default under any material agreements or a
violation of any applicable law;
- the documents and reports that the parties have filed with the SEC;
- litigation;
- whether certain events, changes or effects have occurred from December
31, 1999 to the date of the merger agreement;
- taxes;
- retirement and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974;
- labor matters;
- environmental matters;
- intellectual property matters;
- material court orders and decrees;
- maintenance of insurance;
- brokerage and similar fees;
- receipt of fairness opinions from financial advisors;
- beneficial ownership of each other party's common shares;
- the shareholder votes required in connection with the merger agreement;
- Transocean Sedco Forex's and R&B Falcon's ownership of their respective
drilling rigs and drillships;
- liabilities not disclosed in the materials related to the merger;
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- non-competition agreements and material contracts;
- capital expenditure programs; and
- improper payments.
In addition, R&B Falcon has made representations and warranties regarding
amendments and actions taken under its rights agreement. Transocean Sedco Forex,
Transocean Holdings and TSF Delaware have also made representations and
warranties about the ownership and activities of Transocean Holdings and TSF
Delaware.
None of these representations and warranties will survive after the
effective time of the merger.
CONDITIONS TO THE MERGER
Conditions to Each Party's Obligations
R&B Falcon, Transocean Sedco Forex, Transocean Holdings and TSF Delaware
will be obligated to effect the merger only if the following conditions are
satisfied or waived at or before the closing date.
Shareholder Approval. R&B Falcon must have received the required approval
of its common shareholders to adopt the merger agreement and to approve the
proposed amendment to R&B Falcon's certificate of incorporation.
Transocean Sedco Forex shall have received the necessary shareholder
approvals to:
- increase its authorized ordinary share capital to 800,000,000 ordinary
shares; and
- issue Transocean Sedco Forex ordinary shares pursuant to the merger.
Antitrust Waiting Periods and Related Matters. Any waiting period
applicable to the completion of the merger under the Hart-Scott-Rodino Act shall
have expired or been terminated. In the event of any review by the U.K. Office
of Fair Trading or the U.K. Secretary of State for Trade and Industry,
indications reasonably satisfactory to each of R&B Falcon and Transocean Sedco
Forex that the merger will not be referred to the Competition Commission shall
have been received. In addition, each of the following is also a condition to
the merger if in the reasonable judgment of Transocean Sedco Forex, in each
case, non-satisfaction of the condition is reasonably likely to individually or
in the aggregate have a material adverse effect on Transocean Sedco Forex or R&B
Falcon, materially impair the benefits or advantages that Transocean Sedco Forex
expects to receive from the merger or have a material adverse effect on
Transocean Sedco Forex's business plan or business strategy for the combined
company:
- 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, United Kingdom or the European Union seeking to restrain,
prohibit or rescind any transaction contemplated by the merger agreement
as an actual or threatened violation of any antitrust law or seeking to
penalize a party for completing any transaction contemplated by the
merger;
- any mandatory waiting period under any applicable non-U.S. antitrust laws
shall have expired or been terminated; and
- 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.
No Injunctions or Restraints. None of the parties to the merger agreement
shall be subject to any decree, order or injunction of a court of competent
jurisdiction that prohibits the merger. No governmental authority shall have
enacted any statute, rule or regulation that prohibits the merger or makes it
unlawful.
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Registration Statement. The SEC shall have declared the registration
statement, of which this joint proxy statement/prospectus forms a part, to be
effective, and no stop order concerning the registration statement shall be in
effect.
NYSE Listing. The New York Stock Exchange shall have authorized for listing
the Transocean Sedco Forex ordinary shares to be issued pursuant to the merger.
Charter Amendment. The amendment to R&B Falcon's certificate of
incorporation shall have been filed with the Delaware Secretary of State and
become effective.
Additional Conditions to the Obligation of R&B Falcon to Effect the Merger
R&B Falcon is not obligated to effect the merger unless the following
additional conditions are satisfied or waived at or before the closing date.
Covenants, Representations and Warranties. Transocean Sedco Forex,
Transocean Holdings and TSF Delaware shall have performed in all material
respects the covenants and agreements that the merger agreement requires them to
perform on or before the closing date. The representations and warranties of
Transocean Sedco Forex, Transocean Holdings and TSF Delaware contained in the
merger agreement that are qualified as to materiality or material adverse effect
on Transocean Sedco Forex shall be true and correct in all respects as of the
closing date. The representations and warranties of Transocean Sedco Forex,
Transocean Holdings and TSF Delaware contained in the merger agreement that are
not qualified as to materiality or material adverse effect on Transocean Sedco
Forex shall be true and correct in all respects as of the closing date, except
for breaches of representations and inaccuracies in warranties that do not and
are not reasonably likely to have, individually or in the aggregate, a material
adverse effect on Transocean Sedco Forex. However, representations and
warranties made as of a specified date need only be so true and correct as of
the specified date. R&B Falcon is entitled to receive a certificate of each of
Transocean Sedco Forex, Transocean Holdings and TSF Delaware, executed by a
respective President or Vice President, certifying that Transocean Sedco
Forex's, Transocean Holdings' and TSF Delaware's representations and warranties
are true and correct.
Tax Opinion. Cravath, Swaine & Moore, counsel to R&B Falcon, shall have
delivered to R&B Falcon an opinion, in form and substance reasonably
satisfactory to R&B Falcon, dated the closing date, stating that, for U.S.
federal income tax purposes, the merger will qualify as a reorganization under
Section 368(a) of the U.S. Internal Revenue Code and no gain or loss will be
recognized by the R&B Falcon shareholders who exchange R&B Falcon common shares
solely for Transocean Sedco Forex ordinary shares, except with respect to (i)
cash received in lieu of fractional shares or (ii) some shareholders of R&B
Falcon who will hold 5% or more of the shares of Transocean Sedco Forex after
the merger. In rendering this opinion, Cravath, Swaine & Moore will be entitled
to receive and rely upon representations of officers of Transocean Sedco Forex,
R&B Falcon, Transocean Holdings and TSF Delaware as of the closing date.
No Material Adverse Effect. At any time after the date of the merger
agreement, no event or occurrence shall have transpired that has had or is
reasonably likely to have a material adverse effect on Transocean Sedco Forex.
For purposes of the merger agreement, "material adverse effect" means a material
adverse effect or change in:
- the business, assets, conditions (financial or otherwise) or operations
of a party 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 the
merger agreement; or
- the ability of the party to consummate the transactions contemplated by
the merger agreement or to fulfill the conditions to closing.
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Additional Conditions to the Obligation of Transocean Sedco Forex, Transocean
Holdings and TSF Delaware to Effect the Merger
Transocean Sedco Forex, Transocean Holdings and TSF Delaware are not
obligated to effect the merger unless the following additional conditions are
satisfied or waived at or before the closing date.
Covenants, Representations and Warranties. R&B Falcon shall have performed
in all material respects the covenants and agreements that the merger agreement
requires it to perform on or before the closing date. The representations and
warranties of R&B Falcon contained in the merger agreement that are qualified as
to materiality or material adverse effect on R&B Falcon shall be true and
correct in all respects as of the closing date. The representations and
warranties of R&B Falcon contained in the merger agreement that are not
qualified as to materiality or material adverse effect on R&B Falcon shall be
true and correct as of the closing date, except for breaches of representations
and inaccuracies in warranties that do not and are not reasonably likely to
have, individually or in the aggregate, a material adverse effect on R&B Falcon.
Transocean Sedco Forex is entitled to receive a certificate of R&B Falcon,
executed by a President or Vice President of R&B Falcon, certifying that R&B
Falcon's representations and warranties are true and correct.
Tax Opinion. Baker Botts L.L.P., counsel to Transocean Sedco Forex, shall
have delivered to Transocean Sedco Forex an opinion, in form and substance
reasonably satisfactory to Transocean Sedco Forex, dated the closing date,
stating that, for U.S. federal income tax purposes, the merger will qualify as a
reorganization under Section 368(a)(1)(B) of the U.S. Internal Revenue Code and
no gain or loss will be recognized by the R&B Falcon shareholders who exchange
R&B Falcon common shares solely for Transocean Sedco Forex ordinary shares,
except with respect to (i) cash received in lieu of fractional shares or (ii)
some shareholders of R&B Falcon who will hold 5% or more of the shares of
Transocean Sedco Forex after the merger. In rendering this opinion, Baker Botts
L.L.P. will be entitled to receive and rely upon representations of officers of
Transocean Sedco Forex, R&B Falcon, Transocean Holdings and TSF Delaware as of
the closing date.
No Material Adverse Effect. At any time after the date of the merger
agreement, no event or occurrence shall have occurred that has had or is likely
to have a material adverse effect on R&B Falcon.
Exchange Listing. The R&B Falcon preferred shares shall have been listed on
the New York Stock Exchange, another national securities exchange or the Nasdaq
National Market System before the record date for the meeting of the R&B Falcon
common shareholders to adopt the merger agreement.
Rule 145 Affiliate Agreements. Transocean Sedco Forex shall have received a
written agreement from each person who is an "affiliate" of R&B Falcon, as
defined under Rule 145 of the Securities Act, that the person will not sell,
pledge, transfer or otherwise dispose of any Transocean Sedco Forex ordinary
shares received in the merger except pursuant to an effective registration
statement or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act.
Public Offering. R&B Falcon shall have closed a public offering of its
common shares with aggregate net proceeds of at least $105 million, given notice
of partial redemption of the R&B Falcon preferred shares having an aggregate
liquidation preference of up to $105 million at a price of 113.875% of the
liquidation preference, plus accrued and unpaid dividends, if any, to the
redemption date, and deposited the funds necessary for the redemption. This will
cease to be a condition if the other conditions to the merger that can be
fulfilled prior to the closing date have been fulfilled for a period of eight
days, R&B Falcon has given Transocean Sedco Forex notice as to the fulfillment
of the other conditions and has complied with its obligations regarding the
public offering and the registration statement for the public offering has
become and remained effective and no stop order in respect of the registration
statement under which the public offering is made is in effect.
Investment Grade. Specified R&B Falcon debt shall have been rated
"Investment Grade" or been given an "Investment Grade Rating," as those terms
are defined in the debt indentures, by Moody's and Standard & Poor's.
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TERMINATION OF THE MERGER AGREEMENT
R&B Falcon and Transocean Sedco Forex may terminate the merger agreement by
mutual written consent.
Either the R&B Falcon board of directors or the Transocean Sedco Forex
board of directors may terminate the merger agreement if:
- the parties have not completed the merger by August 31, 2001, and the
party desiring to terminate the merger agreement for this reason has not
failed to perform or observe in any material respect any of its
obligations under the merger agreement in any manner that caused the
merger not to occur on or before that date;
- at a meeting of the shareholders of R&B Falcon, those shareholders do not
adopt the merger agreement and approve the proposed amendment to R&B
Falcon's certificate of incorporation;
- at a meeting of the shareholders of Transocean Sedco Forex, those
shareholders do not approve the increase in Transocean Sedco Forex's
authorized ordinary share capital and the issuance of ordinary shares in
the merger; or
- a U.S. federal or state or non-U.S. court of competent jurisdiction or
federal or state or non-U.S. governmental, regulatory or administrative
agency or commission has issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by the merger agreement, and this order,
decree, ruling or other action has become final and unappealable.
However, the party seeking to terminate the merger agreement for this
reason must have complied with the covenants in the merger agreement
which generally relate to antitrust, tax and other governmental filings
and approvals and, with respect to other matters, used its commercially
reasonable best efforts to remove this injunction, decree or order.
R&B Falcon may terminate the merger agreement if:
- Transocean Sedco Forex or TSF Delaware has breached any representation,
warranty, covenant or agreement in the merger agreement, or any
representation or warranty of Transocean Sedco Forex or TSF Delaware has
become untrue, in either case such that a condition to the merger would
not be met, and such breach is not curable or, if curable, is not cured
within 30 days after R&B Falcon gives written notice of the breach to
Transocean Sedco Forex, and R&B Falcon is not, at that time, in material
breach of any representation, warranty, covenant or agreement in the
merger agreement; or
- the board of directors of Transocean Sedco Forex has withdrawn or
materially modified, in a manner adverse to R&B Falcon, its approval or
recommendation of the amendments to its charter documents or the issuance
of ordinary shares pursuant to the merger, or recommended a competing
acquisition proposal for Transocean Sedco Forex, or resolved to do so.
In addition, R&B Falcon may terminate the merger agreement if:
- Before its shareholders adopt the merger agreement and approve the
proposed amendment to its certificate of incorporation, R&B Falcon
concurrently enters into a binding definitive written agreement
concerning a transaction that constitutes a superior proposal for R&B
Falcon after the board of directors of R&B Falcon determines that:
- proceeding with the merger would be inconsistent with its fiduciary
obligations by reason of the superior proposal; and
- there is a substantial likelihood that the adoption by R&B Falcon's
shareholders of the merger agreement with Transocean Sedco Forex will
not be obtained by reason of the existence of the superior proposal for
R&B Falcon.
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<PAGE> 93
However, R&B Falcon may not effect that termination:
- unless R&B Falcon has complied in all material respects with the
non-solicitation provisions of the merger agreement;
- if Transocean Sedco Forex is entitled to terminate the merger agreement
because R&B Falcon has breached any representation, warranty, covenant or
agreement in the merger agreement, or any representation or warranty of
R&B Falcon shall have become materially untrue;
- unless and until Transocean Sedco Forex receives at least 10 business
days' prior written notice from R&B Falcon of its intention to effect
that termination; and
- during that 10-business day period, R&B Falcon considers, and causes its
respective financial and legal advisors to consider, any adjustment in
the terms and conditions of the merger agreement that Transocean Sedco
Forex may propose.
Any such termination of the merger agreement will not be effective until
R&B Falcon has paid to Transocean Sedco Forex the $225 million termination fee
described under "-- Expenses and Termination Fees."
Transocean Sedco Forex may terminate the merger agreement if:
- R&B Falcon has breached any representation, warranty, covenant or
agreement in the merger agreement, or any representation or warranty of
R&B Falcon has become untrue, in either case such that a condition to the
merger would not be met, and such breach is not curable or, if curable,
is not cured within 30 days after Transocean Sedco Forex gives written
notice of the breach to R&B Falcon, and Transocean Sedco Forex is not, at
that time, in material breach of any representation, warranty, covenant
or agreement set forth in the merger agreement; or
- the board of directors of R&B Falcon has withdrawn or materially
modified, in a manner adverse to Transocean Sedco Forex, its approval or
recommendation of the merger or the proposed amendment to R&B Falcon's
certificate of incorporation or recommended a competing acquisition
proposal for R&B Falcon, or resolved to do so.
In addition, Transocean Sedco Forex may terminate the merger agreement if:
- before its shareholders approve the increase in its authorized ordinary
share capital and the issuance of its ordinary shares pursuant to the
merger, Transocean Sedco Forex concurrently enters into a binding
definitive written agreement concerning a transaction that constitutes a
superior proposal for Transocean Sedco Forex after its board of directors
determines that:
- proceeding with the merger would be inconsistent with its fiduciary
obligations by reason of the superior proposal; and
- there is a substantial likelihood that the adoption by Transocean Sedco
Forex's shareholders of the merger agreement with R&B Falcon will not be
obtained by reason of the existence of the superior proposal for
Transocean Sedco Forex.
However, Transocean Sedco Forex may not effect that termination:
- unless Transocean Sedco Forex has complied in all material respects with
the non-solicitation provisions of the merger agreement;
- if R&B Falcon is entitled to terminate the merger agreement because
Transocean Sedco Forex has breached any representation, warranty,
covenant or agreement in the merger agreement, or any representation or
warranty of Transocean Sedco Forex shall have become materially untrue;
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<PAGE> 94
- unless and until R&B Falcon receives at least 10 business days' prior
written notice from Transocean Sedco Forex of its intention to effect
that termination; and
- during that 10-business-day period, Transocean Sedco Forex considers, and
causes its respective financial and legal advisors to consider, any
adjustment in the terms and conditions of the merger agreement that R&B
Falcon may propose.
Any such termination of the merger agreement will not be effective until
Transocean Sedco Forex has paid to R&B Falcon the $225 million termination fee
described under "-- Expenses and Termination Fees."
No party may terminate the merger agreement after the effectiveness of the
merger.
EXPENSES AND TERMINATION FEES
Whether or not the merger is completed, all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated by the
merger agreement will be paid by the party incurring those expenses, except as
expressly provided in the merger agreement.
R&B Falcon is required to pay Transocean Sedco Forex a cash termination fee
of $225 million at the time of the termination if the merger agreement is
terminated as follows:
- by R&B Falcon or Transocean Sedco Forex because R&B Falcon's common
shareholders do not adopt the merger agreement and approve the amendment
to R&B Falcon's certificate of incorporation after the public
announcement of a competing acquisition proposal for R&B Falcon, whether
or not that proposal is still pending or has been consummated;
- by Transocean Sedco Forex because the board of directors of R&B Falcon
has withdrawn or materially modified, in a manner adverse to Transocean
Sedco Forex, its approval or recommendation of the merger or the
amendment to R&B Falcon's certificate of incorporation or recommended a
competing acquisition proposal for R&B Falcon, or resolved to do so; or
- by R&B Falcon because the board of directors of R&B Falcon determines
that proceeding with the merger would be inconsistent with its fiduciary
duties and concurrently enters into a binding definitive agreement
concerning a transaction that constitutes a superior proposal for R&B
Falcon.
Transocean Sedco Forex is required to pay R&B Falcon a cash termination fee
of $225 million at the time of the termination if the merger agreement is
terminated as follows:
- by R&B Falcon or Transocean Sedco Forex because Transocean Sedco Forex's
shareholders do not approve the increase in share capital and the
issuance of Transocean Sedco Forex ordinary shares pursuant to the merger
after the public announcement of a competing acquisition proposal for
Transocean Sedco Forex, whether or not that proposal is still pending or
has been consummated;
- by R&B Falcon because the board of directors of Transocean Sedco Forex
has withdrawn or materially modified, in a manner adverse to R&B Falcon,
its approval or recommendation of the amendment to the charter documents
or the issuance of ordinary shares or recommended a competing acquisition
proposal for R&B Falcon, or resolved to do so; or
- by Transocean Sedco Forex because the board of directors of Transocean
Sedco Forex determines that proceeding with the merger would be
inconsistent with its fiduciary duties and concurrently enters into a
binding definitive agreement concerning a transaction that constitutes a
superior proposal for Transocean Sedco Forex.
If the merger agreement is terminated because the shareholders of R&B
Falcon do not approve the merger and there was no public announcement of a
competing acquisition proposal for R&B Falcon before the shareholders' vote,
then R&B Falcon is required to pay Transocean Sedco Forex a fee of $10 million
to reimburse it for its costs and expenses incurred in connection with the
merger and related transactions.
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<PAGE> 95
If the merger agreement is terminated because the shareholders of
Transocean Sedco Forex do not approve the proposed increase in Transocean Sedco
Forex's authorized ordinary share capital or the issuance of the ordinary shares
in the merger and there was no public announcement of a competing acquisition
proposal for Transocean Sedco Forex before the shareholders' vote, then
Transocean Sedco Forex is required to pay R&B Falcon a fee of $10 million to
reimburse it for its costs and expenses incurred in connection with the merger
and related transactions.
AMENDMENT
The parties may amend the merger agreement, by action taken or authorized
by their boards of directors, at any time before or after approval by the
shareholders of the parties of the matters presented in connection with the
merger. After any shareholder approval, the parties may not amend the merger
agreement if the law requires further approval by those shareholders, unless
such further approval is obtained.
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<PAGE> 96
BUSINESS OF TRANSOCEAN SEDCO FOREX
Transocean Sedco Forex is a leading international provider of offshore
contract drilling services for oil and gas exploration, development and
production. As of the date of this joint proxy statement/prospectus, Transocean
Sedco Forex owned, had partial ownership interests in, operated or had under
construction 71 mobile offshore drilling units. Transocean Sedco Forex's active
fleet includes 12 high-specification semisubmersibles, 29 second- and
third-generation semisubmersibles, two Discoverer Enterprise-class drillships,
four other drillships, 17 jackup rigs and three tenders. Transocean Sedco Forex
also has under construction one additional Discoverer Enterprise-class
drillship, the Discoverer Deep Seas; and three Sedco Express-class
semisubmersibles, the Sedco Express, Sedco Energy and Cajun Express. In addition
to the 71 mobile offshore drilling units, the fleet includes one mobile offshore
production unit, six swamp barges and two land drilling rigs.
Transocean Sedco Forex's core business is to contract these drilling rigs,
related equipment and work crews primarily on a dayrate basis to drill offshore
wells. Transocean Sedco Forex specializes in technically demanding segments of
the offshore drilling business with a particular focus on deepwater and harsh
environment drilling services. Transocean Sedco Forex also provides additional
services, including international turnkey drilling and management of third-party
well service activities.
On December 31, 1999, Transocean Sedco Forex merged with Sedco Forex
Holdings Limited ("Sedco Forex"), the offshore drilling service business of
Schlumberger Limited. As a result of the merger, Sedco Forex became a wholly
owned subsidiary of Transocean Sedco Forex, which changed its name to Transocean
Sedco Forex Inc.
Transocean Sedco Forex is a Cayman Islands company with offices located at
4 Greenway Plaza, Houston, Texas 70046. Its telephone number at that address is
(713) 232-7500.
For a more detailed description of the business of Transocean Sedco Forex,
see the description set forth in Transocean Sedco Forex's 1999 Annual Report on
Form 10-K, which is incorporated by reference herein. See "Where You Can Find
More Information."
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BUSINESS OF R&B FALCON
R&B Falcon's primary business is providing marine contract drilling and
ancillary services on a worldwide basis. R&B Falcon provides the equipment and
personnel for drilling wells and conducting workover operations on wells in
marine environments and on land. R&B Falcon possesses experience in deepwater
drilling, U.S. and international shallow-water drilling, inland barge drilling,
land drilling, marine services and turnkey drilling.
R&B Falcon owns and operates towing vessels and barges used to transport
and store equipment and material to support drilling operations. These assets
are deployed in the jack-up and barge rig businesses. R&B Falcon also provides,
to a minor extent, equipment for ocean transportation of materials and in
connection with marine construction projects.
R&B Falcon is the result of the 1997 combination of Reading & Bates
Corporation and Falcon Drilling Company, Inc. and the subsequent acquisition of
Cliffs Drilling Company in late 1998. R&B Falcon operates a fleet of 138 marine
units, including 61 inland marine drilling and workover units, 50 shallow-water
units, 22 deepwater drilling and service units and five mobile production units.
Additionally, R&B Falcon operates an inland marine towing and support fleet
consisting of 108 tugs and other support units plus a land rig fleet of 12
units.
With headquarters in Houston and regional offices in Louisiana, Scotland,
Malaysia and Brazil, R&B Falcon has over 5,100 employees. R&B Falcon has a
presence in the major drilling arenas of the world, with operations offices in
locations such as Angola, Indonesia, Australia, Italy, India and Venezuela.
For a more detailed description of the business of R&B Falcon, see the
description set forth in R&B Falcon's 1999 Annual Report on Form 10-K which is
incorporated by reference herein. See "Where You Can Find More Information."
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<PAGE> 98
MARKET PRICE AND DIVIDEND INFORMATION
The following table shows the high and low sales prices for Transocean
Sedco Forex ordinary shares and R&B Falcon common shares for the periods shown
in the table. The table also shows the amount of cash dividends declared on
Transocean Sedco Forex's ordinary shares during the periods presented in the
table. No cash dividends were declared on R&B Falcon common shares during the
periods presented in the table.
Transocean Sedco Forex's ordinary shares are listed on the New York Stock
Exchange under the symbol "RIG." R&B Falcon's common shares are listed on the
New York Stock Exchange under the symbol "FLC." As of October 30, 2000, the
record date for determining holders of Transocean Sedco Forex ordinary shares
and R&B Falcon common shares, there were holders of record of Transocean
Sedco Forex ordinary shares and holders of record of R&B Falcon common
shares.
<TABLE>
<CAPTION>
TRANSOCEAN SEDCO FOREX
------------------------------
CASH R&B FALCON
DIVIDENDS ------------------
CALENDAR YEAR HIGH LOW DECLARED HIGH LOW
------------- -------- ------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998
First quarter............................... $54 15/16 $35 $0.03 $35 3/8 $23 1/8
Second quarter.............................. 59 15/16 41 11/16 0.03 34 1/16 20 1/2
Third quarter............................... 46 3/8 23 0.03 23 3/16 8 3/4
Fourth quarter.............................. 41 1/2 23 9/16 0.03 16 1/2 6 3/4
1999
First quarter............................... $31 9/16 $19 5/8 $0.03 $ 9 1/4 $ 8 5/8
Second quarter.............................. 32 1/2 22 5/8 0.03 11 3/4 9 3/8
Third quarter............................... 36 1/2 25 9/16 0.03 16 1/16 13 1/8
Fourth quarter.............................. 34 3/8 23 7/8 0.03 13 1/4 10 11/16
2000
First quarter............................... $53 1/8 $29 1/4 $0.03 $20 15/16 $11 11/16
Second quarter.............................. 56 3/16 41 1/4 0.03 25 1/2 16 13/16
Third quarter............................... 65 5/8 45 5/8 0.03 31 18 5/16
Fourth quarter
(through October 25)..................... 65 1/2 54 11/16 31 25 3/4
</TABLE>
On August 18, 2000, the last full trading day before Transocean Sedco Forex
and R&B Falcon announced the execution of the merger agreement, Transocean Sedco
Forex ordinary shares closed at $57.69 per share and R&B Falcon common shares
closed at $25.19 per share. The market price of Transocean Sedco Forex ordinary
shares will fluctuate before the merger, but the exchange ratio is fixed.
SHAREHOLDERS ARE ENCOURAGED TO OBTAIN RECENT STOCK QUOTES FOR TRANSOCEAN SEDCO
FOREX ORDINARY SHARES AND R&B FALCON COMMON SHARES.
Transocean Sedco Forex intends to file an application with the NYSE to list
the Transocean Sedco Forex ordinary shares that holders of R&B Falcon common
shares will receive in the merger.
Following completion of the merger, Transocean Sedco Forex ordinary shares
will continue to trade on the New York Stock Exchange under the symbol "RIG."
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<PAGE> 99
UNAUDITED PRO FORMA FINANCIAL INFORMATION
BACKGROUND
On December 31, 1999, Transocean Sedco Forex, then known as "Transocean
Offshore Inc.," merged with Sedco Forex Holdings Limited, the offshore drilling
service business of Schlumberger Limited. This merger was accounted for as a
purchase, with Sedco Forex as the acquiror for accounting purposes.
On December 31, 1997, Reading & Bates Corporation and Falcon Drilling
Company combined to form R&B Falcon Corporation. The combination was accounted
for as a pooling of interests. On December 1, 1998, R&B Falcon acquired all of
the outstanding shares of Cliffs Drilling Company. The acquisition was accounted
for using the purchase method of accounting.
SOURCES OF INFORMATION
Transocean Sedco Forex and R&B Falcon are providing the following selected
financial information concerning Transocean Sedco Forex and R&B Falcon to help
you in your analysis of the financial aspects of the merger of the two
companies. We derived this information from the audited and unaudited financial
statements of Transocean Sedco Forex and R&B Falcon for the periods presented.
The information is only a summary, and you should read it in conjunction with
the financial information incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" beginning on
page 129.
HOW WE PREPARED THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The balance sheet data assume the merger had been completed on June 30,
2000 and the operating results data assume the merger was completed on January
1, 1999. The pro forma operating results data for the year ended December 31,
1999 also assume that the merger of Transocean Offshore Inc. and Sedco Forex was
completed on January 1, 1999. The pro forma financial information for the
Transocean Offshore Inc. and Sedco Forex merger is incorporated by reference in
this joint proxy statement/ prospectus from the Form 8-K filed by Transocean
Sedco Forex on September 22, 2000.
If Transocean Sedco Forex had merged with R&B Falcon and Transocean
Offshore Inc. had merged with Sedco Forex on the dates assumed in the pro forma
financial statements, Transocean Sedco Forex might have performed differently.
You should not rely on the pro forma financial information as an indication of
the financial position or results of operations that Transocean Sedco Forex
would have achieved had the mergers taken place earlier or of the future results
that Transocean Sedco Forex will achieve after the merger.
Transocean Sedco Forex prepared the pro forma combined financial
information using the purchase method of accounting, with Transocean Sedco Forex
treated as the acquiror. As a result, the assets and liabilities of Transocean
Sedco Forex are recorded at historical amounts, without restatement to fair
values. The assets and liabilities of R&B Falcon are recorded at their
preliminary estimated fair values at the date of merger, with the excess of the
purchase price over the sum of these fair values recorded as goodwill. The
preliminary estimates of fair values are subject to change. Reclassifications
were made to historical amounts with no effect on net income to conform the pro
forma presentation.
The Transocean Sedco Forex unaudited condensed pro forma combined financial
statements reflect a total purchase price of $6.3 billion, which was calculated
using the estimated number of Transocean Sedco Forex ordinary shares to be
issued in the merger and an average closing price of Transocean Sedco Forex
ordinary shares for a period immediately before and after August 21, 2000, the
date the merger was announced, plus estimated direct merger costs and expenses
and the estimated fair value of R&B Falcon's stock options and warrants at the
pro forma balance sheet date, which will be assumed by Transocean Sedco Forex.
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<PAGE> 100
TRANSACTION-RELATED EXPENSES
Transocean Sedco Forex estimates that it will incur fees and expenses
totaling approximately $29 million in connection with the merger and it has
included these costs in calculating the purchase price. After the merger,
Transocean Sedco Forex will incur additional charges and expenses relating to
restructuring and integrating the operations of R&B Falcon and Transocean Sedco
Forex, the amount of which has not yet been determined. The pro forma
information has not been adjusted for these additional charges and expenses or
for other potential expense savings and operational efficiencies that may be
realized as a result of the merger.
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<PAGE> 101
TRANSOCEAN SEDCO FOREX
UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
TRANSOCEAN HISTORICAL ----------------------------
SEDCO FOREX R&B FALCON ADJUSTMENTS(1) COMBINED
----------- ---------- -------------- ---------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
Cash and Cash Equivalents.................. $ 169.3 $ 294.8 $ -- $ 464.1
Accounts Receivable........................ 287.5 192.0 -- 479.5
Other Current Assets....................... 115.1 168.9 (3.5)(1a) 280.5
-------- -------- -------- ---------
Total Current Assets............. 571.9 655.7 (3.5) 1,224.1
-------- -------- -------- ---------
Property and Equipment, net................ 4,539.7 3,748.4 485.9(1b) 8,774.0
Goodwill, net.............................. 1,051.5 86.7 5,121.6(1c) 6,259.8
Other Assets............................... 151.2 257.5 (126.9)(1d) 281.8
-------- -------- -------- ---------
Total Assets..................... $6,314.3 $4,748.3 $5,477.1 $16,539.7
======== ======== ======== =========
Current Liabilities........................ $ 393.6 $ 295.9 $ 90.4(1e) $ 779.9
Long-Term Obligations...................... 1,412.7 2,910.3 74.3(1f) 4,397.3
Deferred Taxes and Other Credits........... 528.3 59.8 200.7(1g) 788.8
Minority Interest.......................... 3.5 58.2 (49.5)(1h) 12.2
Redeemable Preferred Shares................ -- 302.0 12.9(1i) 314.9
Shareholders' Equity....................... 3,976.2 1,122.1 5,148.3(1j) 10,246.6
-------- -------- -------- ---------
Total Liabilities and
Shareholders' Equity........... $6,314.3 $4,748.3 $5,477.1 $16,539.7
======== ======== ======== =========
</TABLE>
See Notes to the Transocean Sedco Forex Unaudited Condensed Pro Forma
Combined Financial Statements.
94
<PAGE> 102
TRANSOCEAN SEDCO FOREX
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- ---------------------------
TRANSOCEAN R&B
SEDCO FOREX FALCON ADJUSTMENTS(1) COMBINED
----------- ------ -------------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating Revenues............................. $600.1 $419.4 $ -- $1,019.5
Costs and Expenses
Operating and Maintenance.................... 367.5 299.7 -- 667.2
Depreciation and Amortization................ 129.4 89.2 92.3(1k) 310.9
--------
General and Administrative................... 22.4 29.7 (1.3)(1l) 50.8
------ ------ ------ --------
Total Costs and Expenses............. 519.3 418.6 91.0 1,028.9
------ ------ ------ --------
Operating Income (Loss)........................ 80.8 0.8 (91.0) (9.4)
Other Income (Expense), net.................... 8.8 (93.8) 5.6(1m) (79.4)
------ ------ ------ --------
Income (Loss) From Continuing Operations Before
Taxes........................................ 89.6 (93.0) (85.4) (88.8)
Income Taxes................................... 20.8 (27.9) (6.3)(1n) (13.4)
Minority Interest.............................. 0.4 3.3 (2.8)(1o) 0.9
------ ------ ------ --------
Income (Loss) From Continuing Operations....... 68.4 (68.4) (76.3) (76.3)
Dividends and Accretion on Preferred Shares.... -- 26.2 (14.0)(1p) 12.2
------ ------ ------ --------
Income (Loss) From Continuing Operations
Applicable to Ordinary/Common Shareholders... $ 68.4 $(94.6) $(62.3) $ (88.5)
====== ====== ====== ========
Net Income (Loss) Per Share Applicable to
Ordinary/Common Shareholders
Basic........................................ $ 0.33 $(0.49) $ (0.29)
====== ====== ========
Diluted...................................... $ 0.32 $(0.49) $ (0.29)
====== ====== ========
Weighted Average Shares Outstanding
Basic........................................ 210.3 193.2 99.4(2a) 309.7
Diluted...................................... 211.4 193.2 98.3(2b) 309.7
</TABLE>
See Notes to the Transocean Sedco Forex Unaudited Condensed Pro Forma
Combined Financial Statements.
95
<PAGE> 103
TRANSOCEAN SEDCO FOREX
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRO FORMA HISTORICAL
-------------- ---------- PRO FORMA
TRANSOCEAN R&B ---------------------------
SEDCO FOREX(3) FALCON ADJUSTMENTS(1) COMBINED
-------------- ---------- -------------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Operating Revenues......................... $1,579.0 $ 918.8 $ -- $2,497.8
Costs and Expenses
Operating and Maintenance................ 925.2 643.5 -- 1,568.7
Depreciation and Amortization............ 301.9 158.0 187.5(1k) 647.4
General and Administrative............... 62.2 69.9 (1.0)(1l) 131.1
-------- ------- ------- --------
Total Costs and Expenses......... 1,289.3 871.4 186.5 2,347.2
-------- ------- ------- --------
Operating Income (Loss).................... 289.7 47.4 (186.5) 150.6
Other Income (Expense), net................ 11.7 (134.5) 3.8(1m) (119.0)
-------- ------- ------- --------
Income (Loss) From Continuing Operations
Before Taxes............................. 301.4 (87.1) (182.7) 31.6
Income Taxes............................... 63.0 (31.6) (14.7)(1n) 16.7
Minority Interest.......................... 0.5 12.3 (12.0)(1o) 0.8
-------- ------- ------- --------
Income (Loss) From Continuing Operations... 237.9 (67.8) (156.0) 14.1
Dividends and Accretion on Preferred
Shares................................... -- 33.7 (17.9)(1p) 15.8
-------- ------- ------- --------
Income (Loss) From Continuing Operations
Applicable to Ordinary/Common
Shareholders............................. $ 237.9 $(101.5) $(138.1) $ (1.7)
======== ======= ======= ========
Net Income (Loss) Per Share Applicable to
Ordinary/Common Shareholders
Basic.................................... $ 1.13 $ (0.53) $ (0.01)
======== ======= ========
Diluted.................................. $ 1.13 $ (0.53) $ (0.01)
======== ======= ========
Weighted Average Shares Outstanding
Basic.................................... 209.9 192.7 99.4(2a) 309.3
Diluted.................................. 210.5 192.7 98.8(2b) 309.3
</TABLE>
See Notes to the Transocean Sedco Forex Unaudited Condensed Pro Forma
Combined Financial Statements.
96
<PAGE> 104
TRANSOCEAN SEDCO FOREX
NOTES TO UNAUDITED CONDENSED PRO FORMA
COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS OR UNLESS OTHERWISE INDICATED)
(1) A summary of the pro forma adjustments to effect the merger is as
follows:
(a) Other Current Assets -- Represents the adjustment needed to record
R&B Falcon's other current assets at estimated fair value at the date of
the merger.
(b) Property and equipment, net -- Represents the adjustment needed to
record R&B Falcon's property and equipment at preliminary estimated fair
value at the date of the merger.
(c) Goodwill -- The merger will be accounted for under the purchase
method of accounting, with Transocean Sedco Forex treated as the acquiror.
The adjusted pro forma goodwill amount includes the excess purchase price
over the preliminary estimated fair values of R&B Falcon's assets and
liabilities (see Note 1(j)). The goodwill calculation assumes a purchase
price of $6.3 billion calculated using the estimated number of Transocean
Sedco Forex ordinary shares to be issued in the merger and a $57.2313 per
share average closing price of Transocean Sedco Forex ordinary shares for a
period immediately before and after August 21, 2000, the date the merger
was announced, plus estimated direct merger costs and expenses and the
estimated fair value of R&B Falcon's stock options and warrants, which will
be assumed by Transocean Sedco Forex. The calculated purchase price is for
accounting purposes only and is not indicative of the price at which
Transocean Sedco Forex ordinary shares will trade immediately before the
completion of the merger or the value of Transocean Sedco Forex ordinary
shares to be received by common shareholders of R&B Falcon in connection
with the merger. The recording of goodwill and the associated amortization
period of 40 years are supported by the nature of the offshore drilling
industry, long-lived drilling equipment and the long-standing relationships
with core customers.
(d) Other assets -- A reconciliation of the pro forma adjustment to
other assets is as follows:
<TABLE>
<S> <C>
Fair value adjustment of R&B Falcon's investments in
unconsolidated affiliates................................. $ 21.0
Fair value adjustment of R&B Falcon's deferred debt issue
costs..................................................... (47.6)
Eliminate Transocean Sedco Forex's investment in Arcade
Drilling.................................................. (76.3)
Fair value adjustment of R&B Falcon's other deferred
charges, net.............................................. (24.0)
-------
Total pro forma adjustment to other assets........ $(126.9)
=======
</TABLE>
(e) Current liabilities -- A reconciliation of the pro forma
adjustment to current liabilities is as follows:
<TABLE>
<S> <C>
Effect of change of control provisions in R&B Falcon's
benefit plans............................................. $41.2
Fees payable associated with the merger..................... 32.8
Costs directly related to the issuance of Transocean Sedco
Forex ordinary shares..................................... 16.4
-----
Total pro forma adjustment to current
liabilities..................................... $90.4
=====
</TABLE>
(f) Long-term obligations -- Represents the adjustment needed to
record R&B Falcon's fixed rate debt at estimated fair value at the date of
the merger.
(g) Deferred taxes and other credits -- Represents the adjustment to
deferred tax liabilities for the net effect of the pro forma adjustments
($202.0 million) and other fair value adjustments ($(1.3) million).
(h) Minority Interest -- Represents the elimination of R&B Falcon's
historical minority interest related to the portion of Arcade Drilling
owned by Transocean Sedco Forex.
97
<PAGE> 105
TRANSOCEAN SEDCO FOREX
NOTES TO UNAUDITED CONDENSED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(i) Redeemable preferred shares -- Represents the adjustment required
to record R&B Falcon's redeemable preferred shares at estimated fair value
at the date of the merger, net of the pro forma effect of the yet to be
completed redemption of $105 million face value ($87.2 million book value)
of redeemable preferred shares required as a condition to closing in the
merger agreement.
(j) Shareholders' equity -- Represents the difference between the
purchase price (see Note 1(c)) and the book value of the net assets of R&B
Falcon at the pro forma balance sheet date, less $16.4 million of estimated
costs to issue shares.
The purchase price will be allocated based upon the estimated fair values
of R&B Falcon assets and liabilities at the closing date of the merger. For
purposes of the Unaudited Condensed Pro Forma Combined Financial
Statements, the purchase price has been allocated as follows:
<TABLE>
<S> <C>
Historical net book value of R&B Falcon..................... $1,122.1
Fair value adjustment of property and equipment, net........ 485.9
Effect of change of control provisions in benefit plans..... (41.2)
Fair value of additional liabilities associated with the
merger.................................................... (32.8)
Fair value adjustment of defined benefit plans, net......... 3.5
Deferred income tax effect of pro forma adjustments, net.... (202.0)
Fair value adjustment of investment in unconsolidated
affiliates and minority interest, net..................... (5.8)
Fair value adjustment of fixed rate debt.................... (74.3)
Fair value adjustment of redeemable preferred shares........ (12.9)
Fair value adjustment of deferred debt issue costs.......... (47.6)
Fair value adjustment of other deferred charges, net........ (26.2)
Fair value adjustment of other current assets............... (3.5)
Adjustment to goodwill...................................... 5,121.6
--------
Total purchase price.............................. $6,286.8
========
</TABLE>
(k) Depreciation and amortization -- A reconciliation of the pro forma
adjustment to depreciation and amortization is as follows:
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
Additional depreciation resulting from the
adjustment to fair value of R&B Falcon's
property and equipment and conforming
depreciable lives and salvage values........ $28.0 $ 58.9
Amortization of goodwill resulting from the
merger over a 40-year estimated life. See
Note 1(c)................................... 64.3 128.6
----- ------
Total pro forma adjustment to
depreciation and amortization..... $92.3 $187.5
===== ======
</TABLE>
(l) General and administrative -- Represents adjustments resulting
from the fair value adjustments of R&B Falcon's defined benefit pension
plans and other post retirement benefit plans.
98
<PAGE> 106
TRANSOCEAN SEDCO FOREX
NOTES TO UNAUDITED CONDENSED PRO FORMA
COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(m) Other income (expense), net -- A reconciliation of the pro forma
adjustment to other income (expense), net is as follows:
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------- -----------------
<S> <C> <C>
Adjustment to interest expense resulting from the
fair value adjustment of R&B Falcon's fixed rate
debt............................................ $ 8.8 $ 16.3
Elimination of historical Transocean Sedco Forex
equity in earnings of Arcade Drilling........... (3.2) (12.5)
----- ------
Total pro forma adjustment to other
income (expense), net................. $ 5.6 $ 3.8
===== ======
</TABLE>
(n) Income taxes -- Represents the incremental benefit from U.S.
income taxes related to pro forma adjustments. The amortization of goodwill
is assumed to be nondeductible for tax purposes.
(o) Minority interest -- Represents the elimination of the portion of
R&B Falcon's minority interest relating to Arcade Drilling owned by
Transocean Sedco Forex.
(p) Dividends and accretion on preferred shares -- Represents the
adjustment required as a result of the adjustment to fair value of R&B
Falcon's redeemable preferred shares.
(2) Net income (loss) per share applicable to ordinary/common shareholders:
(a) Basic -- The adjustment to pro forma basic weighted average shares
outstanding represents the total estimated Transocean Sedco Forex shares
expected to be issued to R&B Falcon's common shareholders in the merger.
(b) Diluted -- Diluted pro forma net loss per share is the same as
basic pro forma net loss per share. Options and warrants to purchase
ordinary shares were not included in the computation of diluted pro forma
weighted average shares outstanding as the effect would have been
antidilutive due to the pro forma net loss for both periods.
(3) The pro forma Transocean Sedco Forex results for the year ended
December 31, 1999 assume the merger of Transocean Offshore and Sedco Forex was
completed on January 1, 1999. The pro forma results are incorporated by
reference in this joint proxy statement/prospectus from the Form 8-K filed by
Transocean Sedco Forex on September 22, 2000.
99
<PAGE> 107
DESCRIPTION OF SHARE CAPITAL OF TRANSOCEAN SEDCO FOREX
TRANSOCEAN SEDCO FOREX ORDINARY SHARES
Description of Authorized Shares of Transocean Sedco Forex
The following discussion is a summary of Transocean Sedco Forex's share
capital. This summary is not complete and is subject to the complete text of
Transocean Sedco Forex's memorandum of association and its articles of
association. For information on how to obtain a copy of Transocean Sedco Forex's
memorandum of association and articles of association, see "Where You Can Find
More Information." We encourage you to read those documents carefully.
Authorized Share Capital
Transocean Sedco Forex's authorized share capital is $8,000,000, divided
into 300,000,000 ordinary shares, par value $0.01, and 50,000,000 other shares,
par value $0.10, which shares may be designated and created as shares of any
other classes or series of shares with the respective rights and restrictions
determined by action of the board of directors. If the proposed resolution to
increase the ordinary share capital is approved, Transocean Sedco Forex's
authorized share capital will be increased to $13,000,000 and the number of
ordinary shares authorized will increase to 800,000,000. As of October 30, 2000,
ordinary shares and no other class or series of shares had been
issued.
Voting
The holders of Transocean Sedco Forex's ordinary shares are entitled to one
vote per share other than on the election of directors.
With respect to the election of directors, each holder of Transocean Sedco
Forex's ordinary shares entitled to vote at the election has the right to vote,
in person or by proxy, the number of shares held by him for as many persons as
there are directors to be elected and for whose election that holder has a right
to vote. The directors are divided into three classes, with only one class being
up for election each year. Directors are elected by a plurality of the votes
cast in the election. Cumulative voting for the election of directors is
prohibited by Transocean Sedco Forex's articles of association.
There are no limitations imposed by Cayman Islands law or Transocean Sedco
Forex's articles of association on the right of nonresident shareholders to hold
or vote their Transocean Sedco Forex ordinary shares.
The rights attached to any separate class or series of shares, unless
otherwise provided by the terms of the shares of that class or series, may be
varied only with the consent in writing of the holders of all of the issued
shares of that class or series or by a special resolution passed at a separate
general meeting of holders of the shares of that class or series. The necessary
quorum for that meeting is the presence of holders of at least a majority of the
shares of that class or series. Each holder of shares of the class or series
present, in person or by proxy, will have one vote for each share of the class
or series of which he is the holder. Outstanding shares will not be deemed to be
varied by the creation or issuance of additional shares that rank in any respect
prior to or equivalent with those shares.
Under Cayman Islands law, some matters, like altering the memorandum of
association or the articles of association, changing the name of a company,
voluntarily winding up a company or resolving to be registered by way of
continuation in a jurisdiction outside the Cayman Islands, require approval of
the shareholders by a special resolution. A special resolution is a resolution
(1) passed by the holders of two-thirds of the shares voted at a general meeting
or (2) approved in writing by all shareholders entitled to vote at a general
meeting of the company.
100
<PAGE> 108
Quorum for General Meetings
The presence of shareholders, in person or by proxy, holding at least a
majority of the issued shares generally entitled to vote at a meeting, is a
quorum for the transaction of most business. However, different quorums are
required in some cases to approve a change in Transocean Sedco Forex's articles
of association.
Shareholders present, in person or by proxy, holding at least 95% of the
issued shares entitled to vote at a meeting constitute the required quorum at a
general meeting to consider or adopt a special resolution to amend, vary,
suspend the operation of or cause any of the following provisions of the
articles of association to cease to apply:
- Section 17 -- which relates to the convening of general meetings;
- Section 19 -- which relates to proceedings and procedures at general
meetings;
- Section 21.1 -- which relates to the election and appointment of
directors;
- Section 26 -- which requires shareholders to approve the sale, lease or
exchange of all or substantially all of Transocean Sedco Forex's property
or assets; or
- Section 27 -- which generally requires shareholders to approve business
combinations with interested shareholders (with the exceptions described
below).
However, the presence of shareholders, in person or by proxy, holding at
least a majority of the issued shares entitled to vote at the meeting, is a
quorum if:
- a majority of the board of directors has, at or prior to the meeting,
recommended a vote in favor of the special resolution; and
- in the case of a special resolution to amend, vary, suspend the operation
of or disapply Section 27 of the articles of association, other than a
special resolution referred to below, the favorable board of directors'
recommendation is made at a time when a majority of the board of
directors then in office were directors prior to any person becoming an
interested shareholder during the previous three years or were
recommended for election or elected to succeed those directors by a
majority of those directors.
In addition, the presence of shareholders, in person or by proxy, holding
at least a majority of the issued shares entitled to vote at a meeting, is also
the required quorum to consider or adopt a special resolution to delete Section
27 of the articles of association if:
- the resolution will not be effective until 12 months after the passing of
the resolution; and
- the restriction in Section 27 of the articles of association will
otherwise continue to apply to any business combination between
Transocean Sedco Forex and any person who became an interested
shareholder on or before the passing of the resolution.
The shareholders present at a duly constituted general meeting may continue
to transact business until adjournment, despite the withdrawal of shareholders
that leaves less than a quorum.
Dividend Rights
Subject to any rights and restrictions of any other class or series of
shares, the board of directors may, from time to time, declare dividends on the
shares issued and authorize payment of the dividends out of Transocean Sedco
Forex's lawfully available funds. The board of directors may declare that any
dividend be paid wholly or partly by the distribution of shares of Transocean
Sedco Forex and/or specific assets.
101
<PAGE> 109
Rights Upon Liquidation
Upon the liquidation of Transocean Sedco Forex, after the full amounts
holders of any issued shares ranking senior to the ordinary shares as to
distribution on liquidation or winding-up are entitled to receive have been paid
or set aside for payment, the holders of Transocean Sedco Forex's ordinary
shares are entitled to receive, pro rata, any remaining assets of Transocean
Sedco Forex available for distribution to the holders of the ordinary shares.
The liquidator may deduct from the amount payable in respect of those ordinary
shares any liabilities the holder has to or with Transocean Sedco Forex. The
assets received by the holders of Transocean Sedco Forex ordinary shares in a
liquidation may consist in whole or in part of property. That property is not
required to be of the same kind for all shareholders.
No Sinking Fund
The Transocean Sedco Forex ordinary shares have no sinking fund provisions.
No Liability for Further Calls or Assessments
The Transocean Sedco Forex ordinary shares to be issued in the merger will
be duly and validly issued, fully paid and nonassessable.
No Preemptive Rights
Holders of Transocean Sedco Forex ordinary shares have no preemptive or
preferential right to purchase any securities of Transocean Sedco Forex.
Redemption and Conversion
The Transocean Sedco Forex ordinary shares are not convertible into shares
of any other class or series or subject to redemption by Transocean Sedco Forex
or the holder of the shares.
Repurchase
Under Transocean Sedco Forex's articles of association, Transocean Sedco
Forex may purchase any issued ordinary shares in the circumstances and on the
terms agreed by Transocean Sedco Forex and the holder of the shares, whether or
not Transocean Sedco Forex has made a similar offer to any of the other holders
of ordinary shares.
Restrictions on Transfer
Subject to the rules of any stock exchange on which the ordinary shares may
be listed, the board of directors may, in its absolute discretion and without
assigning any reason, decline to register any transfer of shares.
Other Classes or Series of Shares
The board of directors is authorized, without obtaining any vote or consent
of the holders of any class or series of shares unless expressly provided by the
terms of issue of that class or series, to provide from time to time for the
issuance of other classes or series of shares and to establish the
characteristics of each class or series, including the number of shares,
designations, relative voting rights, dividend rights, liquidation and other
rights, redemption, repurchase or exchange rights and any other preferences and
relative, participating, optional or other rights and limitations not
inconsistent with applicable law.
102
<PAGE> 110
Compulsory Acquisition of Shares Held by Minority Holders
An acquiring party is generally able to acquire compulsorily the ordinary
shares of minority holders in one of two ways:
- By a procedure under the Companies Law (2000 Revision) of the Cayman
Islands known as a "scheme of arrangement." A scheme of arrangement is
made by obtaining the consent of the Cayman Islands company, the consent
of a Cayman Islands court and approval of the arrangement by holders of
ordinary shares (1) representing a majority in number of the shareholders
present, in person or by proxy, at the meeting held to consider the
arrangement and (2) holding at least 75% of all the issued ordinary
shares other than those held by the acquiring party, if any. If a scheme
of arrangement receives all necessary consents, all holders of ordinary
shares of the company would be compelled to sell their shares under the
terms of the scheme of arrangement.
- By acquiring pursuant to a tender offer 90% of the ordinary shares not
already owned by the acquiring party. If the acquiring party has, within
four months after the making of an offer for all the ordinary shares not
owned by the acquiring party, obtained the approval of not less than 90%
of all the shares to which the offer relates, the acquiring party may, at
any time within two months after the end of that four-month period,
require any nontendering shareholder to transfer its shares on the same
terms as the original offer. In those circumstances, nontendering
shareholders will be compelled to sell their shares, unless within one
month from the date on which the notice to compulsorily acquire was given
to the nontendering shareholder, the nontendering shareholder is able to
convince a Cayman Islands court to order otherwise.
TRANSOCEAN SEDCO FOREX PREFERENCE SHARES
Transocean Sedco Forex is authorized to issue preference shares but
currently has no preference shares outstanding.
LIMITATION ON DIRECTOR'S LIABILITY
Cayman Islands law, which governs Transocean Sedco Forex, does not allow
the limitation of a director's liability for fraud, willful neglect or willful
default. Transocean Sedco Forex's articles of association provide that the
directors will have no personal liability to Transocean Sedco Forex or, if any,
its shareholders for monetary damages for breach of fiduciary duty as a
director, except for:
- breaching the duty of loyalty to the company or, if any, its
shareholders;
- failing to act in good faith;
- engaging in intentional misconduct or a known violation of the law; or
- obtaining an improper personal benefit from the company.
LIMITATION ON CHANGES IN CONTROL
Transocean Sedco Forex's articles of association have provisions that could
have an anti-takeover effect. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the board of
directors and in the policies formulated by the board of directors, and may have
the effect of discouraging actual or threatened changes of control.
The articles of association provide that Transocean Sedco Forex's board of
directors will be divided into three classes serving staggered three-year terms.
Directors can be removed from office only for cause, as defined in the articles
of association, by the affirmative vote of the holders of a majority of the
issued shares generally entitled to vote. The board of directors does not have
the power to remove directors. Vacancies on the board of directors may be filled
only by the remaining directors and not by the shareholders. Each of these
provisions can delay a shareholder from obtaining majority representation on the
board of directors.
103
<PAGE> 111
The articles of association provide that the board of directors will
consist of at least two and not more than twelve persons, the exact number to be
set from time to time by a majority of the whole board of directors.
Accordingly, the board of directors, and not the shareholders, has the authority
to determine the number of directors and could delay any shareholder from
obtaining majority representation on the board of directors by enlarging the
board of directors and filling the new vacancies with its own nominees until a
general meeting at which directors are to be appointed. If the proposed
resolution is approved, the maximum number of persons on the board of directors
will be increased to 13 persons.
The articles of association establish an advance notice procedure that must
be followed by shareholders if they wish to nominate candidates for election as
directors or propose any business at an annual general meeting of shareholders.
The articles of association provide generally that, if a shareholder desires to
nominate candidates for election as directors or propose any business at an
annual general meeting, that shareholder must give Transocean Sedco Forex notice
not less than 90 days prior to the anniversary of the originally scheduled date
of the immediately preceding annual general meeting. However, if the date of the
forthcoming annual general meeting is more than 30 days before or after the
anniversary date, the deadline is the close of business on the tenth day after
Transocean Sedco Forex publicly discloses the meeting date. In each case, the
notice must contain specified information concerning the shareholder submitting
the proposal.
Subject to the terms of any other class of shares in issue, any action
required or permitted to be taken by the holders of Transocean Sedco Forex's
ordinary shares must be taken at a duly called annual or special general meeting
of shareholders unless taken by written consent of all holders of ordinary
shares. Special general meetings may be called only by a majority of the entire
board of directors.
The board of directors is authorized, without obtaining any vote or consent
of the holders of any class or series of shares unless expressly provided by the
terms of issue of a class or series, to issue from time to time any other
classes or series of shares with the designations and relative powers,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or terms or conditions of redemption as it considers
fit. The board of directors could authorize the issuance of preference shares
with terms and conditions that could discourage a takeover or other transaction
that holders of some or a majority of the ordinary shares might believe to be in
their best interests or in which holders might receive a premium for their
shares over the then market price of the shares. No preference shares have been
established as of the date of this document.
The special quorum provisions contained in the articles of association
require the holders of 95% of all the voting shares to be present, in person or
by proxy, at a general meeting to consider or adopt a special resolution to
amend, vary, suspend the operation of or cease the application of the following
provisions of the articles of association, unless a majority of the board of
directors has recommended that the shareholders vote in favor of the special
resolution:
- Section 17 -- which relates to the convening of general meetings;
- Section 19 -- which relates to proceedings and procedures at general
meetings;
- Section 21.1 -- which relates to the election and appointment of
directors;
- Section 26 -- which generally requires shareholders to approve the sale,
lease or exchange of all or substantially all of Transocean Sedco Forex's
property or assets; or
- Section 27 -- which requires shareholders to approve business
combinations with interested shareholders (for a description of
exceptions to the quorum requirements to amend Section 27, see "-- Quorum
for General Meetings").
Transocean Sedco Forex's articles of association generally prohibit
"business combinations" between Transocean Sedco Forex and an "interested
shareholder." Specifically, "business combinations" between
104
<PAGE> 112
an interested shareholder and Transocean Sedco Forex are prohibited for a period
of three years after the time the interested shareholder acquired its shares,
unless:
- the business combination or the transaction resulting in the person
becoming an interested shareholder is approved by the board of directors
prior to the date the interested shareholder acquired shares;
- the interested shareholder acquired at least 85% of Transocean Sedco
Forex's shares in the transaction in which it became an interested
shareholder; or
- the business combination is approved by a majority of the board of
directors and by the affirmative vote of disinterested shareholders
holding at least two-thirds of the shares generally entitled to vote.
"Business combinations" is defined broadly to include mergers,
consolidations of majority owned subsidiaries, sales or other dispositions of
assets having an aggregate value in excess of 10% of the consolidated assets of
Transocean Sedco Forex and most transactions that would increase the interested
shareholder's proportionate share ownership in Transocean Sedco Forex.
"Interested shareholder" is defined as a person who, together with any
affiliates and/or associates of that person, beneficially owns, directly or
indirectly, 15% or more of the issued voting shares of Transocean Sedco Forex.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Transocean Sedco Forex ordinary shares
is the Bank of New York.
STOCK EXCHANGE LISTING
Transocean Sedco Forex ordinary shares are listed on the New York Stock
Exchange under the symbol "RIG."
105
<PAGE> 113
COMPARISON OF RIGHTS OF SHAREHOLDERS
As a result of the merger, holders of common shares of R&B Falcon will
become shareholders of Transocean Sedco Forex. The rights of R&B Falcon's
shareholders are governed by Delaware law and R&B Falcon's certificate of
incorporation and bylaws. The rights of Transocean Sedco Forex's shareholders
are governed by Cayman Islands law, including the Companies Law (2000 Revision),
and Transocean Sedco Forex's memorandum of association and articles of
association.
This section describes some of the material differences between the rights
of R&B Falcon's shareholders and the rights of Transocean Sedco Forex's
shareholders. However, this section does not describe all of those differences.
If you wish to review all of the differences or see the precise terms of these
provisions, you should read Transocean Sedco Forex's memorandum of association
and articles of association, R&B Falcon's certificate of incorporation and
bylaws and the applicable laws in their entirety. For information on obtaining
Transocean Sedco Forex's memorandum of association and articles of association
and R&B Falcon's certificate of incorporation and bylaws, see "Where You Can
Find More Information."
SHAREHOLDER APPROVAL OF BUSINESS COMBINATIONS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Generally, under Delaware law, unless the Cayman Islands law does not include a
certificate of incorporation provides for statutory merger procedure. Cayman Islands
the vote of a larger portion of the shares, law does, however, provide for a procedure
completion of a merger, consolidation, or known as a "scheme of arrangement." A scheme
the sale, lease or exchange of all or of arrangement is made by obtaining the
substantially all of a corporation's assets consent of the Cayman Islands company, the
or dissolution requires: consent of a Cayman Islands court and
approval by holders of ordinary shares (1)
- approval of the board of directors; and representing a majority in number of the
shareholders present, in person or by proxy,
- approval by the vote of the holders of a at the meeting held to consider the
majority of the outstanding shares or, if arrangement and (2) holding at least 75% of
the certificate of incorporation provides all the issued ordinary shares other than
for more or less than one vote per share, those held by the acquiring party, if any.
a majority of the votes of the outstanding If a scheme of arrangement receives all of
shares of a corporation entitled to vote the necessary consents, all holders of
on the matter. ordinary shares of a company would be
compelled to sell their shares under the
The R&B Falcon certificate of incorporation terms of the scheme of arrangement.
neither requires the affirmative vote of a Transocean's Cayman Islands counsel,
larger proportion than a majority of the Walkers, has advised that Cayman Islands
holders of R&B Falcon voting shares for a courts are likely to sanction such a scheme
merger or consolidation nor provides for of arrangement in the absence of bad faith,
more or less than one vote per share of the fraud or unequal treatment of shareholders.
outstanding shares. In addition, Cayman Islands companies may be
acquired by other corporations by the direct
Under the rules of the NYSE, the issuance of acquisition of the share capital of the
additional common shares of a listed company Cayman Islands company or by direct asset
involving directors, officers, substantial acquisition. Cayman Islands law provides
security holders or other affiliates of the that when an offer is made for ordinary
company, involving a change in control or shares of a Cayman Islands company and,
totaling 20% or more of the outstanding within four months of the offer, the holders
common shares of company requires the of not less than 90% of those shares accept,
approval of the holders of a majority of the the offeror may, for two months after that
shares voting on the transaction. Other four-month period, require the remaining
transactions do not require shareholder ordinary shareholders to transfer their
approval under the NYSE rules ordinary shares on the same terms as the
original offer. Transocean Sedco Forex's
articles of
</TABLE>
106
<PAGE> 114
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
association provide that, in order for it to
sell, lease or exchange all or substantially
all of its property or assets, other than
transactions with entities it controls, it
must first obtain:
- approval of the board of directors; and
- approval of the holders of at least a
majority of the issued shares generally
entitled to vote.
Transocean Sedco Forex is subject to the
same NYSE rules for some issuances of
additional shares as R&B Falcon.
</TABLE>
SPECIAL VOTE REQUIRED FOR COMBINATIONS WITH INTERESTED SHAREHOLDERS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Delaware law restricts "business Transocean Sedco Forex's articles of
combinations" -- including mergers, sales association include a provision that is
and leases of assets, issuances of based upon the Delaware law regarding
securities and similar transactions -- business combinations. This provision
between a Delaware corporation and an provides that, in general, it may not engage
"interested stockholder" who beneficially in a business combination with an interested
owns 15% or more of a corporation's voting shareholder for a period of three years
shares for a period of three years after the after the time of the transaction in which
interested stockholder acquired its 15% the person became an interested shareholder.
position, unless certain exceptions are The prohibition on business combinations
satisfied. Because R&B Falcon is subject to with interested shareholders does not apply
this law, an interested stockholder cannot in some cases, including if:
engage in business combinations with R&B
Falcon for a three-year period after he or - Transocean Sedco Forex's board of
she becomes an interested stockholder, directors, prior to the time of the
unless: transaction in which the person became an
interested shareholder, approves (1) the
- the business combination, or the business combination or (2) the
transaction that resulted in the transaction in which the shareholder
interested stockholder becoming such, was becomes an interested shareholder;
approved by the R&B Falcon board of
directors before the other party to the - as a result of the business combination,
business combination became an interested the interested shareholder owns at least 85%
stockholder; of the voting shares of Transocean Sedco
Forex issued at the time the transaction
- upon consummation of the transaction that commenced; or
resulted in the interested stockholder
becoming an interested stockholder, the - Transocean Sedco Forex's board of
interested stockholder owned at least 85% directors and the holders of at least
of the voting shares of R&B Falcon two-thirds of the outstanding voting
outstanding at the commencement of the shares not owned by the interested
transaction (excluding voting shares owned shareholder approve the business
by directors who are also officers or held combination on or after the time of the
in employee stock plans in which the transaction in which the person became an
employees do not have a right to determine interested shareholder. Transocean Sedco
confidentially whether to tender shares Forex's articles of association define an
held by the plan); or interested shareholder to include any
person who, together with that person's
- the business combination was approved by affiliates or associates, (1) owns 15% or
the R&B Falcon board of directors and more of Transocean Sedco Forex's issued
ratified by 66% of the voting shares that voting shares or (2) is an affiliate or
the interested stockholder did not own. associate of Transocean Sedco Forex and
owned 15% or more of the
</TABLE>
107
<PAGE> 115
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
The three-year prohibition does not apply to outstanding voting shares of Transocean
certain business combinations proposed by an Sedco Forex at any time within the
interested stockholder following the previous three years.
announcement or notification of certain
extraordinary transactions involving R&B
Falcon and a person who had not been an
interested stockholder during the previous
three years or who became an interested
stockholder with the approval of a majority
of R&B Falcon's directors. The term
"business combination" is defined generally
to include:
- mergers or consolidations between the
corporation and an interested stockholder;
- transactions with an interested
stockholder involving the assets or shares
of the corporation or its majority-owned
subsidiaries; and
- transactions that increase an interested
stockholder's percentage ownership of
shares.
</TABLE>
SHAREHOLDER RIGHTS PLANS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
In 1997, the board of directors of R&B Transocean Sedco Forex does not have a
Falcon adopted a shareholder rights plan shareholder rights plan.
providing for the distribution of one
preferred share purchase right for each R&B
Falcon common share outstanding. The rights
become exercisable only in the event, with
specified exceptions, that an acquiring
party accumulates 15% or more of the
outstanding R&B Falcon common shares or R&B
Falcon is acquired in a merger or other
business combination transaction or 50% or
more of its consolidated assets or earnings
power are sold after a party acquires 15% or
more of the outstanding R&B Falcon common
shares. The rights will not become
exercisable as a result of the merger
because of an amendment made to the rights
plan at the time of the approval of the
merger. The rights initially have an
exercise price of $150 per one hundredth of
a preferred share and expire on November 1,
2007.
</TABLE>
APPRAISAL RIGHTS AND COMPULSORY ACQUISITION
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Delaware law generally provides shareholders Neither Cayman Islands law nor Transocean
of a corporation involved in a merger the Sedco Forex's memorandum of association or
right to demand and receive payment of the articles of association specifically
fair value of their shares as determined by provides for appraisal rights. However, in
the Delaware Chancery Court. Appraisal connection with the compulsory transfer of
rights are not available, however, to shares to a 90% shareholder of a Cayman
holders of shares: Islands company as described under
"-- Shareholder Approval of
- listed on a national securities exchange;
</TABLE>
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<PAGE> 116
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Business Combinations," a minority
- designated as a national market system shareholder may apply to the court within
security on an interdealer quotation one month of receiving notice of the
system operated by the National compulsory transfer objecting to that
Association of Securities Dealers, Inc.; transfer. In these circumstances, the burden
or is on the minority shareholder to show that
the court should exercise its discretion to
- held of record by more than 2,000 prevent the compulsory transfer. Transocean
shareholders; Sedco Forex has been advised that the court
is unlikely to grant any relief to the
unless the holders are required to accept in minority shareholder in the absence of bad
the merger anything other than any faith, fraud, unequal treatment of
combination of: shareholders or collusion between the
offeror and the holders of the shares who
- shares or depositary receipts of the have accepted the offer as a means of
surviving corporation in the merger; unfairly forcing out minority shareholders.
- shares or depositary receipts of another
corporation that, at the effective date of
the merger, will be
(1) listed on a national securities
exchange,
(2) designated as a national market system
security on an interdealer quotation
system operated by the National
Association of Securities Dealers,
Inc., or
(3) held of record by more than 2,000
holders; or
- cash instead of fractional shares or
depositary receipts received.
</TABLE>
SHAREHOLDER CONSENT TO ACTION WITHOUT MEETING
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
The R&B Falcon certificate of incorporation Cayman Islands law and Transocean Sedco
prohibits action by written consent of Forex's articles of association provide that
shareholders. shareholders may take action requiring a
special resolution without a meeting only by
unanimous written consent.
</TABLE>
MEETINGS OF SHAREHOLDERS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
The R&B Falcon bylaws provide that annual Under Transocean Sedco Forex's articles of
meetings of shareholders are to be held on a association, a general meeting of
date and at a time fixed by the board of shareholders is required to be held at least
directors of R&B Falcon. The R&B Falcon annually. That meeting can be held anywhere.
certificate of incorporation and bylaws Under Transocean Sedco Forex's articles of
provide that a special meeting of association, an extraordinary general
shareholders may be called by the president meeting of Transocean may be called only by
of R&B Falcon, its board of directors, its a majority of the board of directors of
chairman, or its chief executive officer Transocean Sedco Forex.
</TABLE>
109
<PAGE> 117
DISTRIBUTIONS AND DIVIDENDS; REPURCHASES AND REDEMPTIONS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Under Delaware law, the board of directors, Transocean Sedco Forex is not required to
subject to any restrictions in the present proposed dividends to its
corporation's certificate of incorporation, shareholders for approval or adoption.
may declare and pay dividends out of:
Under Cayman Islands law, the board of
- surplus of the corporation, which is directors of Transocean Sedco Forex may
defined as net assets less statutory declare the payment of dividends to the
capital; or ordinary shareholders out of Transocean
Sedco Forex's:
- if no surplus exists, out of the net
profits of the corporation for the year in - profits; or
which the dividend is declared and/or the
preceding year. - "share premium account," which represents
the excess of the price paid to Transocean
If, however, the capital of the corporation Sedco Forex on issue of its shares over
has been diminished to an amount less than the par or "nominal" value of those
the aggregate amount of capital represented shares, which is similar to the U.S.
by the issued and outstanding shares of all concept of additional paid in capital.
classes having preference upon the
distribution of assets, the board may not However, no dividends may be paid if, after
declare and pay dividends out of the payment, Transocean Sedco Forex would not be
corporation's net profits until the able to pay its debts as they come due in
deficiency in the capital has been repaired. the ordinary course of business.
The R&B Falcon certificate of incorporation Under Cayman Islands law, shares of a Cayman
contains no provisions restricting dividends Islands company may be redeemed or
on R&B Falcon common shares, except that repurchased out of profits of the company,
holders of R&B Falcon preferred shares have out of the proceeds of a fresh issue of
preferences over the holders of R&B Falcon shares made for that purpose or out of
common shares with respect to dividends and capital, provided the company has the
distributions upon liquidation. ability to pay its debts as they come due in
the ordinary course of business.
Under Delaware law, any corporation may
purchase or redeem its own shares, except
that generally it may not purchase or redeem
these shares if the capital of the
corporation is impaired at the time or would
become impaired as a result of the
redemption.
</TABLE>
NUMBER OF DIRECTORS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
The R&B Falcon bylaws provide that the Under Transocean Sedco Forex's articles of
number of directors on its board will be not association, the minimum number of directors
less than one nor more than 15. The R&B is two and the maximum number is 12. The
Falcon board of directors has set the number current number of directors is 10. Pursuant
of directors at 12. to the merger agreement, shareholders of
Transocean Sedco Forex will vote at the
Transocean Sedco Forex extraordinary meeting
on a proposal to increase the maximum number
of directors to 13.
</TABLE>
110
<PAGE> 118
VACANCIES ON BOARD OF DIRECTORS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
The R&B Falcon certificate of incorporation Transocean Sedco Forex's articles of
provides that any vacancy may only be filled association provide that a vacancy or a
by a majority of the remaining board (even newly created directorship may only be
if less than a quorum). Any director elected filled by a majority of the remaining
to fill a vacancy or from an increase in the directors.
number of directors will serve the same
remaining term as that of his or her
predecessor or, if the director has no
predecessor, the class of directors to which
the director has been elected.
</TABLE>
REMOVAL OF DIRECTORS; STAGGERED TERM OF DIRECTORS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
The R&B Falcon certificate of incorporation Transocean Sedco Forex's articles of
provides for a classified board of association provide for a classified board
directors. Directors serve for terms of directors and also provide that directors
expiring on the third annual shareholders may only be removed by the holders of a
meeting following the shareholders meeting majority of the shares entitled to vote on
at which they are elected. Neither the the election of directors and only for
certificate of incorporation nor the bylaws "cause." Transocean Sedco Forex's articles
of R&B Falcon address the issue of removal of association define "cause" for this
of directors. Under Delaware law, unless purpose to mean:
otherwise provided in the certificate of
incorporation, members of a classified board - an action by a director involving willful
of directors may be removed only for cause malfeasance, which conduct has a material
and only by the affirmative vote of not less adverse effect on Transocean Sedco Forex;
than a majority of the outstanding shares or
entitled to vote thereon.
- conviction of a felony.
</TABLE>
CUMULATIVE VOTING
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Under Delaware law, each shareholder is Transocean Sedco Forex's articles of
entitled to one vote per share of stock, association expressly prohibit cumulative
unless the certificate of incorporation voting for the election of directors.
provides otherwise. In addition, under
Delaware law, cumulative voting in the
election of directors is only permitted if
expressly authorized in a corporation's
charter. R&B Falcon's certificate of
incorporation does not expressly authorize
cumulative voting.
</TABLE>
AMENDMENT OF GOVERNING DOCUMENTS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Except as described below, R&B Falcon can Under Cayman Islands law, Transocean Sedco
amend its certificate of incorporation by Forex's memorandum of association and
vote of a majority of shareholders. The R&B articles of association may only be amended
Falcon bylaws may be altered or repealed, by a special resolution of its shareholders.
and new bylaws made, by its board. Under Transocean Sedco Forex's board of directors
Delaware law, the power to amend bylaws may not effect amendments to Transocean
remains with the shareholders even where Sedco Forex's articles of association on its
such power has also been conferred upon the own. Some amendments to Transocean Sedco
directors. The R&B Falcon certificate of Forex's articles of association require as a
incorporation and bylaws provide that the quorum the presence of shareholders
</TABLE>
111
<PAGE> 119
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
shareholders may not amend the bylaws except holding at least 95% of the shares entitled
by a 66% vote. to vote at that meeting. See "Description of
Capital Stock of Transocean Sedco Forex."
The affirmative vote of 66% of the total
voting power of all outstanding R&B Falcon
common shares entitled to vote for the
election of directors is required to amend
the article of the certificate of
incorporation that concerns supermajority
voting requirements, the number and
classification of and filling of vacancies
on the R&B Falcon board, the prohibition
against action by written consent of
shareholders in lieu of a meeting, the
limitation of liability of directors and the
calling of special meetings of shareholders.
</TABLE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Under its bylaws, R&B Falcon must indemnify Cayman Islands law does not limit the extent
any person from all expense, liability or to which a company may indemnify its
loss reasonably incurred or suffered by him directors, officers, employees and agents
or her in connection with any action brought except to the extent that such provision may
by any party (other than an action by or in be held by the Cayman Islands courts to be
the right of R&B Falcon) by reason of such contrary to public policy. For instance, a
person's service as a director or officer of provision purporting to provide
R&B Falcon if he or she acted in good faith indemnification against the consequences of
and in a manner that he or she reasonably committing a crime may be deemed contrary to
believed to be in or not opposed to the best public policy. In addition, an officer or
interests of R&B Falcon and, with respect to director may not be indemnified for his own
criminal actions, that he or she had no fraud, willful neglect or willful default.
reasonable cause to believe that conduct Transocean Sedco Forex's articles of
related to the action was unlawful. R&B association make indemnification of
Falcon is similarly required to indemnify directors and officers and advancement of
any person from all expense reasonably expenses to defend claims against directors
incurred or suffered by him or her in and officers mandatory on the part of
connection with any action brought by or in Transocean Sedco Forex to the fullest extent
the right of R&B Falcon by reason of his or allowed by law.
her service as a director or officer of R&B
Falcon if he or she acted in good faith and
in a manner that he or she reasonably
believed to be not opposed to the best
interests of R&B Falcon and, with respect to
criminal actions, that he or she had no
reasonable cause to believe that conduct
related to the action was unlawful, although
such indemnification is not permitted if the
director or officer is adjudged liable to
the corporation (unless the court otherwise
determines). Under its bylaws, R&B Falcon
must advance all reasonable expenses
incurred by or on behalf of any person
entitled to indemnification by R&B Falcon.
</TABLE>
112
<PAGE> 120
LIMITED LIABILITY OF DIRECTORS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
R&B Falcon's certificate of incorporation Cayman Islands law will not allow the
provides that directors are not personally limitation of a director's liability for his
liable to R&B Falcon or its shareholders for own fraud, willful neglect or willful
monetary damages for breach of fiduciary default. Transocean Sedco Forex's articles
duty as a director, except for liability: of association provide that its directors
have no personal liability to Transocean
- for any breach of the directors' duty of Sedco Forex or, if any, its shareholders for
loyalty to R&B Falcon or its shareholders; monetary damages for breach of fiduciary
duty as a director, except for:
- for acts or omissions made not in good
faith or that involve intentional - breaching the duty of loyalty to
misconduct or a knowing violation of law; Transocean Sedco Forex or, if any, its
shareholders;
- under Section 174 of the Delaware General
Corporation Law which relates to unlawful - failing to act in good faith;
dividends and share repurchases; or
- engaging in intentional misconduct or a
- for any transaction from which the known violation of law; or
director derived an improper personal
benefit. - obtaining an improper personal benefit
from Transocean Sedco Forex.
</TABLE>
ADVANCE NOTIFICATION REQUIREMENTS FOR PROPOSALS OF SHAREHOLDERS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Under the R&B Falcon bylaws, any shareholder Transocean Sedco Forex's articles of
may bring proper business before an annual association require shareholders wishing to
meeting, including nominations to the board nominate directors or propose business for a
of directors, if the shareholder gives shareholders' meeting to give advance notice
timely notice, in writing and in proper as described under "Future Shareholder
form, of the shareholder's intention to Proposals."
bring the business before the meeting. To be
timely, a shareholder's notice must be
received at R&B Falcon's principal executive
offices between 60 and 90 days in advance of
the annual meeting. In addition, SEC rules
allow resolutions to be included in
management's proxy statement for annual
meetings of shareholders if, among other
conditions required to be met, advance
notice is given to the corporation.
</TABLE>
LIMITATION ON OWNERSHIP BY NON-U.S. CITIZENS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Under R&B Falcon's certificate of Transocean Sedco Forex's articles of
incorporation, there are restrictions on the association and memorandum of association do
ownership of more than 24% of the not include restrictions on the ownership of
outstanding common shares of R&B Falcon, or shares by non- U.S. citizens.
any series of shares, by non-U.S. citizens.
These restrictions will be removed if the
merger is approved by R&B Falcon's common
shareholders.
</TABLE>
113
<PAGE> 121
SHAREHOLDERS' SUITS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Under Delaware law, a shareholder may bring The Cayman Islands courts have recognized
a derivative action on behalf of the derivative suits by shareholders; however,
corporation to enforce the rights of the the consideration of those suits has been
corporation. An individual also may commence limited. In this regard, the Cayman Islands
a class action suit on behalf of himself or courts ordinarily would be expected to
herself and other similarly situated follow English precedent, which would permit
shareholders where the requirements for a minority shareholder to commence an action
maintaining a class action under Delaware against or a derivative action in the name
law have been met. A person may institute of the company only:
and maintain such a suit only if such person
was a shareholder at the time of the - where the act complained of is alleged to
transaction which is the subject of the suit be beyond the corporate power of the company
or his or her shares thereafter devolved or illegal;
upon him or her by operation of law.
Additionally, under Delaware case law, the - where the act complained of is alleged to
plaintiff generally must be a shareholder constitute a fraud against the company;
not only at the time of the transaction
which is the subject of the suit, but also - where the act requires approval by a
through the duration of the derivative suit. greater percentage of the company's
Delaware law also requires that the shareholders than actually approved it; or
derivative plaintiff make a demand on the
directors of the corporation to assert the - where there is an absolute necessity to
corporate claim before the suit may be waive the general rule that a shareholder
prosecuted by the derivative plaintiff, may not bring such an action in order that
unless such demand would be futile. there not be a denial of justice or a
violation of the company's memorandum of
association.
</TABLE>
INSPECTION OF BOOKS AND RECORDS
<TABLE>
<CAPTION>
R&B FALCON TRANSOCEAN SEDCO FOREX
<S> <C>
Delaware law allows any shareholder the Cayman Islands law does not expressly
right: provide shareholders of a Cayman Islands
company with any general rights to inspect
- to inspect the corporation's stock ledger, or obtain copies of the list of shareholders
a list of its shareholders, and its other or corporate records of a company, other
books and records; and than the register of mortgages and charges.
However, Transocean Sedco Forex's articles
- to make copies or extracts of those of association provide that any shareholder
materials during normal business hours; may inspect its books and records for a
proper purpose. Transocean's board of
provided that the shareholder makes a directors may establish procedures or
written request under oath stating the conditions regarding these inspection rights
purpose of his inspection, and the for the following purposes:
inspection is for a purpose reasonably
related to the person's interest as a - protecting the interests of Transocean
shareholder. Sedco Forex;
- protecting the confidentiality of the
information contained in those books and
records;
- the convenience of Transocean Sedco Forex;
or
- protecting any other interest of
Transocean Sedco Forex that the board of
directors deems proper.
</TABLE>
114
<PAGE> 122
TRANSOCEAN SEDCO FOREX'S PROPOSAL
TO AMEND ITS MEMORANDUM OF ASSOCIATION
AND ARTICLES OF ASSOCIATION
GENERAL
The board of directors of Transocean Sedco Forex has unanimously adopted a
resolution to submit to a vote of its shareholders a proposal to amend its
memorandum of association and articles of association to increase the maximum
number of directors constituting Transocean Sedco Forex's board of directors to
13 and make updating and other clarifying changes described below.
PURPOSES AND EFFECTS OF INCREASING THE NUMBER OF DIRECTORS
There are currently 10 directors serving on the Transocean Sedco Forex
board of directors. The maximum number of directors under Transocean Sedco
Forex's charter documents is 12. If this proposal is approved by Transocean
Sedco Forex's shareholders and the merger is completed, the maximum number of
directors constituting the board of directors of Transocean Sedco Forex would
increase from 12 to 13. The merger agreement provides that R&B Falcon, in
consultation with Transocean Sedco Forex, will designate two persons to become
new members of the board of directors of Transocean Sedco Forex after completion
of the merger. The merger agreement also provides that if this proposal is
approved, R&B Falcon will designate one additional new member of the Transocean
Sedco Forex board of directors. The purpose of the proposed increase in the
maximum number of directors is to permit the election of this additional person
designated by R&B Falcon. If the proposal is not approved, then R&B Falcon will
only designate two persons to be elected to fill two vacancies on the Transocean
Sedco Forex board of directors. These designees would be allocated by Transocean
Sedco Forex as nearly as possible on a proportionate basis to each of the three
classes into which its board of directors is divided in accordance with its
charter documents.
As of the date of this joint proxy statement/prospectus, the board of
directors of R&B Falcon has not yet designated the persons to serve as
Transocean Sedco Forex's directors; however, such designations will occur no
later than promptly after the Transocean Sedco Forex shareholders' meeting.
PURPOSES AND EFFECTS OF UPDATING AND OTHER CLARIFYING CHANGES
The purpose of the proposed amendment to the memorandum of association and
articles of association is to update references to Cayman Islands statutes,
reflect the change of name of Transocean Sedco Forex's registered office,
reflect increases in share capital and the size of the board of directors, and
clarify that Transocean Sedco Forex's authorized share capital may be amended by
an ordinary resolution and that the maximum number of directors does not limit
the right of holders of any class or series of shares, other than the ordinary
shares, to elect directors.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
As a part of the negotiation of the merger agreement, R&B Falcon requested
the ability to designate directors to the Transocean Sedco Forex board of
directors. Although Transocean Sedco Forex was willing to agree to three
additional directors designated by R&B Falcon, it was restricted insofar as only
two additional directors may be added before reaching the maximum limit of 12
directors under the Transocean Sedco Forex charter documents. In the merger
agreement, however, Transocean Sedco Forex agreed to propose and recommend to
its shareholders that these charter documents be amended so that a third R&B
Falcon designee could be appointed to the Transocean Sedco Forex board of
directors.
Approval of this proposal requires the affirmative vote of the holders of
at least two-thirds of the ordinary shares present in person or by proxy at the
Transocean Sedco Forex extraordinary general meeting and entitled to vote on
this matter. Approval of the proposal is not a condition to the merger, but if
approved, it will be implemented only if the merger is completed.
FOR THE REASONS DESCRIBED ABOVE, TRANSOCEAN SEDCO FOREX'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO AMEND ITS MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION.
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TRANSOCEAN SEDCO FOREX'S PROPOSAL TO INCREASE ITS AUTHORIZED CAPITAL
GENERAL
The board of directors of Transocean Sedco Forex has unanimously adopted a
resolution to submit to a vote of the shareholders a proposal to increase
Transocean Sedco Forex's authorized ordinary share capital to $8,000,000 and the
number of authorized ordinary shares to 800,000,000.
The terms of the additional ordinary shares will be identical to those of
the currently outstanding ordinary shares. However, because shareholders have no
preemptive rights to purchase any additional ordinary shares that may be issued,
the issuance of additional ordinary shares will reduce the percentage interest
of current shareholders in the total outstanding ordinary shares. Approval of
this proposal will not affect the number of other shares authorized. The
relative rights and limitations of the ordinary shares and other shares
authorized would remain unchanged under this proposal.
PURPOSES AND EFFECTS OF INCREASING THE NUMBER OF AUTHORIZED ORDINARY SHARES
If this proposal is approved by Transocean Sedco Forex's shareholders and
the merger is completed, the number of ordinary shares that Transocean Sedco
Forex is authorized to issue would increase from 300,000,000 to 800,000,000. The
additional 500,000,000 shares, if and when issued, would have the same rights
and privileges as the currently issued Transocean Sedco Forex ordinary shares.
The primary purpose of the proposed increase in the authorized number of
ordinary shares is to ensure that enough shares are available to complete the
merger. Currently, Transocean Sedco Forex has only about 80 million authorized
ordinary shares available for issuance and it expects that it will need to issue
or reserve for issuance about 110 million new ordinary shares in connection with
the merger. In addition, Transocean Sedco Forex's board of directors recommends
the proposed increase in the authorized number of ordinary shares over and above
that required to complete the merger to ensure an adequate supply of authorized
and unissued ordinary shares for one or more of the following purposes:
- to effect stock splits, stock dividends or bonus issues of shares;
- to provide sufficient ordinary shares to cover obligations under
Transocean Sedco Forex's Long-Term Incentive Plan and Employee Stock
Purchase Plan and R&B Falcon's stock plans that are being assumed in
connection with the merger; and
- to raise additional capital for ongoing operations and other corporate
purposes.
Except as described in this joint proxy statement/prospectus, there are
currently no plans or arrangements relating to the issuance of any of the
additional ordinary shares proposed to be authorized. These shares would be
available for issuance without further action by shareholders, except as
required by New York Stock Exchange rules.
The increase in the number of authorized ordinary shares has not been
proposed for any anti-takeover purpose and the board of directors and members of
management of Transocean Sedco Forex have no knowledge of any current effort to
obtain control of Transocean Sedco Forex or to accumulate large amounts of its
ordinary shares. However, the availability of additional ordinary shares could
make any attempt to gain control of Transocean Sedco Forex or of the board of
directors more difficult. Authorized but unissued ordinary shares could be
issued in an effort to dilute the share ownership and voting power of any person
or entity desiring to acquire control of Transocean Sedco Forex. Issuance of
ordinary shares may have the effect of discouraging or lessening the likelihood
of the change of control. These shares could also be issued to other persons or
entities who support the board of directors in opposing a takeover attempt that
the board considers not to be in the best interests of Transocean Sedco Forex
and its shareholders.
In evaluating this proposal, shareholders should consider the effect of the
other provisions of Transocean Sedco Forex's articles of association that may
have anti-takeover consequences, which are
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described in this joint proxy statement/prospectus under "Description of Capital
Stock of Transocean Sedco Forex -- Limitation on Changes in Control."
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
Approval of this proposal requires the affirmative vote of holders of at
least a majority of the ordinary shares present in person or by proxy at the
extraordinary general meeting and entitled to vote on this matter. Approval of
the proposal is a condition to the merger because Transocean Sedco Forex does
not have enough authorized but unissued ordinary shares to effect the merger. If
approved, this proposal will be implemented only if the merger is completed.
FOR THE REASONS DESCRIBED ABOVE, TRANSOCEAN SEDCO FOREX'S BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO INCREASE TRANSOCEAN SEDCO FOREX'S AUTHORIZED ORDINARY SHARE CAPITAL TO
$8,000,000, CONSISTING OF 800,000,000 ORDINARY SHARES, PAR VALUE $0.01 PER
SHARE.
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TRANSOCEAN SEDCO FOREX'S PROPOSAL
TO AMEND ITS LONG-TERM INCENTIVE PLAN
DESCRIPTION OF THE PROPOSAL
The board of directors of Transocean Sedco Forex has unanimously adopted a
resolution to submit to a vote of its shareholders a proposal to amend
Transocean Sedco Forex's Long-Term Incentive Plan:
- to increase the number of ordinary shares reserved for issuance under the
incentive plan from 13,300,000 to 19,500,000, such increase of 6,200,000
shares to consist of 6,000,000 shares to be reserved for issuance to
employees and 200,000 shares to be reserved for issuance to outside
directors; and
- to increase the aggregate number of shares subject to awards of
freestanding share appreciation rights to employees from 250,000 to
300,000.
As of this date, under the incentive plan there remain only about 6,805,948
shares available for issuance in connection with option grants. Because the
merger will substantially increase the number of Transocean Sedco Forex
employees, the board believes that the proposed increase in shares reserved for
issuance is necessary to maintain adequate flexibility to use the incentive plan
to attract and retain qualified employees and directors.
PRINCIPAL PROVISIONS OF THE LONG-TERM INCENTIVE PLAN
The following summary of the incentive plan is qualified by reference to
the full text of the current plan, which, as amended and restated effective as
of January 1, 2000, is attached as Annex G to this joint proxy
statement/prospectus.
The incentive plan is administered by the executive compensation committee
of the board of directors, all of the members of which are "non-employee
directors" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 and "outside directors" within the meaning of Section 162(m) of the U.S.
Internal Revenue Code. It is intended that the grant of awards under the amended
incentive plan, after approval by shareholders, will satisfy the requirements of
Section 162(m) of the code, as applicable to limitations on deductions of
compensation expenses in excess of $1 million for certain executive officers.
The committee designates the employees of Transocean Sedco Forex and its
subsidiaries and affiliated companies to be granted awards under the incentive
plan and the type and amount of awards to be granted. The committee has
authority to interpret and amend the incentive plan, adopt administrative
regulations for the operation of the incentive plan and determine and amend the
terms of awards to employees under the incentive plan. However, the committee
has no authority to vary the amount or terms of awards to outside directors from
those set forth in the incentive plan.
Under the incentive plan, options to purchase ordinary shares, share
appreciation rights in tandem with options, freestanding share appreciation
rights, restricted shares and cash performance awards may be granted to
employees at the discretion of the committee. The committee may provide for a
supplemental cash payment upon the exercise of an option or share appreciation
right to cover the employee's tax burden associated with the exercise. In
addition, the incentive plan provides for automatic awards to outside directors
of options to purchase 4,000 ordinary shares or, in the case of outside
directors who reside in Norway, share appreciation rights with respect to 4,000
ordinary shares. An automatic award to an outside director is granted at the
time the individual becomes such a director, as well as at each annual meeting
of Transocean Sedco Forex's shareholders at which the individual remains or is
reelected as a director.
The aggregate number of ordinary shares that may be issued under the
incentive plan may not exceed 12,900,000 shares with respect to awards to
employees, reduced by the number of shares which have previously been issued
with respect to awards to employees. Cash tax-offset supplemental payments will
not count against these limits. Lapsed, forfeited or canceled awards, including
options canceled upon the
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exercise of tandem share appreciation rights, will not count against these
limits and can be regranted under the incentive plan. If the exercise price of
an option is paid in ordinary shares or if ordinary shares are withheld from
payment of an award to satisfy tax obligations with respect to the award, those
shares will also not count against the above limits. No employee may be granted
options or restricted shares with respect to more than 600,000 ordinary shares
in any fiscal year. The aggregate number of ordinary shares subject to awards to
outside directors may not exceed 400,000. The aggregate number of ordinary
shares subject to awards of freestanding share appreciation rights to employees
may not exceed 250,000. The shares issued under the incentive plan may be
ordinary shares held in treasury or authorized but unissued ordinary shares.
Transocean Sedco Forex's officers are eligible to participate in the
incentive plan, as are employees of Transocean Sedco Forex and its subsidiaries,
and of partnerships or joint ventures in which Transocean Sedco Forex and its
subsidiaries have a significant ownership interest, as determined by the
committee. Outside directors of Transocean Sedco Forex are automatically granted
options or, for outside directors residing in Norway, share appreciation rights
that have the terms specified in the incentive plan. Outside directors are not
eligible for any other awards under the incentive plan. Approximately 311
current employees and nine current outside directors have received awards under
the incentive plan. All of Transocean Sedco Forex's employees are eligible to
receive awards under the incentive plan at present.
The committee determines, in connection with each option awarded to an
employee, the exercise price, whether that price is payable in cash, ordinary
shares or by cashless exercise, the terms and conditions of exercise, whether
the option will qualify as an incentive stock option under the U.S. Internal
Revenue Code, or a non-qualified option, restrictions on transfer of the option
and other provisions not inconsistent with the incentive plan. The committee is
also authorized to grant share appreciation rights to incentive plan
participants, either as freestanding awards or in tandem with an option. Every
share appreciation right entitles the participant, upon exercise of the share
appreciation right, to receive in cash or ordinary shares a value equal to the
excess of the market value of a specified number of ordinary shares at the time
of exercise, over the exercise price established by the committee. The incentive
plan requires that the exercise price of options and share appreciation rights
be at least equal to fair market value on the date of grant, except with respect
to options granted within 90 days of the closing of Transocean Sedco Forex's
initial public offering in June 1993. The term of options and share appreciation
rights under the incentive plan may not exceed 10 years, except that the
committee may extend the term for up to one year following the death of the
participant.
The committee is authorized to grant employees awards of restricted shares.
The committee determines the terms, conditions, restrictions and contingencies
applicable to awards of restricted shares. Awards of restricted shares may be
designated as "qualified performance-based compensation" under Section 162(m) of
the U.S. Internal Revenue Code. The performance goals will be based on the same
criteria as the cash performance awards discussed below.
The committee may also provide for cash performance awards to employees
based on the achievement of one or more objective performance goals. Cash
performance awards may be designated as "qualified performance-based
compensation" under Section 162(m) of the U.S. Internal Revenue Code. If so
designated, the cash performance awards will be contingent upon the performance
of Transocean Sedco Forex during the performance period, as measured by targets
established by the committee, based on any one or more of:
- sales;
- operating profits;
- operating profits before interest expense and taxes;
- net earnings;
- earnings per share;
- return on equity;
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- return on assets;
- return on invested capital;
- total shareholder return;
- cash flow;
- debt-to-equity ratio;
- market share;
- stock price;
- economic value added; and
- market value added.
Such performance measures may be applied to Transocean Sedco Forex on a
consolidated basis and to a business unit, as an absolute measure or as a
measure relative to a peer group of companies. The committee will establish the
performance objectives for an award in writing no later than 90 days after
beginning of the fiscal year to which the award relates.
The number and kind of shares covered by the incentive plan and by
outstanding awards under the incentive plan and the exercise price of
outstanding awards are subject to adjustment in the event of any:
- reorganization;
- recapitalization;
- stock dividend;
- stock split;
- merger;
- consolidation;
- extraordinary cash dividend;
- split-up;
- spin-off;
- combination; or
- exchange of shares.
Upon the occurrence of a change of control, following the grant of an
award, (1) all outstanding restricted shares will immediately vest, (2) all
options and share appreciation rights held by outside directors will become
immediately exercisable and will remain exercisable for the remainder of their
term, and (3) all outstanding options, tandem share appreciation rights and
freestanding share appreciation rights held by then-current employees will
become immediately exercisable and will remain exercisable for the remainder of
their term.
The incentive plan is not limited in duration by its terms. However,
pursuant to Section 422(b)(2) of the U.S. Internal Revenue Code, no option that
is intended to constitute an incentive stock option may be granted under the
incentive plan after May 1, 2003. The Transocean Sedco Forex board of directors
may at any time amend, suspend or terminate the incentive plan, but in doing so
cannot adversely affect any outstanding awards without the grantee's written
consent. In addition, the board of directors may not increase the number of
shares reserved for issuance under the incentive plan or change the minimum
option or share appreciation right price without shareholder approval.
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The amount and type of awards to be granted in the future under the
incentive plan to the named officers, to all executive officers as a group and
to all other employees are not currently determinable.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the general rules of present U.S. federal
income tax law relating to the tax treatment of incentive stock options,
non-qualified stock options, share appreciation rights and restricted share
awards issued under the incentive plan. The discussion is general in nature and
does not take into account a number of considerations that may apply based on
the circumstances of a particular participant under the incentive plan,
including the possibility that a participant may not be subject to U.S. federal
income taxation. When the term "Transocean Sedco Forex" is used in this section,
the term is understood to mean the U.S. subsidiary of Transocean Sedco Forex.
Options
Some of the options issuable under the incentive plan may constitute
"incentive stock options" within the meaning of Section 422 of the U.S. Internal
Revenue Code, while other options granted under the incentive plan will be
non-qualified stock options. The U.S. Internal Revenue Code provides for tax
treatment of stock options qualifying as incentive stock options that may be
more favorable to employees than the tax treatment accorded non-qualified stock
options. Generally, upon the exercise of an incentive stock option, the optionee
will recognize no income for U.S. federal income tax purposes. However, the
difference between the exercise price of the incentive stock option and the fair
market value of the shares at the time of exercise is an item of tax adjustment
that may require payment of an alternative minimum tax. On the sale of shares
acquired by exercise of an incentive stock option, assuming that the sale does
not occur within two years of the date of grant of the option or within one year
from the date of exercise, referred to as a disqualifying disposition, any gain
will be taxed to the optionee as the appropriate type of capital gain, depending
on the actual holding period from the exercise date. In contrast, upon the
exercise of a non-qualified option, the optionee recognizes taxable ordinary
income, subject to withholding, in an amount equal to the difference between the
fair market value of the shares on the date of exercise and the exercise price.
Upon any sale of such shares by the optionee, any difference between the sale
price and the fair market value of the shares on the date of exercise of the
non-qualified option will be treated generally as capital gain or loss. No
deduction is available to Transocean Sedco Forex upon the grant or exercise of
an incentive stock option, although a deduction may be available if the employee
sells the shares acquired upon exercise before the applicable holding period
expires, whereas upon exercise of a non-qualified stock option, Transocean Sedco
Forex is entitled to a deduction in an amount equal to the income recognized by
the employee. Except in the case of the death or disability of an optionee, an
optionee has three months after termination of employment in which to exercise
an incentive stock option and retain favorable tax treatment at exercise. An
option exercised more than three months after an optionee's termination of
employment other than upon death or disability of an optionee cannot qualify for
the tax treatment accorded incentive stock options. Such option would be treated
as a non-qualified stock option instead.
Share Appreciation Rights
The amount of any cash or the fair market value of any share received by
the holder upon the exercise of share appreciation rights under the incentive
plan will be subject to ordinary income tax in the year of receipt, and
Transocean Sedco Forex will be entitled to a deduction for that amount.
Restricted Share Awards
Generally, a grant of ordinary shares under the incentive plan, which
shares are subject to vesting and transfer restrictions, will not result in
taxable income to the recipient for U.S. federal income tax purposes or a tax
deduction to Transocean Sedco Forex in the year of the grant. Generally, the
recipient will be taxed on the value of the ordinary shares as ordinary income
in the years in which the restrictions on the shares lapse. The value of the
ordinary shares will be the fair market value of the shares on the dates the
restrictions terminate, less any consideration paid for the ordinary shares.
Under Section 83(b) of the
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U.S. Internal Revenue Code, any recipient may elect to treat the fair market
value of the ordinary shares on the date of a grant as compensation income in
the year of the grant, provided the recipient makes the election pursuant to
Section 83(b) of the code within 30 days after the date of the grant. In any
case, Transocean Sedco Forex will receive a deduction for U.S. federal income
tax purposes equal to the amount of compensation included in the recipient's
income in the year in which that amount is so included.
Cash Performance Awards
Payments of cash performance awards will be ordinary income to the
recipient in the year paid, and Transocean Sedco Forex will be entitled to a
deduction for that amount in the year in which it is so included.
Other
In general, a U.S. federal income tax deduction is allowed to Transocean
Sedco Forex in an amount equal to the ordinary income recognized by a
participant with respect to awards under the incentive plan, provided that the
amount constitutes an ordinary and necessary business expense of Transocean
Sedco Forex. However, Transocean Sedco Forex will not be entitled to a deduction
to the extent compensation in excess of $1 million is paid to an executive
officer named in Transocean Sedco Forex's proxy statement who was employed by
Transocean Sedco Forex at year-end, unless the compensation qualifies as
"performance based" under Section 162(m) of the U.S. Internal Revenue Code or
other exceptions apply. In addition, Transocean Sedco Forex will not be entitled
to a deduction with respect to payments to employees that are contingent upon a
change of control if those payments are deemed to constitute "excess parachute
payments" under Section 280G of the U.S. Internal Revenue Code and do not
qualify as reasonable compensation pursuant to that section; such payments will
subject the recipients to a 20% excise tax.
A participant's tax basis in shares acquired upon exercise of an option
under the incentive plan is equal to the sum of the price paid for the ordinary
shares, if any, and the amount of ordinary income recognized by the participant
on the receipt or transfer of the shares acquired upon exercise of an option.
The participant's holding period for the shares begins upon the receipt of the
ordinary shares acquired upon exercise of an option. If a participant sells the
ordinary shares, assuming there is no disqualifying disposition of an "incentive
stock option," any difference between the amount realized in the sale and the
participant's tax basis in the shares is taxed as long-term or short-term
capital gain or loss, provided the shares are held as a capital asset on the
date of sale, and depending on the participant's holding period for the shares.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of at least a majority of the votes cast on the
proposal at the extraordinary general meeting is required for approval of the
amendment of the incentive plan, provided that the total number of votes cast
represent a majority of the votes entitled to be cast.
Approval of this proposal is not a condition to the merger but, if
approved, it will be implemented only if the merger is completed.
TRANSOCEAN SEDCO FOREX'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE PROPOSAL TO APPROVE AND RATIFY THE ADOPTION OF THE AMENDMENT TO
TRANSOCEAN SEDCO FOREX'S LONG-TERM INCENTIVE PLAN.
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TRANSOCEAN SEDCO FOREX'S PROPOSAL TO
AMEND ITS EMPLOYEE STOCK PURCHASE PLAN
DESCRIPTION OF THE PROPOSAL
The board of directors of Transocean Sedco Forex has unanimously adopted a
resolution to submit to a vote of the shareholders a proposal to amend
Transocean Sedco Forex's Employee Stock Purchase Plan to increase the number of
ordinary shares reserved for issuance under the stock purchase plan to
1,500,000.
The purpose of Transocean Sedco Forex's stock purchase plan is to encourage
and assist Transocean Sedco Forex's employees to acquire an equity interest in
Transocean Sedco Forex through the purchase of ordinary shares. Transocean Sedco
Forex's board of directors believes the stock purchase plan is achieving its
purpose, and believes that to continue to carry out its purpose and to provide
for the substantial increase in the size of the workforce as a result of the
merger, it is necessary to amend the stock purchase plan to increase the number
of ordinary shares reserved for issuance under the stock purchase plan from
750,000 ordinary shares to 1,500,000 ordinary shares. Of the 750,000 ordinary
shares currently reserved for issuance under the plan, approximately 410,000
shares are expected to remain available after giving effect to the 2000 purchase
period.
Approval of the amendment to increase the number of shares reserved for
issuance under the stock purchase plan is not a condition to the merger. If this
proposal is approved, it will be implemented only if the merger is completed.
The stock purchase plan will terminate after all Transocean Sedco Forex ordinary
shares covered by the stock purchase plan have been purchased, unless Transocean
Sedco Forex's board of directors terminates the plan earlier.
PRINCIPAL PROVISIONS OF THE EMPLOYEE STOCK PURCHASE PLAN
The following summary of the stock purchase plan is qualified by reference
to the full text of the current plan, as amended and restated effective January
1, 2000, which is attached as Annex H to this joint proxy statement/prospectus.
Under the stock purchase plan, all full-time employees of Transocean Sedco
Forex, and any subsidiary of Transocean Sedco Forex that has, with the consent
of Transocean Sedco Forex's board of directors, adopted the stock purchase plan,
who do not own, or hold options to acquire, five percent or more of the total
combined voting power or value of Transocean Sedco Forex's ordinary shares, are
eligible to participate in the stock purchase plan. Currently, approximately
4,300 employees of Transocean Sedco Forex are eligible to participate in the
stock purchase plan. Participants in the stock purchase plan may purchase
Transocean Sedco Forex ordinary shares through payroll deductions on an
after-tax basis over a plan year beginning on each January 1 and ending on the
following December 31 during the term of the stock purchase plan. A
participant's right to participate in the stock purchase plan terminates
immediately when a participant ceases to be employed by Transocean Sedco Forex.
An employee may elect to participate in the stock purchase plan as of any
January 1 following his or her completion of six consecutive months of
employment by Transocean Sedco Forex. A participant may elect to make
contributions each pay period in an amount not less than two percent of the
participant's monthly compensation, with no dollar minimum, subject to a monthly
limitation equal to twenty percent of his base monthly earnings or such other
amount established by the Transocean Sedco Forex board of directors compensation
committee, taking into account a "maximum share limitation." The maximum share
limitation is the number of ordinary shares derived by dividing $25,000 by the
fair market value, as defined below, of ordinary shares determined as of the
date of grant. The contributions will be held in trust during a plan year, and
interest will be credited to the participant's account. Unless a participant
elects otherwise, the dollar amount in the participant's account at the end of
the plan year will then be used to purchase as many whole ordinary shares as the
funds in his or her account will allow. The purchase price for the stock will be
85 percent of the lesser of (1) its fair market value on the first trading day
of the plan year or (2) its fair market value on the last trading day of the
plan year. "Fair market value" means the closing composite sales price per
ordinary share on the New York Stock Exchange on the applicable date. Any
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cash remaining in the participant's account will be carried over to the next
plan year. If the participant elects not to purchase ordinary shares at the end
of the plan year, such participant will receive a return of his or her payroll
deductions during the plan year plus the interest accrued on such deductions. At
the end of each plan year, participants will receive a statement of their
account balances, including interest earned and the number of whole ordinary
shares purchased and in the accounts. Any dividends on ordinary shares held in a
participant's account will be credited to his or her account.
A participant may elect to withdraw his or her entire contributions for the
current year from the stock purchase plan at any time prior to the purchase of
Transocean Sedco Forex ordinary shares. Any participant who so elects will
receive his or her entire account balance, including interest and dividends, if
any. A participant who suspends his or her payroll deductions or withdraws
contributions cannot resume participation in the stock purchase plan during that
plan year and must reenroll in the stock purchase plan the following year in
order to participate. A participant may also elect at any time to withdraw
ordinary shares held in his or her account for at least one year. Although the
plan provides that a participant may not sell ordinary shares held in the
participant's account for less than three months, this restriction has been
waived by the Finance and Benefits Committee. In the event of a participant's
death, amounts credited to his or her account, including interest and dividends,
if applicable, will be paid in cash, and a certificate for any ordinary shares
will be delivered to his or her designated beneficiaries or other legal
representative.
Transocean Sedco Forex's board of directors generally may amend or
terminate the stock purchase plan at any time, provided that approval of
Transocean Sedco Forex's shareholders must be obtained for any amendment to the
stock purchase plan if required under Section 423 of U.S. Internal Revenue Code
or any other applicable law or regulation. Section 423 of the U.S. Internal
Revenue Code currently requires shareholder approval of a plan amendment that
would change the number of shares reserved for issuance under the stock purchase
plan.
The shares to be issued pursuant to the stock purchase plan may be ordinary
shares held in treasury or authorized but unissued ordinary shares.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the general rules of present U.S. federal
income tax law relating to the tax treatment of employee stock purchase plans.
The discussion is general in nature and does not take into account a number of
considerations that may apply based on the circumstances of a particular
participant under the stock purchase plan, including the possibility that a
participant may not be subject to U.S. federal income taxation. When the term
"Transocean Sedco Forex" is used in this section, the term is understood to mean
the U.S. subsidiary of Transocean Sedco Forex.
Transocean Sedco Forex intends for the stock purchase plan to constitute an
"employee stock purchase plan" under the provisions of Section 423 of the U.S.
Internal Revenue Code. Stock purchase plan participants will recognize taxable
ordinary income upon disposition of the ordinary shares acquired under the stock
purchase plan if such shares are disposed of in a "disqualifying disposition,"
which is a disposition of the shares before the later of (1) two years from the
date an option to purchase stock was issued under the plan or (2) one year from
the date that shares acquired pursuant to the plan were transferred to the
participant. This taxable income will equal the amount by which the fair market
value of the shares on the exercise date exceeds the purchase price of the
shares, but in no event will the income recognized exceed the sales proceeds for
such shares reduced by the purchase price for such shares. If a participant
sells or otherwise disposes of his or her shares after the above holding period
so that there is no disqualifying disposition, the participant would realize
ordinary income equal to the lesser of (a) the excess of the fair market value
of the shares at the time of the disposition over the exercise price or (b) the
excess of the fair market value of the shares at the time the option was granted
over the option price. If a participant sells the ordinary shares acquired under
the stock purchase plan, assuming there is no disqualifying disposition, any
difference between the amount realized in the sale and the participants' tax
basis in the shares (which would include any ordinary income recognized with
respect to the shares) is
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taxed as long-term or short-term capital gain or loss, provided the shares are
held as a capital asset on the date of sale, and depending on the participant's
holding period for the shares.
Transocean Sedco Forex is entitled to a deduction for U.S. federal income
tax purposes for dispositions of shares acquired by participants in the stock
purchase plan only to the extent that a participant realizes ordinary income as
a result of a disqualifying disposition of shares acquired under the stock
purchase plan.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the votes cast on the proposal at the
extraordinary general meeting is required for approval of the amendment of the
stock purchase plan, provided that the total number of votes cast represent a
majority of the votes entitled to be cast.
Approval of this proposal is not a condition to the merger but, if
approved, it will be implemented only if the merger is completed.
TRANSOCEAN SEDCO FOREX'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE PROPOSAL TO APPROVE AND RATIFY THE ADOPTION OF THE AMENDMENT TO
TRANSOCEAN SEDCO FOREX'S EMPLOYEE STOCK PURCHASE PLAN.
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R&B FALCON'S PROPOSAL TO AMEND
ITS CERTIFICATE OF INCORPORATION
GENERAL
The board of directors of R&B Falcon has unanimously adopted a resolution
declaring advisable an amendment to R&B Falcon's certificate of incorporation.
If both the amendment and the merger proposal are approved by R&B Falcon's
common shareholders, the amendment will take effect immediately prior to the
effective time of the merger.
PURPOSE OF THE AMENDMENT
The purpose of the amendment is to satisfy requirements to permit the
merger to be tax-free to R&B Falcon's common shareholders, except with respect
to cash received in lieu of fractional shares and except with respect to some 5%
shareholders of R&B Falcon who will own 5% or more of the ordinary shares of
Transocean Sedco Forex after the merger.
DESCRIPTION OF THE PROPOSED AMENDMENT
The amendment will grant holders of R&B Falcon's 13.875% cumulative
redeemable preferred shares voting rights in the election of R&B Falcon's
directors. Each preferred share will have 0.1787 votes per share in the election
of directors and will vote together with the common shareholders and any other
class or series of shares that generally votes together with the common shares
as one class. As a result of the conversion in the merger of each of the one
million TSF Delaware common shares outstanding before the merger into one R&B
Falcon common share and each R&B Falcon common share outstanding before the
merger into the right to receive 0.5 Transocean Sedco Forex ordinary shares,
Transocean Holdings will hold all of the one million outstanding common shares
of R&B Falcon after the merger. These shares will constitute more than a
majority of the total voting power of R&B Falcon after the merger. The
certificate of incorporation of R&B Falcon does not provide for cumulative
voting. As a result, Transocean Holdings will be in a position to elect all of
the directors of R&B Falcon after the merger. As of the date of this joint proxy
statement/prospectus, assuming the adoption of this proposal and the completion
of the merger, the voting power of the preferred shares would represent
approximately 6% of the total voting power of the preferred shares and the
common shares.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
Approval of this proposal requires the affirmative vote of at least a
majority of R&B Falcon's outstanding common shares. Approval of this proposal is
a condition to the merger. The amendment to the certificate of incorporation
will not be effected if the merger is not consummated.
FOR THE REASONS DESCRIBED ABOVE, R&B FALCON'S BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT R&B FALCON'S COMMON SHAREHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT TO R&B FALCON'S CERTIFICATE OF INCORPORATION.
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EXPERTS
The consolidated balance sheet of Transocean Sedco Forex Inc. and
Subsidiaries as of December 31, 1999, and the related combined statements of
operations, equity, and cash flows for the year then ended (and the financial
statement schedule), incorporated by reference in this joint proxy
statement/prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report incorporated herein, and are incorporated
herein in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The combined balance sheet as of December 31, 1998 and the related combined
statements of operations, equity and cash flows for each of the two years in the
period ended December 31, 1998 incorporated in this joint proxy
statement/prospectus by reference to the Annual Report on Form 10-K of
Transocean Sedco Forex have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The consolidated balance sheets of R&B Falcon as of December 31, 1999 and
1998 and the related statements of operations, shareholders' equity and cash
flows for each of the years in the three year period ended December 31, 1999,
incorporated by reference in this joint proxy statement/prospectus and elsewhere
in this registration statement, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
With respect to the unaudited interim financial information for the
quarters ended March 31, 2000 and 1999 and June 30, 2000 and 1999, Arthur
Andersen LLP has applied limited procedures in accordance with professional
standards for a review of that information. However, their separate reports
thereon state that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on that information should be restricted in light of the limited nature
of the review procedures applied. In addition, the accountants are not subject
to the liability provisions of Section 11 of the Securities Act of 1933 for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of the registration statement prepared or
certified by the accountants within the meaning of Sections 7 and 11 of the Act.
LEGAL MATTERS
The validity of the Transocean Sedco Forex ordinary shares to be issued
pursuant to the terms of the merger agreement will be passed upon for Transocean
Sedco Forex by Walkers, Cayman Islands.
Cravath, Swaine & Moore, New York, New York, will pass upon certain U.S.
federal income tax consequences of the merger for R&B Falcon. Baker Botts
L.L.P., Houston, Texas, will pass upon certain U.S. federal income tax
consequences of the merger for Transocean Sedco Forex.
FUTURE SHAREHOLDER PROPOSALS
Rule 14a-8 under the Securities Exchange Act of 1934 addresses when a
company must include a shareholder's proposal in its proxy statement and
identify the proposal in its form of proxy when the company holds an annual or
special meeting of stockholders. In general, under Rule 14a-8 a proposal for a
regularly scheduled annual meeting must be received at the company's principal
executive offices not less than 120 calendar days before the date of the
company's proxy statement released to shareholders in connection with the
previous year's annual meeting. For a special meeting, the deadline is a
reasonable time before the company begins to print and mail its proxy materials.
In addition to complying with the applicable deadline, shareholder proposals
must also be otherwise eligible for inclusion.
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<PAGE> 135
TRANSOCEAN SEDCO FOREX
Transocean Sedco Forex has already held its 2000 annual meeting. In order
for proposals to be considered for inclusion in the proxy statement and proxy
card relating to the 2001 annual general meeting of shareholders of Transocean
Sedco Forex, those proposals must be received at Transocean Sedco Forex's
principal executive offices, 4 Greenway Plaza, Houston, Texas 77046, by no later
than December 9, 2000. However, if the date of the 2001 annual general meeting
changes by more than 30 days from the date of the 2000 annual general meeting,
the deadline is a reasonable time before Transocean Sedco Forex begins to print
and mail their proxy materials. Transocean will notify shareholders of this
deadline in a Quarterly Report on Form 10-Q or in another communication to
shareholders. Shareholder proposals must also be otherwise eligible for
inclusion.
If you desire to bring a matter before an annual meeting and the proposal
is submitted outside the process of Rule 14a-8, you must follow the procedures
set forth in Transocean Sedco Forex's articles of association. The articles of
association provide generally that if you desire to propose any business at an
annual meeting of shareholders, you must give Transocean written notice not less
than 90 days prior to the anniversary of the originally scheduled date of the
immediately preceding annual meeting. The deadline under Transocean Sedco
Forex's articles of association for submitting proposals will be February 11,
2001 for the 2001 annual meeting unless it is more than 30 days before or after
the anniversary of the 2000 annual meeting. However, if the date of the
forthcoming annual meeting is more than 30 days before or after that anniversary
date, the deadline is the close of business on the tenth day after Transocean
Sedco Forex publicly discloses the meeting date. Your notice must set forth:
- a brief description of the business desired to be brought before the
meeting and the reasons for conducting the business at the meeting;
- your name and address;
- a representation that you are a holder of record of Transocean Sedco
Forex ordinary shares entitled to vote at the meeting, or if the record
date for the meeting is subsequent to the date required for shareholder
notice, a representation that you are a holder of record at the time of
the notice and intend to be a holder of record on the date of the
meeting, and, in either case, intend to appear in person or by proxy at
the meeting to propose that business; and
- any material interest you have in the business.
If you desire to nominate directors at an annual meeting, you must give
Transocean Sedco Forex written notice within the time period described in the
preceding paragraph. If you desire to nominate directors at a special meeting at
which the board of directors has determined that directors will be elected, you
must give Transocean Sedco Forex written notice by the close of business on the
tenth day following Transocean Sedco Forex's public disclosure of the meeting
date. Your notice must set forth:
- your name and address and the name and address of the person or persons
to be nominated;
- a representation that you are a holder of record of Transocean Sedco
Forex ordinary shares entitled to vote at the meeting or, if the record
date for the meeting is subsequent to the date required for that
shareholder notice, a representation that you are a holder of record at
the time of the notice and intend to be a holder of record on the date of
the meeting and, in either case, setting forth the class and number of
shares so held, including shares held beneficially;
- a representation that you intend to appear in person or by proxy as a
holder of record at the meeting to nominate the person or persons
specified in the notice;
- a description of all arrangements or understandings between you and each
nominee you propose and any other person or persons under which the
nomination or nominations are being made by you;
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<PAGE> 136
- any other information regarding each nominee you propose that would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission; and
- the consent of each nominee to serve as a director if so elected.
The chairman of the meeting may refuse to transact any business or to
acknowledge the nomination of any person if you fail to comply with the
foregoing procedures.
You may obtain a copy of Transocean Sedco Forex's articles of association,
in which these procedures are set forth, upon written request to Eric B. Brown,
Secretary, Transocean Sedco Forex Inc., 4 Greenway Plaza, Houston, Texas 77046
or see "Where You Can Find More Information."
R&B FALCON
R&B Falcon has already held its 2000 annual meeting. R&B Falcon will hold
an annual meeting in the year 2001 only if the merger has not already been
completed. If the annual meeting is held, any shareholder intending to present a
proposal for action at R&B Falcon's 2001 annual meeting and wishing to have the
proposal included in R&B Falcon's proxy statement must notify R&B Falcon in
writing no later than December 27, 2000. Proposals should be addressed to R&B
Falcon at 901 Threadneedle, Houston, Texas 77079.
R&B Falcon's bylaws require written notice to R&B Falcon of a nomination
for election as a director (other than a nomination by the Board) and of the
submission of a proposal (other than a proposal by the Board) for consideration
at an annual meeting of shareholders. The notice must contain certain
information concerning the nominating or proposing shareholder, and the nominee
or the proposal, as the case may be, and be furnished to R&B Falcon not less
than 60 days or more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders. A copy of the applicable
bylaw provisions may be obtained, without charge, upon written request to the
Secretary of R&B Falcon at 901 Threadneedle, Houston, Texas 77079 or see "Where
You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires Transocean Sedco Forex and R&B Falcon to
file information with the Securities and Exchange Commission concerning their
respective business and operations. Accordingly, Transocean Sedco Forex and R&B
Falcon file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document Transocean Sedco
Forex and R&B Falcon file at the SEC's public reference rooms located at 450
Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. These SEC filings are also available to the public on the SEC's
web site at: http://www.sec.gov. Copies of these reports, proxy statements and
other information can also be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
Transocean Sedco Forex has filed with the SEC a registration statement on
Form S-4. This joint proxy statement/prospectus is a part of the registration
statement and constitutes a prospectus of Transocean Sedco Forex for the
Transocean Sedco Forex ordinary shares to be issued to holders of R&B Falcon
common shares in the merger, for the warrants to purchase Transocean Sedco Forex
ordinary shares deemed to be issued to holders of warrants to purchase R&B
Falcon common shares as a result of Transocean Sedco Forex's assumption of those
warrants in the merger and for Transocean Sedco Forex ordinary shares issued
upon exercise of those warrants and options to purchase R&B Falcon common shares
outstanding at the effective time of the merger. As allowed by the SEC rules,
this joint proxy statement/prospectus does not contain all the information you
can find in the registration statement or the exhibits to the registration
statement. For further information with respect to Transocean Sedco Forex and
the Transocean Sedco Forex ordinary shares, you should consult the registration
statement and its exhibits.
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Statements contained in this joint proxy statement/prospectus concerning the
provisions of any documents are summaries of those documents, and we refer you
to the document filed with the SEC for additional information. The registration
statement and any of its amendments, including exhibits filed as a part of the
registration statement or an amendment to the registration statement, are
available for inspection and copying as described above.
SEC rules and regulations permit us to "incorporate by reference" the
information Transocean Sedco Forex and R&B Falcon files with the SEC. This means
that we can disclose important information to you by referring you to the other
information Transocean Sedco Forex and R&B Falcon have filed with the SEC. The
information that we incorporate by reference is considered to be part of this
joint proxy statement/prospectus. Information that Transocean Sedco Forex and
R&B Falcon file later with the SEC will automatically update and supersede this
information.
We incorporate by reference the documents listed below and any filings
Transocean Sedco Forex or R&B Falcon will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 following the
date of this document, but prior to the date of their respective shareholder
meeting:
For Transocean Sedco Forex:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1999;
- Quarterly Reports on Form 10-Q for the periods ended March 31, 2000 and
June 30, 2000; and
- Current Reports on Form 8-K filed with the SEC on January 12, 2000, March
10, 2000, April 4, 2000, May 24, 2000, August 21, 2000, September 22,
2000 and October 26, 2000.
For R&B Falcon:
- Annual Report on Form 10-K for the fiscal year ended December 31, 1999;
- Quarterly Reports on Form 10-Q for the periods ended March 31, 2000 and
June 30, 2000; and
- Current Reports on Form 8-K filed with the SEC on August 22, 2000 and
October 26, 2000.
You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this joint proxy
statement/prospectus by writing or calling:
For Transocean Sedco Forex:
Transocean Sedco Forex Inc.
4 Greenway Plaza
Houston, Texas 77046
Attn: Jeffrey L. Chastain, Director of Investor Relations and
Communications
Telephone requests may be directed to (713) 232-7500.
For R&B Falcon:
R&B Falcon Corporation
901 Threadneedle
Houston, Texas 77079
Attn: Charles R. Ofner, Senior Vice President
Telephone requests may be directed to (281) 496-5000.
In order to ensure timely delivery of these documents, you should make such
request by , 2000.
Neither Transocean Sedco Forex nor R&B Falcon has authorized anyone to give
any information or make any representation about the merger or about the
respective companies that differs from or adds to the information in this joint
proxy statement/prospectus or in the documents that Transocean Sedco Forex
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<PAGE> 138
files publicly with the SEC. Therefore, you should not rely upon any information
that differs from or is in addition to the information contained in this joint
proxy statement/prospectus or in the documents that Transocean Sedco Forex files
publicly with the SEC.
If you live in a jurisdiction where it is unlawful to offer to exchange or
sell, to ask for offers to exchange or buy, or to ask for proxies regarding the
securities offered by this joint proxy statement/ prospectus, or if you are a
person to whom it is unlawful to direct such activities, the offer presented by
this joint proxy statement/prospectus is not extended to you.
The information contained in this joint proxy statement/prospectus speaks
only as of the date on the cover, unless the information specifically indicates
that another date applies.
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ANNEX A
EXECUTION COPY
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
<PAGE> 140
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 1 THE MERGER....................................... A-1
Section 1.1 The Merger................................... A-1
Section 1.2 The Closing.................................. A-1
Section 1.3 Effective Time............................... A-1
ARTICLE 2 ARTICLES OF ASSOCIATION OF PARENT AND CERTIFICATE
OF INCORPORATION AND BYLAWS OF THE SURVIVING
ENTITY........................................... A-2
Section 2.1 Articles of Association of Parent............ A-2
Section 2.2 Certificate of Incorporation of the Surviving
Entity................................................. A-2
Section 2.3 Bylaws of the Surviving Entity............... A-2
ARTICLE 3 DIRECTORS AND OFFICERS OF THE SURVIVING ENTITY
AND DIRECTORS OF PARENT.......................... A-2
Section 3.1 Directors of Surviving Entity................ A-2
Section 3.2 Officers of Surviving Entity................. A-2
Section 3.3 Board of Directors of Parent................. A-2
ARTICLE 4 CONVERSION OF COMPANY COMMON STOCK............... A-3
Section 4.1 Merger Ratio................................. A-3
Section 4.2 Conversion of Capital Stock of the Company
and Merger Sub......................................... A-3
Section 4.3 Exchange of Certificates Representing Company
Common Stock........................................... A-5
Section 4.4 Adjustment of Merger Ratios.................. A-6
Section 4.5 Rule 16b-3 Approval.......................... A-6
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF COMPANY........ A-7
Section 5.1 Existence; Good Standing; Corporate
Authority.............................................. A-7
Section 5.2 Authorization, Validity and Effect of
Agreements............................................. A-7
Section 5.3 Capitalization............................... A-7
Section 5.4 Significant Subsidiaries..................... A-8
Section 5.5 Compliance with Laws; Permits................ A-8
Section 5.6 No Conflict.................................. A-8
Section 5.7 SEC Documents................................ A-9
Section 5.8 Litigation................................... A-10
Section 5.9 Absence of Certain Changes................... A-10
Section 5.10 Taxes........................................ A-10
Section 5.11 Employee Benefit Plans....................... A-11
Section 5.12 Labor Matters................................ A-12
Section 5.13 Environmental Matters........................ A-13
Section 5.14 Intellectual Property........................ A-13
Section 5.15 Decrees, Etc................................. A-13
Section 5.16 Insurance.................................... A-14
Section 5.17 No Brokers................................... A-14
Section 5.18 Opinion of Financial Advisor................. A-14
Section 5.19 Parent Share Ownership....................... A-14
Section 5.20 Vote Required................................ A-14
Section 5.21 Ownership of Drilling Rigs and Drillships.... A-14
Section 5.22 Undisclosed Liabilities...................... A-15
Section 5.23 Certain Contracts............................ A-15
Section 5.24 Capital Expenditure Program.................. A-15
Section 5.25 Improper Payments............................ A-16
Section 5.26 Amendment to the Company Rights Agreement.... A-16
</TABLE>
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<TABLE>
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<S> <C>
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT, SUB AND
MERGER SUB....................................... A-16
Section 6.1 Existence; Good Standing; Corporate
Authority.............................................. A-16
Section 6.2 Authorization, Validity and Effect of
Agreements............................................. A-16
Section 6.3 Capitalization............................... A-17
Section 6.4 Significant Subsidiaries..................... A-17
Section 6.5 Compliance with Laws; Permits................ A-17
Section 6.6 No Conflict.................................. A-18
Section 6.7 SEC Documents................................ A-18
Section 6.8 Litigation................................... A-19
Section 6.9 Absence of Certain Changes................... A-19
Section 6.10 Taxes........................................ A-19
Section 6.11 Employee Benefit Plans....................... A-20
Section 6.12 Labor Matters................................ A-21
Section 6.13 Environmental Matters........................ A-21
Section 6.14 Intellectual Property........................ A-22
Section 6.15 Decrees, Etc................................. A-22
Section 6.16 Insurance.................................... A-22
Section 6.17 No Brokers................................... A-23
Section 6.18 Opinion of Financial Advisor................. A-23
Section 6.19 Company Stock Ownership...................... A-23
Section 6.20 Vote Required................................ A-23
Section 6.21 Ownership of Drilling Rigs and Drillships.... A-23
Section 6.22 Undisclosed Liabilities...................... A-24
Section 6.23 Certain Contracts............................ A-24
Section 6.24 Capital Expenditure Program.................. A-24
Section 6.25 Improper Payments............................ A-24
ARTICLE 7 COVENANTS........................................ A-25
Section 7.1 Conduct of Company Business.................. A-25
Section 7.1A Conduct of Parent Business................... A-27
Section 7.2 No Solicitation by the Company............... A-28
Section 7.3 No Solicitation by Parent.................... A-29
Section 7.4 Meetings of Stockholders..................... A-30
Section 7.5 Filings; Commercially Reasonable Best
Efforts, Etc........................................... A-31
Section 7.6 Inspection................................... A-33
Section 7.7 Publicity.................................... A-33
Section 7.8 Registration Statement on Form S-4........... A-33
Section 7.9 Listing Applications......................... A-34
Section 7.10 Letters of Accountants....................... A-34
Section 7.11 Agreements of Rule 145 Affiliates............ A-35
Section 7.12 Expenses..................................... A-35
Section 7.13 Indemnification and Insurance................ A-35
Section 7.14 Employee Matters............................. A-36
Section 7.15 Rights Agreement............................. A-39
Section 7.16 Delivery of Parent Ordinary Shares........... A-39
Section 7.17 Consulting Agreements........................ A-39
Section 7.18 Assets in the Coastwise Trade................ A-39
Section 7.19 Obtaining Investment Grade Rating............ A-39
Section 7.20 Agreement Regarding Company Redeemable
Preferred Stock........................................ A-40
</TABLE>
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<TABLE>
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<S> <C>
ARTICLE 8 CONDITIONS....................................... A-41
Section 8.1 Conditions to Each Party's Obligation to
Effect the Merger...................................... A-41
Section 8.2 Conditions to Obligation of the Company to
Effect the Merger...................................... A-42
Section 8.3 Conditions to Obligation of Parent, Sub and
Merger Sub to Effect the Merger........................ A-43
ARTICLE 9 TERMINATION...................................... A-44
Section 9.1 Termination by Mutual Consent................ A-44
Section 9.2 Termination by Parent or the Company......... A-44
Section 9.3 Termination by the Company................... A-44
Section 9.4 Termination by Parent........................ A-45
Section 9.5 Effect of Termination........................ A-46
Section 9.6 Extension; Waiver............................ A-46
ARTICLE 10 GENERAL PROVISIONS............................... A-47
Section 10.1 Nonsurvival of Representations, Warranties
and Agreements......................................... A-47
Section 10.2 Notices...................................... A-47
Section 10.3 Assignment; Binding Effect; Benefit.......... A-47
Section 10.4 Entire Agreement............................. A-48
Section 10.5 Amendments................................... A-48
Section 10.6 Governing Law................................ A-48
Section 10.7 Counterparts................................. A-48
Section 10.8 Headings..................................... A-48
Section 10.9 Interpretation............................... A-48
Section 10.10 Waivers..................................... A-49
Section 10.11 Incorporation of Exhibits................... A-49
Section 10.12 Severability................................ A-49
Section 10.13 Enforcement of Agreement.................... A-49
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
</TABLE>
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GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS WHERE DEFINED
------------- -------------
<S> <C>
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)
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)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERMS WHERE DEFINED
------------- -------------
<S> <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
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)
</TABLE>
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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 "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
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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.
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
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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
(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 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
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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.
(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.
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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 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
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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.
(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 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.
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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 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 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
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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
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,
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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
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 payment" within the meaning of Section 280G of
the Code; (vii) to the knowledge of the Company, neither the Company nor
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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. sec. 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 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
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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
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-
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compliance or interference that is not reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect.
(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 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
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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 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.
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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 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.
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.
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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.
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
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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 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
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
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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 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
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(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.
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
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under Treas. Reg. sec. 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 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 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.
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(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 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.
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(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 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 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
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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,
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
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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, 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
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the services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
(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, 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
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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;
(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
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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 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 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
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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 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
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
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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;
(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.
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(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 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 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.
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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.
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.
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(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 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 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.
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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 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
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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 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 to such discretionary
determinations as were made consistent with the practices of the Company for the
1999 fiscal year; provided, however, that the
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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) 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
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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
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,
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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 sec. 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 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 11 3/8% Senior Secured Notes due 2009, the Company's
$200,000,000 12 1/2% Senior Notes due 2006, the Company's $100,000,000 9 1/8%
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 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
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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 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.
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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.
(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.
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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:
(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 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
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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.
(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
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(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
(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; 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
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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.
(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.
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(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
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 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.
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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.
(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
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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 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: President and CEO
TRANSOCEAN HOLDINGS INC.
By: /s/ J. MICHAEL TALBERT
----------------------------------
Name: J. Michael Talbert
Title: President
TSF DELAWARE INC.
By: /s/ J. MICHAEL TALBERT
----------------------------------
Name: J. Michael Talbert
Title: President
R&B FALCON CORPORATION
By: /s/ PAUL B. LOYD, JR.
----------------------------------
Name: Paul B. Loyd, Jr.
Title: Chairman of the Board and
Chief Executive Officer
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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.
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:
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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 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
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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:
ACCEPTED AND AGREED THIS
DAY OF , 2000.
TRANSOCEAN SEDCO FOREX INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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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).
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
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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 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.
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(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.
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.
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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:
---------------------------------------------------------------------------
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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 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
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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 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 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
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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
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.
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
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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.
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:
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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 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
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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. 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 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
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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
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 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.
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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)).
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.
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.
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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
-----------------------------------
Name:
Title:
[Sub]
by
-----------------------------------
Name:
Title:
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ANNEX B
August 19, 2000
Board of Directors
R&B Falcon Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079-2902
Members of the Board:
We understand that R&B Falcon Corporation ("R&B Falcon" or the "Company"),
Transocean Sedco Forex Inc. ("Transocean"), Transocean Holdings Inc., a
wholly-owned subsidiary of Transocean ("Sub"), and TSF Delaware Inc., a
wholly-owned subsidiary of Sub ("MSub"), propose to enter into an Agreement and
Plan of Merger dated August 19, 2000 (the "Merger Agreement"), which provides
for, among other things, the merger of MSub with and into R&B Falcon (the
"Merger"). Pursuant to the Merger, R&B Falcon will become a wholly-owned
subsidiary of Sub and each outstanding share of common stock, par value $0.01
per share, of R&B Falcon (the "R&B Falcon Common Stock") issued and outstanding,
other than shares held in treasury or owned by Transocean or any affiliate of
Transocean or R&B Falcon, will be converted into 0.50 of an ordinary share (the
"Common Stock Merger Ratio"), par value $0.01 per share, of Transocean (the
"Transocean Common Shares"). The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Common Stock Merger Ratio
pursuant to the Merger Agreement is fair from a financial point of view to
holders of shares of R&B Falcon Common Stock.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of R&B Falcon and Transocean, respectively;
(ii)reviewed certain internal financial statements and other financial and
operating data concerning R&B Falcon and Transocean prepared by the
managements of R&B Falcon and Transocean, respectively;
(iii)
reviewed certain financial forecasts prepared by the managements of R&B
Falcon and Transocean, respectively;
(iv)discussed the past and current operations and financial condition and
the prospects of R&B Falcon and Transocean, including information
relating to certain strategic, financial and operational benefits
anticipated from the Merger, with senior executives of R&B Falcon and
Transocean, respectively;
(v) reviewed the pro forma impact of the Merger on Transocean's earnings
per share, cash flow, consolidated capitalization and financial ratios;
(vi)reviewed the reported prices and trading activity for the R&B Falcon
Common Stock and Transocean Common Shares;
(vii)
compared the financial performance of R&B Falcon and Transocean and the
prices and trading activity of R&B Falcon Common Stock and Transocean
Common Shares with that of certain other publicly-traded companies,
comparable with R&B Falcon and Transocean, respectively, and their
securities;
(viii)
discussed the strategic rationale for the Merger with the management
and Board of Directors of R&B Falcon;
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(ix)reviewed the financial terms, to the extent publicly available, of
certain comparable business combination transactions deemed relevant;
(x) participated in discussions and negotiations among representatives of
R&B Falcon and Transocean and their financial and legal advisors;
(xi)reviewed the Merger Agreement and certain related documents; and
(xii)
performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial forecasts, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of R&B Falcon and Transocean, respectively. We have
not made any independent valuation or appraisal of the assets or liabilities of
R&B Falcon or Transocean; nor have we been furnished with any such appraisals.
In addition, we have assumed that the Merger will be consummated in accordance
with the terms set forth in the Merger Agreement, including that the Merger will
be treated as a tax-free reorganization pursuant to the Internal Revenue Code of
1986, as amended. Our opinion is necessarily based on financial, economic,
market and other conditions as in effect on, and the information made available
to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets, nor did we negotiate with any of the parties, other than
Transocean, which expressed interest to us in the possible acquisition of or
merger with the Company or certain of its constituent businesses.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory services for the Company and have received fees for the
rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing of a proxy or registration statement made by R&B Falcon with the
Securities and Exchange Commission in connection with the Merger and the other
transactions contemplated by the Merger Agreement.
In addition, we are expressing no opinion herein as to the prices at which
R&B Falcon Common Stock or Transocean Common Shares will trade at any time. In
addition, Morgan Stanley expresses no opinion or recommendation as to how the
holders of R&B Falcon Common Stock should vote at the stockholders' meeting held
in connection with the Merger.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Common Stock Merger Ratio pursuant to the Merger Agreement is
fair from a financial point of view to holders of shares of R&B Falcon Common
Stock.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ WILLIAM D. McCOMBE
------------------------------------
William D. McCombe
Managing Director
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ANNEX C
PERSONAL AND CONFIDENTIAL
August 19, 2000
Board of Directors
Transocean Sedco Forex Inc.
4 Greenway Plaza
Houston, TX 77046
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to Transocean Sedco Forex Inc. ("Transocean") of the exchange ratio (the
"Exchange Ratio") of 0.5 ordinary shares, par value $0.01 per share (the
"Transocean Shares"), of Transocean to be exchanged for each share of common
stock, par value $0.01 per share (the "Falcon Shares"), of R&B Falcon
Corporation ("Falcon") pursuant to the Agreement and Plan of Merger, dated as of
August 19, 2000, among Falcon, Transocean Holdings Inc., a wholly owned
subsidiary of Transocean ("Sub"), TSF Delaware Inc., a wholly owned subsidiary
of Sub ("Merger Sub"), and Transocean (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with Transocean having provided certain investment banking services to
Transocean from time to time, including having acted as financial advisor to
Sonat Offshore Drilling Inc., a predecessor to Transocean, in connection with
its merger with Transocean ASA in September 1996, having acted as lead-managing
underwriter of the public offerings of $100 million aggregate principal amount
of 7.45% Notes due April 15, 2027 of Transocean and $200 million aggregate
principal amount of 8.00% Debentures due April 15, 2027 of Transocean in April
1997, having acted as agent in connection with Transocean's repurchase program
for Transocean Shares, and having acted as a financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. Goldman, Sachs & Co. provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of Transocean or Falcon for its own account and for the accounts of
customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
Transocean (and certain of its predecessors) and Falcon (and certain of its
predecessors) for the five years ended December 31, 1999; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of Transocean and
Falcon; certain other communications from Transocean and Falcon to their
respective stockholders; certain internal financial analyses and forecasts for
Transocean prepared by the management of Transocean; certain internal financial
analyses and forecasts for Falcon prepared by the management of Falcon; certain
financial analyses and forecasts for Falcon prepared by the management of
Transocean; and certain financial analyses and forecasts for Transocean and
Falcon on a pro forma combined basis prepared by the management of Transocean,
including certain cost savings and other synergies projected by the management
of Transocean to result from the transaction contemplated by the Agreement (the
"Pro Forma Forecasts"). We also have held discussions with members of the senior
managements of Transocean and Falcon regarding their assessment of the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement and the past and current business operations, financial condition
and future prospects of their respective companies. In addition, we have
reviewed the reported price and trading activity for the Transocean Shares and
the Falcon Shares, compared certain financial and stock market information for
Transocean and Falcon with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business
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Transocean Sedco Forex Inc.
August 19, 2000
Page Two
combinations in the offshore contract drilling services industry specifically
and the oil field services industry generally and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In that
regard, we have assumed with your consent that the Pro Forma Forecasts have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of Transocean and that the Pro Forma Forecasts will be realized in
the amounts and time periods contemplated thereby. We have also assumed that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the transaction contemplated by the Agreement will be
obtained without any adverse effect on Transocean or Falcon or on the expected
benefits of the transaction contemplated by the Agreement. In addition, we have
not made an independent evaluation or appraisal of the assets and liabilities of
Transocean or Falcon or any of their subsidiaries and we have not been furnished
with any such evaluation or appraisal. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of
Directors of Transocean in connection with its consideration of the transaction
contemplated by the Agreement and such opinion does not constitute a
recommendation as to how any holder of Transocean Shares should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Agreement is fair from a financial point of view
to Transocean.
Very truly yours,
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<PAGE> 215
ANNEX D
CONFIDENTIAL
August 18, 2000
Board of Directors
Transocean Sedco Forex Inc.
4 Greenway Plaza
Houston, Texas 77046
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to Transocean Sedco Forex Inc. ("Transocean" or the "Company") of the
Merger Ratio (as defined below) as set forth in the Agreement and Plan of Merger
to be dated August 19, 2000 among Transocean, Transocean Holdings Inc. ("Sub"),
TSF Delaware Inc. ("Merger Sub"), and R&B Falcon Corporation ("R&B Falcon") (the
"Merger Agreement"). The Merger Agreement provides for, among other things, the
merger of Merger Sub with and into R&B Falcon, with R&B Falcon being the
surviving entity, thus enabling Transocean to acquire all of the common shares
of R&B Falcon solely in exchange for voting shares of Transocean. In the Merger,
each issued and outstanding common share of R&B Falcon will be exchanged for and
converted into one-half ("1/2" or "0.50") of a Transocean ordinary share (the
"Merger Ratio").
In arriving at our opinion we reviewed and analyzed, among other things,
the following:
(i) the drafts dated August 17, 2000 of the Merger Agreement and other
ancillary transaction agreements;
(ii) the financial statements and other information concerning the
Company contained in the Company's Annual Reports to stockholders and
Annual Reports on Form 10-K for each of the three years ended December 31,
1999, 1998 and 1997, certain interim reports to the Company's shareholders,
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2000 and the Company's most recent Proxy Statement;
(iii) the financial statements and other information concerning R&B
Falcon contained in R&B Falcon's Annual Reports to stockholders and Annual
Reports on Form 10-K for each of the three years ended December 31, 1999,
1998 and 1997, certain interim reports to R&B Falcon's shareholders, R&B
Falcon's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000
and R&B Falcon's most recent Proxy Statement;
(iv) certain business and financial analysis and information relating
to the Company and R&B Falcon, including certain internal financial
forecasts prepared by management of the Company and by the management of
R&B Falcon, provided to us by the Company and R&B Falcon;
(v) certain publicly available information concerning the trading of,
and the trading market for, the Company's and R&B Falcon's ordinary shares;
(vi) certain publicly available information with respect to certain
other companies that we believe to be comparable to the Company and R&B
Falcon and the trading markets for certain of such other companies'
securities;
(vii) certain publicly available information concerning estimates of
the future operating performances of the Company and R&B Falcon and the
comparable companies prepared by industry analysts unaffiliated with either
the Company or R&B Falcon;
(viii) certain publicly available information concerning the nature
and terms of certain other transactions we considered relevant to the
analysis;
(ix) We also met with certain officers and employees of the Company
and R&B Falcon to discuss the assets, liabilities, operations and
businesses of the Company and R&B Falcon and to
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<PAGE> 216
discuss the cost savings and the strategic benefits expected to result from
a combination of the businesses of the Company and R&B Falcon; and
(x) We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria
which we deemed relevant.
In arriving at this opinion, with your consent, we assumed and relied upon
the accuracy and completeness of all the foregoing information and did not
independently verify any of such information. With respect to financial
forecasts, we utilized certain information set forth therein and assumed that
such information was reasonably prepared on bases reflecting the best estimates
and judgments of the management of the Company and R&B Falcon as to the future
financial performance of the Company and R&B Falcon, as available at the time of
preparation. We did not conduct a physical inspection of any of the assets,
operations or facilities of the Company or R&B Falcon and did not make or
receive any independent evaluation or appraisal of any assets or liabilities
(contingent or otherwise) of the Company or R&B Falcon. In addition, we have
assumed that all regulatory approvals required by the Merger Agreement are
obtained. Upon advice of the Company and its legal and accounting advisors, we
have assumed that the Merger will qualify as a tax-free transaction to the
shareholders of the Company.
We are serving as financial advisor to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services. As a specialized energy-related investment banking firm, Simmons &
Company International is engaged, among other things, in the valuation of
businesses and their securities in connection with mergers and acquisitions, in
the management and underwriting and sales of equity and debt securities to the
public and in private placements of equity and debt securities. In addition, in
the ordinary course of business, we may actively trade the securities of
Transocean and R&B Falcon for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities. We also have from time to time been engaged by the Company to
provide general corporate financial advisory services.
You agree that this opinion letter is for the use and benefit of the Board
of Directors of the Company, and may not be used for any other purpose without
our prior written consent, other than including this opinion letter with the
Company's registration statement relating to the Merger. This opinion does not
address the merits of the underlying decision by the Company to enter into the
Merger Agreement and does not constitute a recommendation to any Transocean
shareholder as to how such shareholder should vote on the Merger or on any
matter related thereto. We are not expressing any opinion herein as to the
prices at which Transocean ordinary shares will trade following announcement or
consummation of the Merger. The opinion expressed herein is necessarily based
upon conditions as they exist and can be evaluated on, and on the information
made available at, the date hereof.
Based upon and subject to the foregoing, we are of the opinion that on the
date hereof the Merger Ratio is fair to the Company from a financial point of
view.
Sincerely,
Simmons & Company International
By: /s/ JOHN R. RUTHERFORD
-------------------------------------------------
Name: John R. Rutherford
Title: Managing Director
D-2
<PAGE> 217
ANNEX E
THE COMPANIES LAW
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
TRANSOCEAN SEDCO FOREX INC.
1. The name of the company is Transocean Sedco Forex Inc. (the "Company").
2. The Registered Office of the Company shall be situated at the offices of
Walkers, Walker House, P.O. Box 265, George Town, Grand Cayman, Cayman Islands,
or at such other place as the Board of Directors may from time to time
determine.
3. The objects for which the Company is established are unrestricted and
the Company shall have full power and authority to carry out any objective not
prohibited by any law as provided by Section 7(4) of the Companies Law (2000
Revision), as may be amended, modified or re-enacted from time to time (the
"Statute").
4. Except as prohibited or limited by the Statute, the Company shall have
full power and authority to carry out any object and shall have and be capable
of from time to time and at all times exercising any and all of the powers at
any time or from time to time exercisable by a natural person or body corporate
in doing in any part of the world whether as principal, agent, contractor, or
otherwise whatever may be considered by it necessary or desirable for the
attainment of its objects and whatever else may be considered by it as
incidental or conducive thereto or consequential thereof, including, but without
in any way restricting the generality of the foregoing, the power to make any
alterations or amendments to this Memorandum of Association and the Articles of
Association of the Company considered necessary or convenient in the manner set
out in the Articles of Association of the Company all irrespective of any
question of corporate benefit.
5. The liability of each member is limited to the amount, if any, from time
to time unpaid on such member's shares.
6. The share capital of the Company is US$13,000,000, divided into
800,000,000 Ordinary Shares of a nominal or par value of US$0.01 per share, and
50,000,000 shares of a nominal or par value of U.S. $0.10 per share, which may
be designated and created as shares of any other classes or series of shares
with the respective rights and restrictions determined upon the creation thereof
by action of the Board of Directors, with power for the Company insofar as is
permitted by law, to redeem, call or purchase any of its shares and to increase
or reduce the said capital subject to the provisions of the Statute and the
Articles of Association and to issue any part of its capital, whether original,
redeemed, called or increased with or without any preference, priority or
special privilege or subject to any postponement of rights or to any conditions
or restrictions and so that unless the conditions of issue shall otherwise
expressly declare every issue of shares whether declared to be ordinary,
preference or otherwise shall be subject to the powers hereinabove contained.
7. The Company may exercise the power contained in Section 224 of The
Companies Law to deregister in the Cayman Islands and be registered by way of
continuation in some other jurisdiction.
8. Nothing in the preceding sections shall be deemed to permit the Company
to carry on the business of a Bank or Trust Company without being licensed in
that behalf under the provisions of the Banks & Trust Companies Law (2000
Revision) as may be amended, modified or re-enacted from time to time, or to
carry on Insurance Business from within the Cayman Islands or the business of an
Insurance Manager, Agent, Sub-agent or Broker without being licensed in that
behalf under the provisions of the Insurance Law (1999 Revision) as may be
amended, modified or re-enacted from time to time, or to carry on the
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business of Company Management without being licensed in that behalf under the
provisions of the Companies Management Law 1996 as may be amended, modified or
re-enacted from time to time.
9. The Company will not trade in the Cayman Islands with any person, firm
or company except in furtherance of the business of the Company carried on
outside the Cayman Islands; provided that nothing in this section shall be
construed as to prevent the Company effecting and concluding contracts in the
Cayman Islands, and exercising in the Cayman Islands all of its powers necessary
for the carrying on of its business outside the Cayman Islands.
E-2
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ANNEX F
THE COMPANIES LAW
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
TRANSOCEAN SEDCO FOREX INC.
<PAGE> 220
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. INTERPRETATION.............................................. F-1
II. CERTIFICATES FOR SHARES..................................... F-2
III. ISSUE OF SHARES............................................. F-2
IV. ORDINARY SHARES............................................. F-3
V. OTHER CLASSES OR SERIES OF SHARES........................... F-3
VI. VARIATION OF RIGHTS OF SHARES............................... F-4
VII. REDEMPTION AND REPURCHASE................................... F-4
VIII. TRANSFER OF SHARES.......................................... F-5
IX. NONRECOGNITION OF TRUSTS.................................... F-5
X. LIEN ON SHARES.............................................. F-5
XI. CALL ON SHARES.............................................. F-6
XII. FORFEITURE OF SHARES........................................ F-6
XIII. TRANSMISSION OF SHARES ON DEATH OR BANKRUPTCY............... F-7
XIV. AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF
LOCATION OF REGISTERED OFFICE AND ALTERATION OF CAPITAL..... F-8
XV. CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE........... F-8
XVI. VOTING...................................................... F-9
XVII. GENERAL MEETINGS............................................ F-9
XVIII. NOTICE OF GENERAL MEETINGS.................................. F-10
XIX. PROCEEDINGS AT GENERAL MEETINGS............................. F-10
XX. PROXIES..................................................... F-12
XXI. DIRECTORS................................................... F-13
XXII. POWERS AND DUTIES OF DIRECTORS.............................. F-15
XXIII. COMMITTEES.................................................. F-16
XXIV. PROCEEDINGS OF DIRECTORS.................................... F-17
XXV. VACATION OF OFFICE OF DIRECTOR.............................. F-18
XXVI. CERTAIN BUSINESS COMBINATIONS............................... F-18
XXVII. BUSINESS COMBINATIONS WITH INTERESTED MEMBERS............... F-18
XXVIII. SEAL........................................................ F-21
XXIX. OFFICERS.................................................... F-22
XXX. DIVIDENDS AND RESERVES...................................... F-23
XXXI. CAPITALIZATION.............................................. F-23
XXXII. AUDIT....................................................... F-23
XXXIII. NOTICES..................................................... F-24
XXXIV. LIMITATION OF LIABILITY AND INDEMNITY....................... F-24
XXXV. BOOKS AND RECORDS........................................... F-25
XXXVI. WINDING UP.................................................. F-25
XXXVII. DEREGISTRATION.............................................. F-26
XXXVIII. FISCAL YEAR................................................. F-26
XXXIX. AMENDMENTS OF ARTICLES...................................... F-26
</TABLE>
F-i
<PAGE> 221
I. INTERPRETATION
1.1 The Regulations or Articles contained or incorporated in Table "A"
Regulations For Management of a Company Limited by Shares in the First Schedule
to the Statute shall not apply to this Company, and the following Articles shall
be the Articles of Association of the Company. The following terms shall have
the following meanings wherever they appear herein, and such meanings shall be
equally applicable to both the singular and plural forms of the terms herein
defined.
"Articles" means these Articles of Association, as originally framed or as
from time to time altered by Special Resolution.
"Board of Directors" means the board of directors of the Company.
"Company" means Transocean Sedco Forex Inc., a Cayman Islands exempted
company limited by shares. Where agreement, consent or other action of the
Company is provided for herein, such action shall not require approval of the
Members, except as expressly required by the Statute or these Articles.
"Directors" means the directors of the Company as of the applicable date.
"dividend" includes bonus.
"holder," in relation to any shares, means the Member whose name is entered
in the Register as the holder of such shares.
"Member" has the meaning ascribed to it in Section 38 of the Statute.
"Memorandum" means the memorandum of association of the Company, as may be
amended from time to time.
"Month" means calendar month.
"Ordinary Resolution" means a resolution passed by a majority of such
Members as, being entitled to do so, vote in person or by proxy at any general
meeting of the Company at which the required quorum is present in person or by
proxy.
"Ordinary Shares" has the meaning ascribed to it in Article III.
"Paid-up" means fully paid, paid-up and/or credited as fully paid or
paid-up.
"person" means any individual, corporation, partnership, unincorporated
association or other legal entity.
"Register" means the Register of Members of the Company as maintained in
accordance with Section 40 of the Statute.
"Registered Office" means the registered office of the Company maintained
in accordance with Section 50 and Section 51 of the Statute, and as may be
relocated from time to time.
"Secretary" means the secretary of the Company and includes an Assistant
Secretary and any person appointed to perform the duties of Secretary of the
Company.
"shares" means any Ordinary Shares or other shares issued in the capital of
the Company.
"shares generally entitled to vote" means any share which entitles the
holder to attend and vote at all general meetings of the Company and excludes
(a) any share where the right to vote at general meetings of the Company is
conditional on the Company being in default of an obligation with respect to a
right attaching to the class or series of share to which that share belongs
and/or (b) any share where the right to vote relates solely to such a class or
series of shares (other than the Ordinary Shares).
"Special Resolution" has the same meaning as in the Statute.
"Statute" means the Companies Law (2000 Revision) of the Cayman Islands, as
amended, and every statutory modification or re-enactment thereof for the time
being in force.
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<PAGE> 222
"written" and "in writing" includes all modes of representing or
reproducing words in visible form.
Words importing the singular number shall also include the plural number
and vice-versa.
Words importing the masculine gender shall also include the feminine
gender.
II. CERTIFICATES FOR SHARES
2.1 Unless otherwise provided by resolution of the Board of Directors,
shares shall be represented by certificates that shall be in such form as is
approved by the Board of Directors.
2.2 The Board of Directors shall have authority to make such rules and
regulations as it may deem expedient concerning the issue, transfer (in addition
to or in lieu of those set forth in Article VIII) and registration of shares,
including without limitation, such rules and regulations as may be deemed
expedient concerning the issue of certificates in lieu of certificates claimed
to have been lost, destroyed, stolen or mutilated.
III. ISSUE OF SHARES
3.1 The authorized share capital of the Company as of the date of adoption
of these Articles is US$13,000,000 divided into 800,000,000 Ordinary Shares of a
nominal or par value of US$0.01 per share, with the rights as set out in these
Articles and the Memorandum ("Ordinary Shares"), and 50,000,000 shares of a
nominal or par value of US$0.10 per share which may be designated and created as
shares of any other classes or series of shares with the respective rights and
restrictions determined upon the creation thereof by action of the Board of
Directors.
3.2 Subject to the provisions of these Articles, all unissued shares for
the time being in the capital of the Company shall be at the disposal of the
Board of Directors, and the Board of Directors may designate, re-designate,
allot, grant options over or otherwise dispose of them to such persons, on such
terms and conditions and at such times as they deem proper.
3.3 No holder of Ordinary Shares or any other shares (unless such right is
expressly conferred on the holders of such shares) shall, by reason of such
holding, have any preemptive or preferential right to subscribe to or purchase
any shares or any notes, debentures, bonds or other securities of the Company,
whether or not the issuance of any such shares, notes, debentures, bonds or
other securities would adversely affect the dividend, voting or any other rights
of such holder.
3.4 The Company may, insofar as may be permitted by law, pay a commission
to any person in consideration of such person or any other person subscribing or
agreeing to subscribe whether absolutely or conditionally for any shares. Such
commissions may be satisfied by the payment of cash or the lodgment of fully or
partly paid-up shares or partly in one way and partly in the other. The Company
may also on any issue of shares pay such brokerage as may be lawful.
3.5 The Directors may issue fractions of a share of any class or series of
shares, and, if so issued, a fraction of a share (calculated to three decimal
points) shall be subject to and carry the corresponding fraction of liabilities
(whether with respect to any unpaid amount thereon, contribution, calls or
otherwise), limitations, preferences, privileges, qualifications, restrictions,
rights (including, without limitation, voting and participation rights) and
other attributes of a whole share of the same class or series of shares. If more
than one fraction of a share of the same class or series is issued to or
acquired by the same member such fractions shall be accumulated. For the
avoidance of doubt, in these Articles the expression "share" shall include a
fraction of a share.
3.6 Any shares which have been redeemed or otherwise repurchased by the
Company shall have the status of authorized but unissued shares and may be
subsequently issued in accordance with the Memorandum and these Articles.
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3.7 The Board of Directors shall have the fullest powers permitted by law
to pay all or any monies in respect of the redemption or purchase of any shares
out of the Company's share capital and share premium account.
IV. ORDINARY SHARES
4.1 The Board of Directors may allot, issue or grant any option, right,
warrant or other security exercisable for, convertible into or exchangeable for,
or otherwise dispose of, any shares or securities of the Company at such times
and on such terms as it deems proper. Upon approval of the Board of Directors,
such number of Ordinary Shares, or other shares or securities of the Company, as
may be required for such purpose shall be reserved for issuance in connection
with any option, right, warrant or other security of the Company or any other
person that is exercisable for, convertible into, exchangeable for or otherwise
issuable in respect of such Ordinary Shares or other shares or securities of the
Company. Notwithstanding the generality of the foregoing, the Board of Directors
is expressly authorized and empowered to implement or effect at its sole
discretion the issuance of a preferred share purchase right to be attached to
each issued Ordinary Share with such terms and for such purposes, including the
influencing of takeovers, as may be described in a rights agreement between the
Company and a rights agent.
4.2 Subject to the provisions of applicable law and any rights granted to
any series or class of shares other than Ordinary Shares, the holders of
Ordinary Shares shall have and possess the exclusive right to notice of general
meetings of the Company and the exclusive power to vote on resolutions put to
general meetings of the Company.
V. OTHER CLASSES OR SERIES OF SHARES
5.1 The Board of Directors is authorized, without obtaining any vote or
consent of the holders of any class or series of shares unless expressly
provided by the terms of issue of a class or series, subject to any limitations
prescribed by law, to provide from time to time for the issuance of other
classes or series of shares and, in accordance with applicable procedures of the
Statute, to establish the characteristics of each class or series including,
without limitation, the following:
(a) the number of shares of that class or series, which may
subsequently be increased or decreased (but not below the number of shares
of that class or series then in issue) by resolution of the Board of
Directors, and the distinctive designation thereof;
(b) the voting powers, full or limited, if any, of the shares of that
class or series, including without limitation, the authority to confer
multiple votes per share, voting rights as to specified matters or issues
such as mergers, consolidations or sales of assets, or voting rights to be
exercised either together with holders of Ordinary Shares as a single
class, or independently as a separate class;
(c) the rights in respect of dividends, if any, on the shares of that
class or series; the rate at which such dividends shall be payable and/or
cumulate, which rate may be determined on factors external to the Company
and which dividends may be payable in cash, shares of capital or other
securities or property of the Company; whether dividends shall be
cumulative and, if so, from which date or dates; the relative rights or
priority, if any, of payment of dividends on shares of that class or
series; and any limitation, restrictions or conditions on the payment of
dividends;
(d) the relative amounts, and the relative rights or priority, if any,
of payment in respect of shares of that class or series, which the holder
of the shares of that class or series shall be entitled to receive upon any
liquidation, dissolution or winding up of the Company;
(e) any redemption, repurchase, retirement and sinking fund rights,
preferences and limitations of that class or series, the amount payable on
shares of that class or series in the event of such redemption, repurchase
or retirement, the terms and conditions of any sinking fund, the manner of
creating such fund or funds and whether any of the foregoing shall be
cumulative or non-cumulative;
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(f) the terms, if any, upon which the shares of that class or series
shall be convertible into or exchangeable for shares of any other classes,
series, or other securities, whether or not issued by the Company;
(g) the restrictions, limitations and conditions, if any, upon
issuance of indebtedness of the Company so long as any shares of that class
or series are in issue; and
(h) any other preferences and relative, participating, optional or
other rights and limitations not inconsistent with applicable law.
VI. VARIATION OF RIGHTS OF SHARES
6.1 (a) If at any time the share capital of the Company is divided into
different classes or series of shares, the rights attached to any class or
series (unless otherwise provided by the terms of issue of the shares of that
class) may, whether or not the Company is being wound-up, be varied and amended
with the consent in writing of the holders of all of the issued shares of that
class or series, or with the sanction of a Special Resolution passed at a
separate general meeting of the holders of such class or series.
(b) The provisions of these Articles relating to general meetings of the
Company shall apply to every such separate general meeting of the holders of one
class or series of shares (unless otherwise expressly provided by the terms of
issue of the shares of that class or series).
(c) Separate general meetings of the holders of a class or series of shares
or the seeking of a consent of the holders of a class or series of shares may
only be called at the direction of the Board of Directors (unless otherwise
expressly provided by the terms of issue of the shares of that class or series).
Nothing in this Article VI gives any Member or group of Members the right to
call a class or series meeting or demand a class or series vote or consent.
6.2 The rights conferred upon the holders of the shares of any class or
series issued with preferred or other rights shall not, unless otherwise
expressly provided by the terms of issue of the shares of that class or series,
be deemed to be varied by the creation or issue of further shares ranking in any
respect prior to or pari passu therewith. The rights of the holders of Ordinary
Shares shall not be deemed to be varied by the creation or issue of shares with
preferred or other rights, which may be effected by the Board of Directors as
provided in these Articles without any vote or consent of the holders of
Ordinary Shares.
VII. REDEMPTION AND REPURCHASE
7.1 The Ordinary Shares are not redeemable by the Company or the holder.
Subject as set out herein, the Company is authorized to purchase any issued
Ordinary Shares in such circumstances and on such terms as shall be agreed by
the Company and the holder thereof, subject always to the laws of the Cayman
Islands, and the Company may deduct from the price for such shares the aggregate
amount of any outstanding debts, liabilities and engagements to or with the
Company (whether presently payable or not) by the holder of such shares, either
alone or jointly with any other person, whether a Member or not. Without
limiting the foregoing, the Company may, from time to time, upon the agreement
of a Member, purchase all or part of the Ordinary Shares of any such Member,
whether or not the Company has made a similar offer to all or any of the other
Members.
VIII. TRANSFER OF SHARES
8.1 Transfers of shares shall be registered on the records maintained by
or on behalf of the Company for such purpose upon (i) surrender to the Company
or its transfer agent of a certificate or certificates representing the shares
requested to be transferred, the transfer provisions on the certificate or
certificates being duly completed or on a separate accompanying transfer in such
form as the Board of Directors approves, together with such evidence of the
payment of transfer taxes and compliance with other provisions of law as the
Company or its transfer agent may require, or (ii) if shares are not
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represented by certificates, upon compliance with such transfer procedures as
may be approved by the Board of Directors or prescribed by applicable law.
8.2 Subject to the rules of any stock exchange on which the shares in
question may be listed and except as otherwise expressly provided by the terms
of issue of the shares of any class or series, the Board of Directors may, in
its absolute discretion and without assigning any reason therefore, decline to
register any transfer of any share. The registration of transfers may be
suspended at such times and for such periods as the Board of Directors may from
time to time determine provided always that such registration shall not be
suspended for more than 30 days in any year.
IX. NONRECOGNITION OF TRUSTS
9.1 The Company shall be entitled to treat the holder of record of any
share as the holder in fact thereof and accordingly shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, except as expressly provided by law. The Company shall not be required
to recognize any person as holding any share upon any trust, and the Company
shall not be bound by or be compelled in any way to recognize (even when having
notice thereof) any equitable, contingent, future or partial interest in any
share, any interest in any fractional part of a share (subject to Section 3.5),
or (except only as is otherwise provided by these Articles or the Statute) any
other rights in respect of any share except an absolute right to the entirety
thereof in the registered holder.
X. LIEN ON SHARES
10.1 The Company shall have a first and paramount lien and charge on all
shares (not being a fully paid share) registered in the name of a Member
(whether solely or jointly with others) for all debts, liabilities or
engagements to or with the Company (whether presently payable or not) by such
Member or his estate, either alone or jointly with any other person, whether a
Member or not, but the Board of Directors may at any time declare any share to
be wholly or in part exempt from the provisions of this Article X. The
registration of a transfer of any such share shall operate as a waiver of the
Company's lien (if any) thereon. The Company's lien (if any) on a share shall
extend to all dividends, redemptions or other monies payable in respect thereof.
10.2 The Company may sell, in such manner as the Board of Directors deems
fit, any shares on which the Company has a lien, except as set forth in this
Article X. Unless otherwise permitted in the instrument creating such lien, no
such sale shall be made unless a sum in respect of which the lien exists is
presently payable. Unless otherwise permitted in the instrument creating such
lien, no such sale shall be made until the expiration of 14 days after a notice
in writing, stating and demanding payment of such part of the amount in respect
of which the lien exists as is presently payable, has been given to the holder
or holders for the time being of the shares, or the person, of which the Company
has notice, entitled thereto by reason of his death or bankruptcy.
10.3 To give effect to any such sale, the Board of Directors may authorize
some person to transfer the shares sold to the purchaser thereof. The purchaser
shall be registered as the holder of the shares included in any such transfer,
and he shall not be bound to see to the application of the purchase money, nor
shall his title to the shares be affected by any irregularity or invalidity in
the proceedings in reference to the sale.
10.4 The proceeds of the sale of such shares shall be received by the
Company and applied in payment of such part of the amount in respect of which
the lien exists as is presently payable, and the residue, if any, shall (subject
to a like lien for sums not presently payable as existed upon the shares before
the sale) be paid to the person entitled to the shares at the date of the sale.
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XI. CALL ON SHARES
11.1 (a) The Board of Directors may from time to time make calls upon the
Members in respect of any monies unpaid on their shares (whether on account of
the nominal value of the shares or by way of premium or otherwise) and not by
the conditions of allotment thereof made payable at fixed terms; and each Member
shall, subject to receiving at least 14 days' notice (or some shorter period of
notice as may have been authorized by the terms on issue of the shares)
specifying the time or times of payment, pay to the Company at the time or times
so specified the amount called on the shares. A call may be revoked or postponed
as the Board of Directors may determine. A call may be made payable by
installments.
(b) A call shall be deemed to have been made at the time when the
resolution of the Board of Directors authorizing such call was passed unless
otherwise provided by the Board of Directors.
(c) The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
11.2 If a sum called in respect of a share is not paid before or on the
day appointed for payment thereof, the persons from whom the sum is due shall
pay interest on the sum from the day appointed for payment thereof to the time
of actual payment at such rate not exceeding ten percent (10%) per annum as the
Board of Directors may determine, but the Board of Directors shall be at liberty
to waive payment of such interest either wholly or in part.
11.3 Any sum which by the terms of a share becomes payable on allotment or
at any fixed date, whether on account of the nonfinal value of the share or by
way of premium or otherwise, shall for the purposes of these Articles be deemed
to be a call duly made, notified and payable on the date on which by the terms
of issue the same becomes payable, and in the case of nonpayment, all the
relevant provisions of these Articles as to payment of interest, forfeiture or
otherwise shall apply as if such sum had become payable by virtue of a call duly
made and notified.
11.4 The Board of Directors may, on the issue of shares, differentiate
between the holders as to the amount of calls or interest to be paid and the
times of payment.
11.5 (a) The Board of Directors may, if it thinks fit, receive from any
Member willing to advance the same, all or any part of the monies uncalled and
unpaid upon any shares held by him, and upon all or any of the monies so
advanced may (until the same would but for such advances, become payable) pay
interest at such rate as may be agreed upon between the Company and the Member
paying such sum in advance.
(b) No such sum paid in advance of calls shall entitle the Member paying
such sum to any portion of a dividend declared in respect of any period prior to
the date upon which such sum would, but for such payment, become presently
payable.
XII. FORFEITURE OF SHARES
12.1 (a) If a Member fails to pay any call or installment of a call or to
make any payment required by the terms of issue on the day appointed for payment
thereof, the Board of Directors may, at any time thereafter during such time as
any part of the call, installment or payment remains unpaid, give notice
requiring payment of so much of the call, installment or payment as is unpaid,
together with any interest which may have accrued and all expenses that have
been incurred by the Company by reason of such nonpayment. Such notice shall
name a day (not earlier than the expiration of 14 days from the date of giving
of the notice) on or before which the payment required by the notice is to be
made and shall state that, in the event of nonpayment at or before the time
appointed, the shares in respect of which such notice was given will be liable
to be forfeited.
(b) If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which the notice has been given may at any time
thereafter, before the payment required by the notice has been made, be
forfeited by a resolution of the Board of Directors to that effect. Such
forfeiture shall include all dividends declared in respect of the forfeited
share and not actually paid before the forfeiture.
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(c) A forfeited share may be sold or otherwise disposed of on such terms
and in such manner as the Board of Directors deems fit, and at any time before a
sale or disposition the forfeiture may be canceled on such terms as the Board of
Directors thinks fit.
12.2 A person whose shares have been forfeited shall cease to be a Member
in respect of the forfeited shares, but shall, notwithstanding, remain liable to
pay to the Company all monies which, at the date of forfeiture, were payable by
him to the Company in respect of the shares together with interest thereon, but
his liability shall cease if and when the Company shall have received payment in
full of all monies whenever payable in respect of the shares.
12.3 A certificate in writing under the hand of the President or any Vice
President and the Secretary of the Company that a share in the Company has been
duly forfeited on a date stated in the declaration shall be conclusive evidence
of the fact therein stated as against all persons claiming to be entitled to the
share. The Company may receive the consideration given for the share on any sale
or disposition thereof and may execute a transfer of the share in favor of the
person to whom the share is sold or disposed of, and that person shall thereupon
be registered as the holder of the share and shall not be bound to see to the
application of the purchase money, if any, nor shall that person's title to the
share be affected by any irregularity or invalidity in the proceedings in
reference to the forfeiture, sale or disposal of the share.
12.4 The provisions of these Articles as to forfeiture shall apply in the
case of nonpayment of any sum which, by the terms of issue of a share, becomes
payable at a fixed time, whether on account of the nominal value of the share or
by way of premium as if the same had been payable by virtue of a call duly made
and notified.
XIII. TRANSMISSION OF SHARES ON DEATH OR BANKRUPTCY
13.1 In case of the death of a Member who is a natural person, the
survivor or survivors, where the deceased was a joint holder, and the legal
personal representatives of the deceased, where he was a sole holder, shall be
the only persons recognized by the Company as having any title to his interest
in the shares, but nothing herein contained shall release the estate of any such
deceased holder from any liability in respect of any shares which had been held
by him solely or jointly with other persons.
13.2 (a) Any person becoming entitled to a share in consequence of the
death or bankruptcy of a Member (or in any other way than by transfer) may, upon
such evidence being produced as may from time to time be required by the Board
of Directors and subject as hereinafter provided, elect either to be registered
himself as holder of the share or to make such transfer of the share to such
other person nominated by him as the deceased or bankrupt person could have made
and to have such person registered as the transferee thereof, but the Board of
Directors shall, in either case, have the same right to decline or suspend
registration as they would have had in the case of a transfer of the share by
that Member before his death or bankruptcy, as the case may be.
(b) If the person so becoming entitled shall elect to be registered himself
as holder he shall deliver or send to the Company a notice in writing signed by
him stating that he so elects.
13.3 A person becoming entitled to a share by reason of the death or
bankruptcy of the holder (or in any other case than by transfer) shall be
entitled to the same dividends and other advantages to which he would be
entitled if he were the registered holder of the share, except that he shall
not, before being registered as a Member in respect of the share, be entitled in
respect of it to exercise any right conferred by membership in relation to
meetings of the Company; provided, however, that the Board of Directors may at
any time give notice requiring any such person to elect either to be registered
himself or to transfer the share and if the notice is not complied with within
90 days the Board of Directors may thereafter withhold payment of all dividends,
bonuses or other monies payable in respect of the share until the requirements
of the notice have been complied with.
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XIV. AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF
LOCATION OF REGISTERED OFFICE AND ALTERATION OF CAPITAL
14.1 (a) Subject to and insofar as permitted by the provisions of the
Statute, the Company may from time to time by Special Resolution alter or amend
the Memorandum and, without restricting the generality of the foregoing, the
Company may by ordinary Resolution:
(i) increase the share capital by such sum to be divided into shares
of such amount or without nominal or par value as the resolution shall
prescribe;
(ii) consolidate all or any of its share capital into shares of larger
amount than its existing shares;
(iii) by subdivision of all of its existing shares or any class or
series of shares, divide the whole or any part of its share capital into
shares of smaller amount than is fixed by the Memorandum; or
(iv) cancel any shares which at the date of the passing of the
resolution have not been taken or agreed to be taken by any person or
reserved for issue by the Board of Directors.
(b) All new shares created hereunder shall be subject to the same
provisions with reference to the payment of calls, liens, transfer,
transmission, forfeiture and otherwise as the shares in the original share
capital.
(c) Subject to the provisions of the Statute, the Company may by Special
Resolution reduce its share capital or any capital redemption reserve fund.
14.2 Subject to the provisions of the Statute, the Company may by Special
Resolution change its name.
14.3 Subject to the provisions of the Statute, the Board of Directors may
change the location of the Company's registered office.
XV. CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
15.1 For the purpose of determining Members entitled to notice of or to
vote at any general meeting of the Company or any adjournment thereof, or
Members entitled to receive payment of any dividend or other distribution or
allotment of any rights of the Members entitled to exercise any rights in
respect of any charge, change, conversion or exchange of shares or for the
purpose of any other lawful action, the Board of Directors may provide that the
Register shall be closed for transfers for a stated period.
15.2 In lieu of or apart from closing the Register, the Board of Directors
may fix in advance a date as the record date for any such determination of
Members entitled to notice of or to vote at a general meeting of the Company;
provided, however, that such record date shall not be more than 60 nor less than
10 days prior to such meeting. For the purpose of determining the Members
entitled to receive payment of any dividend or other distribution or allotment
of any rights of the Members entitled to exercise any rights in respect of any
charge, change, conversion or exchange of shares, or for the purpose of any
other lawful action, the Board of Directors may, at or within 60 days prior to
the date of declaration of such dividend or other action, fix a subsequent date
no later than the date of declaration as the record date for such determination.
15.3 If the Register is not so closed and no record date is fixed for the
determination of Members entitled to notice of or to vote at a general meeting
of the Company, the date preceding the day on which notice of the meeting is
given or if notice is waived, at the close of business on the day preceding the
day on which the meeting is held shall be the record date for such determination
of Members. When a determination for Members entitled to vote at any general
meeting of the Company has been made as provided in this Article XV, such
determination shall apply to any adjournment thereof; provided, however, that
the Board of Directors may fix a new record date for the adjourned meeting.
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15.4 If the Register is not so closed and no record date is fixed for the
determination of Members entitled to receive payment of any dividend or other
distribution or allotment of any rights of the Members entitled to exercise any
rights in respect of any charge, change, conversion or exchange of shares, or
for the purpose of any other lawful action (other than as specified in Section
15.3), the record date for determining the Members for any such purpose shall be
the close of business on the day in which the Board of Directors adopts the
resolution relating thereto.
XVI. VOTING
16.1 Subject to the rights of holders of any class or series of shares:
(a) at each election for Directors at a general meeting of the Company
the Directors shall be elected by a plurality of the votes cast in person
or by proxy at that general meeting and each Member holding Ordinary Shares
shall have the right to vote, in person or by proxy, the number of Ordinary
Shares registered in his name in the Register for as many persons as there
are Directors to be elected and for whose election he has a right to vote.
Cumulative voting, for the election of Directors, is expressly prohibited.
Election of Directors need not be by ballot; and
(b) on all matters coming before the Members at a general meeting of
the Company, other than the election of Directors, each Member holding
Ordinary Shares shall have the right to vote, in person or by proxy, one
vote for each issued Ordinary Share registered in his name in the Register.
XVII. GENERAL MEETINGS
17.1 (a) The Company shall in each year of its existence hold a general
meeting of the Company as its annual general meeting. The annual general meeting
shall be held on such date and at such time and place as the Board of Directors
shall appoint. At each annual general meeting, elections shall be held for
Directors whose terms have expired and such other business may be transacted as
may properly be brought before such meeting.
(b) At each annual general meeting of the Company, the Directors to be
elected at that meeting shall be elected by single resolution for the applicable
term or until their respective successors have been elected.
17.2 (a) Except as otherwise required by law, and subject to the rights of
any class or series of shares having a preference over the Ordinary Shares as to
dividends or to elect Directors in specified circumstances, extraordinary
general meetings of the Company may be called only by resolution of the Board of
Directors, approved by at least a majority of the entire Board of Directors.
(b) Any action required or permitted to be taken by the Members
whether pursuant to these Articles or by law, must be taken at a duly
called annual or extraordinary general meeting of the Company unless the
written consent or approval of all holders of issued shares generally
entitled to vote has been obtained with respect to such action.
17.3 No Member shall have any right to requisition a general meeting of
the Company.
XVIII. NOTICE OF GENERAL MEETINGS
18.1 Written notice of each general meeting of the Company stating the
place, date and time of the meeting shall be given not less than 10 (or such
greater number of days as may be required by the Statute) nor more than 60 days
before the date of the meeting to each Member entitled to vote at such meeting.
The notice of each general meeting of the Company shall state the purpose or
purposes for which the meeting is called. The business at an annual general
meeting of the Company shall be limited in the manner set out in Section
19.2(c). No business shall be transacted at any extraordinary general meeting of
the Company except as stated in the notice.
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18.2 The accidental omission to give notice of a general meeting of the
Company to, or the nonreceipt of notice of such a meeting by, any person
entitled to receive notice shall not invalidate the proceedings of that meeting.
XIX. PROCEEDINGS AT GENERAL MEETINGS
19.1 No business shall be transacted at any general meeting of the Company
unless a quorum of Members is present at the time when the meeting proceeds to
business. At a general meeting of the Company to:
(a) consider or adopt a Special Resolution to amend, vary, suspend the
operation of or disapply Sections 17, 19, 21.1, 26 or 27 (other than a
Special Resolution referred to in Section 19.1(b)), one or more Members
present in person or by proxy holding at least 95 percent of the issued
shares entitled to vote at such meeting shall be a quorum unless:
(i) a majority of the Board of Directors has at, or at any time
prior to, the meeting recommended to the Members entitled to vote at
such meeting, to vote in favor of such Special Resolution; and
(ii) in the case of a Special Resolution to amend, vary, suspend
the operation of or disapply Section 27 (other than a Special Resolution
referred to in Section 19.1(b)), such Board of Directors' recommendation
is made at a time where a majority of the Board of Directors then in
office (but not less than one) were Directors prior to any person
becoming an Interested Member (as defined in Section 27) during the
previous three years or were recommended for election or elected to
succeed such Directors by a majority of such Directors, in which case
one or more Members present in person or by proxy holding at least a
majority of the issued shares entitled to vote at such meeting shall be
a quorum;
(b) consider or adopt a Special Resolution to delete Section 27 on the
conditions that (i) such resolution shall not be effective until 12 months
after the passing of such resolution and (ii) the restriction in Section 27
shall otherwise continue to apply to any Business Combination between the
Company and any person who became an Interested Member on or prior to the
passing of such resolution, one or more Members present in person or by
proxy holding at least a majority of the issued shares entitled to vote at
such meeting shall be a quorum; and
(c) consider or adopt any other resolution or to take any other
action, one or more Members present in person or by proxy holding at least
a majority of the issued shares generally entitled to vote at such meeting
shall be a quorum.
The Members present at a duly constituted general meeting of the Company
may continue to transact business until adjournment, despite the withdrawal of
such Members as leave less than a quorum.
19.2 (a) Subject to the rights of holders of any class of shares to the
contrary, nominations for election of Directors at any general meeting of the
Company may be made either by the Board of Directors or by any Member entitled
to vote for the election of Directors who gives advance notice as hereafter
provided. Any such Member may nominate persons for election as Directors only if
written notice of such Member's intent to make such nomination is transmitted
to, and received by, the Secretary at the principal executive offices of the
Company not later than (i) in the case of an annual general meeting of the
Company, not less than 90 days prior to the anniversary of the date of the
immediately preceding annual general meeting that was specified in the initial
formal notice of such meeting (but if the date of the forthcoming annual general
meeting is more than 30 days before or after such anniversary date, such written
notice must instead be received by the Secretary by the close of business on the
10th day following the date on which the Company first makes public disclosure
of the meeting date) and (ii) in the case of an extraordinary general meeting of
the Company (provided that the Board of Directors has determined that Directors
shall be elected at such meeting), the close of business on the 10th day
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following the date on which the Company first makes public disclosure of the
meeting date. Each notice given by such Member shall set forth: (i) the name and
address of the Member who intends to make the nomination and of the person or
persons to be nominated; (ii) a representation that the Member is a registered
holder of shares entitled to vote at such meeting (or if the record date for
such meeting is subsequent to the date required for such Member notice, a
representation that the Member is such a registered holder at the time of such
notice and intends to be a registered holder on the date for such meeting), and
setting forth the class and number of shares so held (including shares held
beneficially); (iii) a representation that such Member intends to appear in
person or by proxy as a registered holder of shares at the meeting to nominate
the person or persons specified in the notice; (iv) a description of all
arrangements or understandings between such Member and any other person or
persons (identifying such person or persons) pursuant to which the nomination or
nominations are to be made by the Member; (v) such other information regarding
each nominee proposed by such Member as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission of the United States of America; and (vi) the consent of each nominee
to serve as a director of the Company if so elected.
(b) If the facts show that a nomination was not made in accordance with the
provisions of Section 19.2(a), the presiding officer of the general meeting
shall so determine and declare to the meeting, whereupon the defective
nomination shall be disregarded. Public disclosure of the date of a forthcoming
general meeting may be made by the Company for purpose of this Section 19.2 not
only by the giving of the formal notice of the meeting, but also (i) by notice
to a national securities exchange (as such term is used in the Securities
Exchange Act of 1934, as amended of the United States of America (the "Exchange
Act") or to the National Association of Securities Dealers, Inc. (if the
Ordinary Shares are then listed on such exchange or quoted on NASDAQ), (ii) by
filing a report under Section 13 or 15(d) of the Exchange Act (if the Company is
then subject thereto) or (iii) by a mailing to Members or by issuance of a
general press release.
(c) No business shall be transacted at an annual general meeting of the
Company other than such business as shall be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (iii) brought before the meeting by a
Member present and entitled to vote at such meeting in accordance with the
following procedure. For business to be brought before an annual general meeting
of the Company by a Member, the Member must have given timely notice in writing
to the Secretary. To be timely, a Member's notice must be transmitted to, and
received by, the Secretary at the principal executive offices of the Company not
less than 90 days prior to the anniversary of the date of the immediately
preceding annual general meeting that was specified in the initial formal notice
of such meeting (but if the date of the forthcoming annual general meeting is
more than 30 days before or after such anniversary date, such written notice
must instead be received by the Secretary by the close of business on the 10th
day following the date on which the Company first makes public disclosure of the
meeting date). Each such notice given by such Member must set forth: (1) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (2) the name and address of
the Member who intends to propose such business; (3) a representation that the
Member is a registered holder of shares entitled to vote at such meeting (or if
the record date for such meeting is subsequent to the date required for such
Member notice, a representation that the Member is a registered holder at the
time of such notice and intends to be a registered holder on the date of such
meeting) and intends to appear in person or by proxy at such meeting to propose
such business; and (4) any material interest of the Member in such business. The
presiding officer of the meeting may refuse to transact any business at any
meeting made without compliance with the foregoing procedure.
(d) Notwithstanding the provisions of Section 19.2, a Member also shall
comply with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in Section 19.2.
Nothing in Section 19.2 shall be deemed to affect any rights of Members to
request inclusion of proposals in the Company's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
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19.3 The Chairman of the Board of Directors appointed by the Board of
Directors prior to the relevant general meeting of the Company or, in his
absence, a person designated by the Chairman of the Board of Directors, or if no
person is so designated, a person designated by the Board of Directors shall
preside at any meeting of the Members and determine the order of business and
all other matters relating to the conduct of the meeting.
19.4 The presiding officer of any meeting of the Members shall have the
power to prescribe such rules, regulations and procedures and to do all such
things as in his judgment may be necessary or desirable for the proper conduct
of the meeting, including, without limitation, the establishment of procedures
for the maintenance of order and safety, the right of Directors, Members and
others to speak, limitations on the time allotted to questions or comments,
restrictions on entry to the meeting after the time scheduled for the
commencement thereof and the opening and closing of the voting polls.
19.5 The presiding officer may, with the consent of a majority of the
Members present and entitled to vote at any general meeting duly constituted
hereunder, adjourn the meeting from time to time and from place to place, but no
business shall be transacted at any adjourned meeting other than the business
left unfinished at the meeting from which the adjournment took place. When a
general meeting is adjourned for 30 days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting; save as aforesaid
it shall not be necessary to give any notice of an adjournment or of the
business to be transacted at an adjourned general meeting.
19.6 In the case of joint registered holders, the vote of the senior
holder who tenders a vote, whether in person or by proxy, shall be accepted to
the exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register.
19.7 No Member shall be entitled to vote at any general meeting of the
Company unless (a) he is registered as a Member on the record date for such
meeting or holds a valid proxy of such a Member or unless (b) all calls or other
sums presently payable in respect of the shares to be voted have been paid.
19.8 Votes may be given either personally or by proxy.
XX. PROXIES
20.1 The instrument appointing a proxy shall be in writing and shall be
executed under the hand of the appointor or his attorney duly authorized in
writing, or, if the appointor is a corporation or other legal entity, under the
hand of an officer, attorney or where applicable, trustee duly authorized in
that behalf. A proxy need not be a Member. Each Member entitled to vote at a
general meeting of the Company may authorize another person or persons to act
for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy specifically provides for a longer period.
If an instrument of proxy designates two or more persons to act as proxies,
their acts with respect to voting shall have the following effect: (a) if only
one proxy acts, his acts bind all; (b) if more than one proxy acts, the act of
the majority binds all; and (c) if more than one acts and a majority do not
agree on a particular issue, each proxy shall be entitled to vote in respect of
the same portion of the shares as such proxy is of the proxies representing such
shares.
20.2 The instrument appointing a proxy shall be deposited at the principal
executive offices of the Company or at such other place as is specified for that
purpose in the notice convening the meeting no later than the time for holding
the meeting, or adjourned meeting; provided that the presiding officer of the
meeting may at his discretion direct that an instrument of proxy shall be deemed
to have been duly deposited upon receipt of facsimile transmission of the signed
proxy or upon receipt of telex or cable confirmation from the appointor that the
instrument of proxy duly signed is in the course of transmission to the Company.
20.3 The instrument appointing a proxy may be in any usual or common form
and may be expressed to be for a particular meeting or any adjournment thereof.
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20.4 A vote given in accordance with the term of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the principal
or revocation of the proxy or of the authority under which the proxy was
executed, or the transfer of the share in respect of which the proxy is given
provided that no notice in writing of such death, insanity, revocation or
transfer as aforesaid shall have been received by the Company at its principal
executive offices before the commencement of the general meeting, or adjourned
meeting, at which it is sought to use the proxy.
20.5 Any corporation or other legal entity, which is a Member, may in
accordance with its articles of association or other governing documents or in
the absence of such provision by resolution of its board of directors or other
governing body authorize such person as it thinks fit to act as its
representative at any general meeting of the Company, and the person so
authorized shall be entitled to exercise the same powers on behalf of the
corporation or other legal entity which he represents as the corporation or
entity could exercise if it were an individual Member.
XXI. DIRECTORS
21.1 (a) There shall be a Board of Directors the members of which shall be
elected by the Members in accordance with Section 16.1 or appointed by the Board
of Directors in accordance with this Article XXI consisting of not less than two
nor more than 13 persons plus that number of directors as any one or more class
or series of shares (other than Ordinary Shares) may be entitled to elect,
voting separately by class or series. The Board of Directors shall have the
exclusive power and right to set the exact number of Directors within that range
from time to time by resolution adopted by the vote of a majority of the whole
Board of Directors.
(b) Except as set out in Section 21(f), the Directors shall be divided into
three classes, designated by Class I, Class II and Class III. At the 2000 annual
general meeting of the Company, Class I Directors shall be elected for a term
expiring at the 2003 annual general meeting of the Company. At the 2001 annual
general meeting of the Company, Class II Directors shall be elected for a term
expiring at the 2004 annual general meeting of the Company. At the 2002 annual
general meeting of the Company, Class III Directors shall be elected for a term
expiring at the 2005 annual general meeting of the Company. At each annual
general meeting of the Company, each class of Directors whose term shall then
expire shall be elected to hold office for a three-year term and until the
election of their respective successors in office or their earlier death,
resignation or removal.
(c) If the number of Directors is decreased by resolution of the Board of
Directors pursuant to this Section 21.1, in no case shall that decrease or
shorten the term of any incumbent Director.
(d) Any newly created directorship resulting from an increase in the number
of Directors and any other vacancy on the Board of Directors, however caused,
may only be filled by a majority of the Directors then in office, although less
than a quorum, or by a sole remaining Director. Any Director elected by the
Board of Directors to fill a vacancy shall hold office until the annual general
meeting of the Company for the year in which the term of the Director vacating
office expires and until his successor shall have been elected. Any newly
created directorship resulting from an increase in the number of Directors may
be created in any Class of Directors that the Board of Directors may determine,
and any Director elected to fill the newly created vacancy shall hold office
until the term of office of such Class expires.
(e) One or more or all of the Directors may be removed only for "cause" by
the affirmative vote of the holders of at least a majority of the issued shares
generally entitled to vote, voting together as a single class, at a general
meeting of the Company for which proper notice of the proposed removal has been
given. As used in the preceding sentence, "cause" shall be limited to (i) action
by the Director involving willful malfeasance, which conduct has a material
adverse effect on the Company, or (ii) conviction of the Director of a felony.
The Board of Directors shall not have any power to remove any Director.
(f) Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of shares in issue has the right, voting separately by class
or series, to elect Directors at an annual general meeting or extraordinary
general meeting of the Company, the election, term of office, filling of
vacancies
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and other features of such directorships shall be governed by the provisions of
these Articles. Directors so elected shall not be divided into classes and shall
be elected by such holders annually unless expressly provided otherwise by those
provisions or resolutions. The aforesaid Directors and the Directors appointed
under Section 21.1 shall together constitute the Board of Directors from time to
time.
21.2 Each Director shall be entitled to receive as compensation for such
Director's services as a Director or committee member or for attendance at
meetings of the Board of Directors or committees, or both, such amounts (if any)
as shall be fixed from time to time by the Board of Directors. Each Director
shall be entitled to reimbursement for reasonable traveling expenses incurred by
such Director in attending any such meeting.
21.3 A Director may hold any other office (other than as an outside
auditor of the Company) or place of profit under the Company in conjunction with
his office of Director for such period and on such terms as to remuneration and
otherwise as the Board of Directors may determine.
21.4 A Director may act by himself or for his firm in a professional
capacity for the Company (other than as an outside auditor of the Company), and
he or his firm shall be entitled to remuneration for professional services as if
he were not a Director; provided, however, that he has disclosed his interest in
the transaction at the first meeting held to consider the transaction or as soon
thereafter as he becomes interested in the transaction.
21.5 No membership qualifications for Directors shall be required.
21.6 A Director may be or become a director or other officer of or
otherwise interested in any company promoted by the Company or in which the
Company may be interested as shareholder, member or otherwise, and no such
Director shall be accountable to the Company for any remuneration or other
benefits received by him as a director or officer of, or from his interest in,
such other company.
21.7 No person shall be disqualified from the office of Director or
prevented by such office from contracting with the Company, either as vendor,
purchaser or otherwise, nor shall any such contract or any contract or
transaction entered into by or on behalf of the Company in which any Director
shall be in any way interested or be liable to be avoided, nor shall any
Director so contracting or being so interested be liable to account to the
Company for any profit realized by any such contract or transaction by reason of
such Director holding office or of the fiduciary relation thereby established;
provided, however, that he has disclosed his interest in the transaction at the
first meeting held to consider the transaction or as soon thereafter as he
becomes interested in the transaction. A Director shall be at liberty to vote in
respect of any contract or transaction in which he is so interested as
aforesaid; provided, however, that the nature of the interest of any Director in
any such contract or transaction shall be disclosed by him at or prior to its
consideration and any vote thereon.
21.8 A general notice that a Director is a member of any specified firm or
company and is to be regarded as interested in any transaction with such firm or
company shall be sufficient disclosure under Section 21.7 and after such general
notice it shall not be necessary to give special notice relating to any
particular transaction.
21.9 The Directors may exercise all the powers of the Company to provide
pensions or other retirement or superannuation benefits and to provide death or
disability benefits or other allowances or gratuities (by insurance or
otherwise) for a person who is or has at any time been a Director of (a) the
Company, (b) a company which is or was an affiliate of the Company, or (c) a
predecessor in business of the Company or of an affiliate of the Company (or, in
each case, for any member of his family, including a spouse or former spouse, or
a person who is or was dependent on him). For this purpose, the Directors may
establish, maintain, subscribe and contribute to any scheme, plan, trust or fund
and pay premiums thereon. The Directors may arrange for this to be done by the
Company alone or in conjunction with another person.
21.10 A Director or former Director is entitled to receive and retain for
his own benefit a pension or other benefit provided under Section 21.9 and is
not obliged to account for it to the Company.
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21.11 A Director may appoint any person to act as his proxy only in
respect of the annual meeting of the Board of Directors required to be held in
the Cayman Islands in each year pursuant to the Statute. Any proxy appointed for
the purposes of any such meeting will have authority only to vote in respect of
the approval of the Company's annual return to the Cayman Islands Registrar of
Companies. Such appointment must be made in writing under the hand of the
appointor and may at any time be revoked in like manner, and notice of every
such appointment or revocation in like manner, and the appointee need not be a
Director or Member, but he must furnish the Company with his address.
XXII. POWERS AND DUTIES OF DIRECTORS
22.1 The business and affairs of the Company shall be managed by the Board
of Directors who may exercise all such powers of the Company and do all such
lawful acts and things as are not from time to time by the Statute or by these
Articles required to be exercised or done by the Company in general meeting.
22.2 The Board of Directors may from time to time and at any time by
powers of attorney appoint any company, firm, person or body of persons, whether
nominated directly or indirectly by the Board of Directors, to be the attorney
or attorneys of the Company for such purpose and with such powers, authorities
and discretions (not exceeding those vested in or exercisable by the Board of
Directors under these Articles) and for such period and subject to such
conditions as it may think fit, and any such powers of attorney may contain such
provisions for the protection and convenience of persons dealing with any such
attorneys as the Board of Directors may deem fit and may also authorize any such
attorney to delegate all or any of the powers, authorities and discretions
vested in him.
22.3 All checks, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for monies paid to the Company shall be
signed, drawn, accepted, endorsed or otherwise executed as the case may be by
such officer or officers or such other person or persons as the Board of
Directors shall from time to time designate.
22.4 The Board of Directors shall cause minutes to be made for the purpose
of recording the proceedings at all meetings of the Company and the Directors
and of committees of the Board of Directors.
22.5 The Board of Directors may exercise all the powers of the Company to
borrow money and to mortgage or charge its undertaking, property and uncalled
capital or any part thereof and to issue debentures, debenture stock and other
securities whether outright or as security for any debt, liability or obligation
of the Company or of any third party.
22.6 The Board of Directors may authorize any officer, officers, agent or
agents to enter into any contract or agreement of any nature whatsoever,
including, without limitation, any contract, deed, bond, mortgage, guaranty,
deed of trust, security agreement, pledge agreement, act of pledge, collateral
mortgage, collateral chattel mortgage or any other document or instrument of any
nature whatsoever, and to execute and deliver any such contract, agreement,
document or other instrument of any nature whatsoever for and in the name of and
on behalf of the Company, and such authority may be general or confined to
specific instances.
22.7 If, as the result of consolidation and division or subdivision of
shares, Members become entitled to fractions of a share, the Board of Directors
may on behalf of the Members deal with the fractions as it thinks fit. In
particular, the Board of Directors may:
(a) sell fractions of a share to a person (including, subject to the
Statute, to the Company) for the best price reasonably obtainable and
distribute the net proceeds of sale in due proportion amongst the persons
entitled (except that if the amount due to a person is less than US$10, or
such other sum as the Board of Directors may decide, the sum may be
retained for the benefit of the Company) and to give effect to such a sale
the Board of Directors may authorize a person to transfer the shares to the
purchaser or his nominee and may cause the name of the purchaser or his
nominee to be entered
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in the register as the holder of the shares. The purchaser is not bound to
see to the application of the purchase money and the title of the
transferee to the shares is not affected by an irregularity or invalidity
in the proceedings connected with the sale; or
(b) subject to these Articles, allot or issue to a member credited as
fully paid by way of capitalization the minimum number of shares required
to round up his holding of shares to a number which, following
consolidation and division or subdivision, leaves a whole number of shares
(such allotment or issue being deemed to have been effected immediately
before consolidation or subdivision, as the case may be) and if shares are
so allotted or issued the amount required to pay-up those shares may be
capitalized as the Board of Directors thinks fit out of amounts standing to
the credit of reserves (including a share premium account, capital
redemption reserve and profit and loss account), whether or not available
for distribution, and applied in paying-up in full the appropriate number
of shares. A resolution of the Board of Directors capitalizing part of the
reserves has the same effect as if the capitalization had been declared by
Ordinary Resolution.
XXIII. COMMITTEES
23.1 The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each committee to
consist of one or more of the Directors, as designated by the Board of
Directors. The Board of Directors may designate one or more alternate Directors
as members of any committee, who may replace any absent member at any meeting of
the committee. In the absence of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent member. At all
meetings of any committee, a majority of its members (or the member, if only
one) shall constitute a quorum for the transaction of business, and the act of a
majority of the members present shall be the act of any such committee, unless
otherwise specifically provided by the Statute, the Memorandum, these Articles
or the resolution establishing such committee. The Board of Directors shall have
the power at any time to change the number and members of any such committee, to
fill vacancies and to discharge any such committee.
23.2 Any such committee, to the extent provided in the resolution of the
Board of Directors but subject to any limitations of the Statute, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Company and may authorize the seal
of the Company to be affixed to all papers that may require it. The provisions
herein with respect to notice of meetings of the Board of Directors shall apply
also to meetings of committees, unless different provisions shall be prescribed
by the Board of Directors. Each committee shall serve at the pleasure of the
Board of Directors. It shall keep minutes of its meetings and report the same to
the Board of Directors when required and shall observe such procedures as are
prescribed by the Board of Directors.
23.3 The committees of the Board of Directors may include the Audit
Committee, the Executive Compensation Committee, the Finance/Benefits Committee
and the Corporate Governance Committee and any other committees designated by
the Board of Directors.
XXIV. PROCEEDINGS OF DIRECTORS
24.1 Except as otherwise provided by these Articles, the Board of
Directors shall meet together for the dispatch of business, convening,
adjourning and otherwise regulating its meetings as it thinks fit. Questions
arising at any meeting shall be decided by a majority of the Directors present
at a meeting at which there is a quorum.
24.2 Regularly scheduled meetings of the Board of Directors may be held at
such time and at such place as shall from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the Chief Executive Officer, the
President or a majority of the Directors.
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24.3 No notice need be given of any regular meeting of the Board of
Directors or of any adjourned meeting of the Board of Directors. No notice need
be given to any Director who signs a written waiver thereof or who attends the
meeting without protesting the lack of notice. Notices need not state the
purpose of the meeting. Attendance of a Director at any meeting shall constitute
a waiver of notice of such meeting, except when a Director attends and makes it
known that he is attending for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully
convened, and such purpose is duly recorded in the minutes of such meeting.
24.4 Notice of each special meeting of the Board of Directors shall be
given to each Director either by first class United States mail at least three
days before the meeting, by "overnight" or other express delivery service at
least two days before the meeting, or by telegram, telex, cable, telecopy,
facsimile, personal written delivery or telephone at least one day before the
meeting. Any notice given by telephone shall be immediately confirmed by
telegram, telex, cable, telecopy or facsimile. Notices are deemed to have been
given: by mail, when deposited in the United States mail with postage prepaid;
by "overnight" or other express delivery service, the day after sending; by
telegram, telex, or cable, at the time of sending; by telecopy or facsimile,
upon receipt of a transmittal confirmation; and by personal delivery or
telephone, at the time of delivery. Written notices shall be sent to a director
at the address designated by such Director for that purpose or, if none has been
so designated, at such director's last known residence or business address.
24.5 The quorum necessary for the transaction of the business of the Board
of Directors shall be a majority of the whole Board of Directors.
24.6 All acts done at any meeting of the Board of Directors or of a
committee of the Board of Directors shall, notwithstanding that it be afterwards
discovered that there was some defect in the appointment of any Director be as
valid as if every such person had been duly appointed and qualified to be a
Director.
24.7 Any one or more members of the Board of Directors or any committee
thereof may participate in a meeting of such Board of Directors or committee by
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
24.8 A resolution in writing (in one or more counterparts) signed by all
the Directors or all the members of a committee of Directors shall be as valid
and effectual as if it had been passed at a meeting of the Board of Directors or
committee, as the case may be, duly convened and held.
XXV. VACATION OF OFFICE OF DIRECTOR
25.1 The office of a Director shall be vacated:
(a) if he gives notice in writing to the Board of Directors or
Secretary that he resigns the office of Director;
(b) if he dies;
(c) if he is found to be or becomes of unsound mind; or
(d) if removed pursuant to Section 21.1.
25.2 In the case of a resignation, the resignation shall be effective as
of the date specified in the notice or if not so specified, upon receipt
thereof. Unless otherwise specified in the notice, acceptance shall not be
required to make it effective.
25.3 A resolution of the Board of Directors declaring a Director to have
vacated office under the terms of Section 25.1 is conclusive evidence as to the
fact and grounds of vacation stated in the resolution.
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XXVI. CERTAIN BUSINESS COMBINATIONS
26.1 In addition to any approval by Members required pursuant to the terms
of any series or class of shares other than Ordinary Shares, the approval of the
holders of at least a majority of the issued shares generally entitled to vote
at a meeting called for such purpose, following approval by the Board of
Directors shall be required in order for the Company "to sell, lease or exchange
all or substantially all of its property or assets" as that phrase is
interpreted for the purposes of section 271 of the Delaware General Corporation
Law, as amended or re-enacted from time to time, of the United States of
America, provided that the foregoing approval by Members shall not apply to any
such transaction of the Company with any entity which the Company, "directly or
indirectly controls" as that phrase is defined in Rule 405 under the Securities
Act of 1933, as amended or re-enacted from time to time, of the United States of
America.
XXVII. BUSINESS COMBINATIONS WITH INTERESTED MEMBERS
27.1 The Company shall not engage in any Business Combination with any
Interested Member for a period of three years following the time that such
Member became an Interested Member, unless, at or subsequent to such time, the
Business Combination is approved by the Board of Directors and authorized at a
general meeting of the Company by the affirmative vote of at least 66 2/3% of
the issued shares generally entitled to vote which are not Owned by the
Interested Member; provided, however, that the restrictions contained in this
Section 27.1 shall not apply if:
(a) prior to such time that such Member became an Interested Member,
the Board of Directors approved either the Business Combination or the
transaction which resulted in the Member becoming an Interested Member;
(b) upon consummation of the transaction which resulted in the Member
becoming an Interested Member, the Interested Member Owned at least 85% of
the issued shares generally entitled to vote at the time the transaction
commenced, excluding for purposes of determining the number of shares then
in issue, those shares Owned (i) by Persons who are both Directors and
officers of the Company and (ii) employee share plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer;
(c) the Company does not have a class of voting shares that is (i)
listed on a national securities exchange (as such term is defined in the
Exchange Act), (ii) authorized for quotation on the NASDAQ Stock Market (or
any successor to such stock market) in the United States of America or
(iii) held by more than 2,000 Members, unless any of the foregoing results
from action taken, directly or indirectly, by an Interested Member or from
a transaction in which a Person becomes an Interested Member;
(d) a Member becomes an Interested Member inadvertently and (i) as
soon as practicable divests itself of Ownership of sufficient shares so
that the Member ceases to be an Interested Member and (ii) would not, at
any time within the three-year period immediately prior to a Business
Combination between the Company and such Member, have been an Interested
Member but for the inadvertent acquisition of Ownership;
(e) the Business Combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public announcement or
the notice required hereunder of a proposed transaction which (i)
constitutes one of the transactions described in the second sentence of
this Section 27.1(e); (ii) is with or by a person who either was not an
Interested Member during the previous three years or who became an
Interested Member with the approval of the Board of Directors or during the
period described in Section 27.1(f); and (iii) is approved or not opposed
by a majority of the members of the Board of Directors then in office (but
not less than one) who were Directors prior to any person becoming an
Interested Member during the previous three years or were recommended for
election or elected to succeed such Directors by a majority of such
Directors. The proposed transactions referred to in the preceding sentence
are limited to (y) a sale, lease, exchange,
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mortgage, pledge, transfer or other disposition (in one transaction or a
series of transactions), whether as part of a dissolution or otherwise, of
assets of the Company or of any direct or indirect majority-Owned
subsidiary of the Company (other than to any direct or indirect wholly
Owned subsidiary or to the Company) having an aggregate market value equal
to 50% or more of either that aggregate market value of all of the assets
of the Company determined on a consolidated basis or the aggregate market
value of all the issued shares or (z) a proposed tender or exchange offer
for 50% or more of the voting shares then in issue. The Company shall give
not less than 20 days' notice to all Interested Members prior to the
consummation of any of the transactions described in clause (y) of the
second sentence of this Section 27.1(e);
(f) the Business Combination is with an Interested Member who became
an Interested Member at a time when the restrictions contained in Section
27.1(e) did not apply by reason of Section 27.1(c);
(g) As used in this Section 27.1, the term:
(i) "Affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, another person.
(ii) "Associate," when used to indicate a relationship with any
person, means (A) any corporation, partnership, unincorporated
association or other entity of which such person is a director, officer
or partner or is, directly or indirectly, the Owner of 20% or more of
any class of voting shares, (B) any trust or other estate in which such
person has at least a 20% beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity and (C) any
relative or spouse of such person, or any relative of such spouse, who
has the same residence as such person.
(iii) "Business Combination," when used in reference to the Company
and any Interested Member of the Company, means:
(A) any merger or consolidation of any direct or indirect
majority-Owned subsidiary of the Company with (1) the Interested
Member or (2) with any other corporation, partnership, unincorporated
association or other entity if the merger or consolidation is caused
by the Interested Member and as a result of such merger or
consolidation Section 27.1 is not applicable to the surviving entity;
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions),
except proportionately as a Member, to or with the Interested Member,
whether as part of a dissolution or otherwise, of assets of the
Company or of any direct or indirect majority-Owned subsidiary of the
Company which assets have an aggregate market value equal to 10% or
more of either the aggregate market value of all the assets of the
Company determined on a consolidated basis or the aggregate market
value of all the shares then in issue;
(C) any transaction which results in the issuance or transfer by
the Company or by any direct or indirect majority-Owned subsidiary of
the Company of any shares or shares of such subsidiary to the
Interested Member, except (1) pursuant to the exercise, exchange or
conversion of securities exercisable for, exchangeable for or
convertible into shares or the shares of a direct or indirect
majority-Owned subsidiary of the Company which securities were in
issue prior to the time that the Interested Member became such; (2)
pursuant to a Holding Company Merger; (3) pursuant to a dividend or
distribution paid or made, or the exercise, exchange or conversion of
securities exercisable for, exchangeable for or convertible into
shares or the shares of a direct or indirect majority-Owned
subsidiary of the Company which security is distributed, pro rata, to
all holders of a class or series of shares subsequent to the time the
Interested Member became such; (4) pursuant to an exchange offer by
the Company to purchase shares made on the same terms to all holders
of said shares; or (5) any issuance or transfer of shares by the
Company; provided, however, that in no case
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under (3)-(5) above shall there be an increase in the Interested
Member's proportionate interest in the shares of any class or series
or of the voting shares;
(D) any transaction involving the Company or any direct or
indirect majority-Owned subsidiary of the Company which has the
effect, directly or indirectly, of increasing the proportionate
interest of the shares of any class or series, or securities
convertible into the shares of any class or series, or of the
interest of the shares of any such subsidiary which is Owned by the
Interested Member, except as a result of immaterial changes due to
fractional share adjustments or as a result of any purchase or
redemption of any shares not caused, directly or indirectly, by the
Interested Member; or
(E) any receipt by the Interested Member of the benefit,
directly or indirectly (except proportionately as a Member), of any
loans, advances, guarantees, pledges or other financial benefits
(other than those expressly permitted in subsections (A)-(D) of this
Section 27.1(g)(iii)) provided by or through the Company or any
direct or indirect majority-Owned subsidiary of the Company.
(iv) "control," including the terms "controlling," "controlled by"
and "under common control with," means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the Ownership of
voting shares, by contract, or otherwise. A person who is the Owner of
20% or more of the issued or outstanding voting shares of any
corporation, partnership, unincorporated association or other entity
shall be presumed to have control of such entity, in the absence of
proof by a preponderance of the evidence to the contrary.
Notwithstanding the foregoing, a presumption of control shall not apply
where such person holds voting shares, in good faith and not for the
purpose of circumventing this section, as an agent, bank, broker,
nominee, custodian or trustee for one or more Owners who do not
individually or as a group have control of such entity.
(v) "Interested Member" means any person (other than the Company
and any direct or indirect majority-Owned subsidiary of the Company)
that (A) is the Owner of 15% or more of the issued voting shares or (B)
is an Affiliate or Associate of the Company and was the Owner of 15% or
more of the issued voting shares at any time within the three-year
period immediately prior to the date on which it is sought to be
determined whether such person is an Interested Member, and also the
Affiliates and Associates of such person; provided, however, that the
term "Interested Member" shall not include any person whose Ownership of
shares in excess of the 15% limitation set forth herein is the result of
action taken solely by the Company; provided that such person shall be
an Interested Member if thereafter such person acquires additional
voting shares, except as a result of further corporate action not
caused, directly or indirectly, by such person. For the purpose of
determining whether a person is an Interested Member, the voting shares
deemed to be in issue shall include shares deemed to be Owned by the
person but shall not include any other unissued shares which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
(vi) "merger or consolidation" shall be construed in accordance
with Section 203 of the Delaware General Corporation Law (as amended or
re-enacted from time to time) of the United States of America.
(vii) "Owner" including the terms "Own," "Owned" and "Ownership"
when used with respect to any shares means a person that individually or
with or through any of its Affiliates or Associates:
(A) beneficially Owns such shares, directly or indirectly;
(B) has (1) the right to acquire such shares (whether such right
is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or
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understanding, or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise; provided, however, that a
person shall not be deemed the Owner of shares tendered pursuant to a
tender or exchange offer made by such person or any of such person's
Affiliates or Associates until such tendered shares is accepted for
purchase or exchange; or (2) the right to vote such shares pursuant
to any agreement, arrangement or understanding; provided,
however,that a person shall not be deemed the Owner of any shares
because of such person's right to vote such shares if the agreement,
arrangement or understanding to vote such shares arises solely from a
revocable proxy or consent given in response to a proxy or consent
solicitation made to 10 or more persons; or
(C) has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except voting pursuant to a
revocable proxy or consent as described in Section
27.1(g)(vii)(B)(2)), or disposing of such shares with any other
person that beneficially Owns, or whose Affiliates or Associates
beneficially Own, directly or indirectly, such shares.
(viii) "voting shares" means, with respect to the Company or any
other corporation, shares or stock of any class or series which entitles
the holder to vote generally in the election of directors and, with
respect to any other entity that is not a corporation, any equity
interest which entitles the holder to vote generally in the election of
the governing body of such entity.
XXVIII. SEAL
28.1 The Board of Directors may adopt a seal, alter the seal at its
pleasure and authorize it to be used by causing it or a facsimile to be affixed
or impressed or reproduced in any other manner.
XXIX. OFFICERS
29.1 The officers of the Company shall be chosen by the Board of Directors
and shall include a President and a Secretary and may also include a Chairman of
the Board of Directors, a Vice Chairman of the Board of Directors, one or more
Vice Presidents (who may be further classified by such descriptions as
"Executive," "Senior" or "Assistant" as determined by the Board of Directors),
and such other officers, as the Board of Directors may deem necessary or
appropriate. The Board of Directors may from time to time authorize any officer
to appoint and remove any other officer or agent and to prescribe such person's
authority and duties. Any person may hold at one time two or more offices. Each
officer shall have such authority and perform such duties, in addition to those
specified in these Articles, as may be prescribed by the Board of Directors from
time to time.
29.2 Each officer shall hold office for the term for which elected or
appointed by the Board of Directors, and until the person's successor has been
elected or appointed and qualified or until such person's earlier resignation or
removal. Any officer may be removed by the Board of Directors, with or without
cause. The election or appointment of an officer shall not in and of itself
create contractual rights against the Company. Any officer may resign at any
time by giving written notice to the Board of Directors or the Secretary. Any
such resignation shall take effect at the time specified therein or, if such
time is not specified therein, then upon receipt of such notice; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
29.3 The Chairman of the Board of Directors shall be a member of the Board
of Directors. The Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors and, if so designated by the Board of
Directors, shall be the Chief Executive Officer of the Company. If designated
Chief Executive Officer, the Chairman of the Board of Directors shall, subject
to the control of the Board of Directors, be responsible for the day-to-day
management of the business and affairs of the Company and shall enjoy all other
powers commonly incident to the office of Chief Executive Officer.
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29.4 Unless there shall be a Chairman of the Board of Directors designated
by the Board of Directors as the Chief Executive Officer of the Company, the
President shall be the Chief Executive Officer of the Company. Subject to the
control of the Board of Directors and the Chairman of the Board of Directors (if
designated Chief Executive Officer), the President shall be responsible for the
day-to-day management of the business and affairs of the Company and shall enjoy
all other powers commonly incident to the office. If the President shall not be
designated the Chief Executive Officer of the Company, such President shall have
such authority and perform such duties as may be prescribed from time to time by
the Board of Directors.
29.5 Each of the Vice Presidents shall have such authority and perform
such duties as may be prescribed from time to time by the Board of Directors.
29.6 The Secretary shall keep the minutes of the meetings of the Members
and the Board of Directors and give notice of such meetings and shall perform
like duties for the committees of the Board of Directors when so required. The
Secretary shall have custody of the seal and affix and attest the seal to any
instrument to be executed under seal and enjoy all powers commonly incident to
the office. In the case of the absence or inability to act of the Secretary, any
Assistant Secretary (or, in the case of keeping minutes of a meeting of Members
or Directors, any other person designated by the presiding officer of such
meeting) may act in the Secretary's place.
29.7 Compensation of officers, agents and employees of the Company shall
be fixed from time to time by, or under the authority of, the Board of
Directors.
XXX. DIVIDENDS AND RESERVES
30.1 Subject to the Statute and any rights and restrictions for the time
being attached to any class or series of shares, the Board of Directors may from
time to time declare dividends (including interim dividends) on the shares
issued and authorize payment of the same out of the funds of the Company
lawfully available therefor.
30.2 Subject to the Statute and any rights and restrictions for the time
being attached to any class or series of shares, all dividends shall be declared
and paid according to the amounts paid or credited as paid on the shares in
respect of which the dividend is paid, but no amount paid or credited as paid on
a share in advance of calls shall be treated for the purposes of this Section
30.2 as paid on the share. Subject to the Statute and any rights and
restrictions for the time being attached to any class or series of shares, all
dividends shall be apportioned and paid proportionately to the amounts paid or
credited as paid on the shares during any portion or portions of the period in
respect of which the dividend is paid but if any share is issued on terms
providing that it shall rank for dividend as from a particular date such share
shall rank for dividend accordingly.
30.3 If several persons are registered as joint holders of any share, any
of them may give effectual receipts for any dividends, bonuses or other moneys
payable on or in respect of the share.
30.4 The Board of Directors may deduct from any dividend payable to any
Member all sums of money (if any) presently payable by him to the Company or
account of calls or otherwise.
30.5 The Board of Directors may declare that any dividend be paid wholly
or partly by the distribution of shares or other securities of the Company
and/or specific assets and in particular of paid-up shares, debentures or
debenture stock of any other company or in any one or more of such ways, and
where any difficulty arises in regard to such distribution, the Board of
Directors may settle the same as it deems expedient and in particular may issue
fractional shares and fix the value for distribution of such specific assets or
any part thereof and may determine that cash payments shall be made to any
Members upon the footing of the value so fixed in order to adjust the rights of
all Members and may vest any such specific assets in trustees as may seem
expedient to the Board of Directors.
30.6 No dividend shall bear interest against the Company unless expressly
authorized by the Board of Directors.
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XXXI. CAPITALIZATION
31.1 The Company may upon the recommendation of the Board of Directors
capitalize any sum standing to the credit of any of the Company's reserve
accounts (including share premium account and capital redemption reserve fund)
or any sum standing to the credit of profit and loss account or otherwise
available for distribution and to appropriate such sum to Members in the
proportions in which such sum would have been divisible amongst them had the
same been a distribution of profits by way of dividend and to apply such sum on
their behalf in paying up in full unissued shares (not being redeemable shares)
for allotment and distribution credited as fully paid up to and amongst them in
the proportion aforesaid. In such event the Board of Directors shall do all acts
and things required to give effect to such capitalization, with full power to
the Board of Directors to make such provisions as it thinks fit for the case of
shares becoming distributable in fractions (including provisions whereby the
benefit of fractional entitlements accrue to the Company rather than to the
Members concerned). The Board of Directors may authorize any person to enter on
behalf of all of the Members interested into an agreement with the Company
providing for such capitalization and matters incidental thereto, and any
agreement made under such authority shall be effective and binding on all
concerned.
XXXII. AUDIT
32.1 The accounts relating to the Company's affairs shall be audited in
such manner, if at all, as may be determined from time to time by the Board of
Directors.
XXXIII. NOTICES
33.1 Notices shall be in writing and may be given by the Company to any
Member either by first class United States mail, "overnight" or other express
delivery service, telegram, telex, cable, telecopy, facsimile or personal
delivery. Notices are deemed to have been given: by mail, three days after
deposited in the United States mail with postage prepaid; by "overnight" or
other express delivery service, the day after sending; by telegram, telex or
cable, at the time of sending; by telecopy or facsimile, upon receipt of a
transmittal confirmation; and by personal delivery, at the time of delivery.
33.2 A notice may be given by the Company to the person or persons which
the Company has been advised are entitled to a share or shares in consequence of
the death or bankruptcy of a Member by any manner set forth in Section 33.1
addressed to them by name, or by the title of representatives of the deceased,
or trustee of the bankruptcy, or by any like description at the address supplied
for that purpose by the persons claiming to be so entitled.
33.3 A notice may be given by the Company to the joint holders of record
of a share by giving the notice to the joining holder first named on the
Register in respect of the share.
33.4 Notice of every general meeting of the Company shall be given in any
manner hereinbefore authorized to:
(a) every holder of voting shares as shown in the Register as of the
record date for such meeting except that in the case of joint holder the
notice shall be sufficient if given to the joint holder first named in the
Register;
(b) every person upon whom the ownership of a voting share devolves by
reason of his being a legal personal representative or a trustee in
bankruptcy of a holder of voting shares where such holder but for his death
or bankruptcy would be entitled to receive notice of the meeting; and
(c) except as otherwise required by law or these Articles, no other
person shall be entitled to receive notice of general meetings.
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XXXIV. LIMITATION OF LIABILITY AND INDEMNITY
34.1 (a) No Director shall be personally liable to the Company or, if any,
its Members for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or, if any, to its Members, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of law or (iii)
for any transaction from which the Director derived an improper personal
benefit.
(b) The Company shall indemnify, to the fullest extent permitted by the
laws of the Cayman Islands as from time to time in effect, if any, any person
who was or is a party or is threatened to be made a party to, or otherwise
requires representation by counsel in connection with, any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (whether or not an action by or in the right of the Company) by
reason of the fact that he is or was a Director or officer of the Company, or,
while serving as a Director or officer of the Company, is or was serving at the
request of the Company, as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or by reason
of any action alleged to have been taken or omitted in such capacity. The right
to indemnification conferred by this Section 34.1 also shall include the right
of such persons to be paid in advance by the Company for their expenses to the
fullest extent permitted by the laws of the Cayman Islands as from time to time
in effect. The right to indemnification conferred on such persons by this
Section 34.1 shall be a contractual right.
(c) Unless otherwise determined by the Board of Directors, the Company
shall indemnify to the fullest extent permitted by the laws of the Cayman
Islands as from time to time in effect, if any, any person who was or is a party
or is threatened to be made a party to, or otherwise requires representation by
counsel in connection with, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (whether or
not an action by or in the right of the Company), by reason of the fact that he
is or was an employee (other than an officer) or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity.
(d) The rights and authority conferred in this Section 34.1 shall not be
exclusive of any other right that any person has or hereafter acquires under any
law, provision of these Articles or the Memorandum, agreement, vote of Members
or of the Board of Directors or otherwise.
(e) Neither the amendment nor repeal of this Section 34.1, nor the adoption
of any provision of the Memorandum or these Articles or of any law inconsistent
with this Section 34.1, shall eliminate or reduce the effect of this Section
34.1 in respect of any acts or omissions occurring prior to such amendment,
repeal or adoption of an inconsistent provision.
XXXV. BOOKS AND RECORDS
35.1 In addition to any rights which may be conferred on Members by
Statute, upon written demand under oath stating the purpose thereof, any Member,
in person or by attorney or other agent, may review for any proper purpose,
during usual hours for business, the books and records of the Company including,
without limitation, the Register. A proper purpose shall mean a purpose
reasonably related to such person's interest as a Member. In every instance
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing which authorizes the attorney or other agent to so act on
behalf of the Member. The demand under oath shall be directed to the corporation
at its principal executive offices.
The Board of Directors may establish procedures for, or limitations or
conditions on, Members' review of books and records of the Company for the
purpose of (a) protecting the interests of the Company, (b) protecting the
confidentiality of the information contained in those books and records, (c) the
convenience of the Company, or (d) protecting any other interest of the Company
that the Board of Directors deems proper.
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XXXVI. WINDING UP
36.1 In the event of any dissolution, liquidation or winding up of the
Company, whether voluntary or involuntary, after there shall have been paid or
set aside for payment to the holders of any issued shares ranking senior to the
Ordinary Shares as to distribution on liquidation or distribution on winding up,
the full amounts to which they shall be entitled and the holders of the
then-issued Ordinary Shares shall be entitled to receive, pro rata according to
the number of Ordinary Shares registered in the names of such Members, any
remaining assets of the Company available for distribution to its Members;
provided, if, at such time, the holder of Ordinary Shares has any outstanding
debts, liabilities or engagements to or with the Company (whether presently
payable or not), either alone or jointly with any other person, whether a Member
or not (including, without limitation, any liability associated with the unpaid
purchase price of such Ordinary Shares), the liquidator appointed to oversee the
liquidation of the Company may deduct from the amount payable in respect of such
Ordinary Shares the aggregate amount of such debts, liabilities and engagements
and apply such amount to any of such holder's debts, liabilities or engagements
to or with the Company (whether presently payable or not). The liquidator may
with the sanction of a Special Resolution distribute, in kind, to the holders of
the Ordinary Shares remaining assets of the Company or may, without the need of
any such sanction sell, transfer or otherwise dispose of all or any part of such
remaining assets to any other person, corporation, trust or entity and receive
payment therefor in cash, shares or obligations of such other person,
corporation, trust or entity or any combination thereof, and may sell all or any
part of the consideration so received, and may distribute the consideration
received or any balance or proceeds thereof to holders of the Ordinary Shares.
The liquidator may, with the like sanction, vest the whole or any part of such
assets in trustees upon such trusts for the benefit of the contributories as the
liquidator, with the like sanction shall think fit, but so that no Member shall
be compelled to accept any shares or other securities whereon there is any
liability.
XXXVII. DEREGISTRATION
37.1 (a) The Company may by Special Resolution resolve to be registered by
way of continuation in a jurisdiction outside the Cayman Islands or such other
jurisdiction in which it is for the time being incorporated, registered or
existing; and
(b) In furtherance of a resolution adopted pursuant to (a) above of this
Section 37.1, the Directors may cause an application to be made to the Registrar
of Companies to deregister the Company in the Cayman Islands or such other
jurisdiction in which it is for the time being incorporated, registered or
existing and may cause all such further steps as they consider appropriate to be
taken to effect the transfer by way of continuation of the Company.
XXXVIII. FISCAL YEAR
38.1 Each Fiscal Year shall commence on such date as may be specified by
the Board of Directors.
XXXIX. AMENDMENTS OF ARTICLES
39.1 Subject to the Statute, the Company may at any time and from time to
time by Special Resolution alter or amend these Articles in whole or in part.
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ANNEX G
LONG-TERM INCENTIVE PLAN
OF
TRANSOCEAN SEDCO FOREX INC.
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000)
I. GENERAL
1.1 PURPOSE OF THE PLAN
The Long-Term Incentive Plan (the "Plan") of Transocean Sedco Forex Inc., a
Cayman Islands exempted company (the "Company"), is intended to advance the best
interests of the Company and its subsidiaries by providing Directors and
employees with additional incentives through the grant of options ("Options") to
purchase ordinary shares, par value US $0.01 per share of the Company ("Ordinary
Shares"), share appreciation rights ("SARs"), restricted Ordinary Shares
("Restricted Shares") and cash performance awards ("Cash Awards"), thereby
increasing the personal stake of such Directors and employees in the continued
success and growth of the Company.
1.2 ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Executive Compensation Committee
or other designated committee (the "Committee") of the Board of Directors of the
Company (the "Board of Directors") which shall consist of at least two
Directors, all of whom (i) are not eligible for awards under Articles II and III
of the Plan, (ii) are "non-employee directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, and (iii) are outside directors
satisfying the requirements of Section 162(m) of the Internal Revenue Code of
1986, as amended, or any successor thereto ("the Code"). The Committee shall
have authority to interpret conclusively the provisions of the Plan, to adopt
such rules and regulations for carrying out the Plan as it may deem advisable,
to decide conclusively all questions of fact arising in the application of the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan. Notwithstanding the foregoing, the Committee shall
have no power or discretion to vary the amount or terms of awards under Article
IV of the Plan, except as provided in Section 6.2. All decisions and acts of the
Committee shall be final and binding upon all affected Plan participants.
(b) The Committee shall designate the eligible employees, if any, to be
granted awards under Articles II and III and the type and amount of such awards
and the time when awards will be granted. All awards granted under the Plan
shall be on the terms and subject to the conditions hereinafter provided.
1.3 ELIGIBLE PARTICIPANTS
Employees, including officers, of the Company and its subsidiaries, and of
partnerships or joint ventures in which the Company and its subsidiaries have a
significant ownership interest as determined by the Committee (all of such
subsidiaries, partnerships and joint ventures being referred to as
"Subsidiaries") shall be eligible for awards under Articles II, III and V of the
Plan. Directors who are not employees of the Company or its Subsidiaries shall
not be eligible for awards under Articles II, III and V.
Each Director of the Company who is not an officer or employee of the
Company or any of its subsidiaries (an "Eligible Director") shall automatically
be granted awards under Article IV of the Plan. Each Eligible Director to whom
Options or SARs are granted under Article IV is hereinafter referred to as a
"Participant."
1.4 AWARDS UNDER THE PLAN
Awards to employees under Articles II and III may be in the form of (i)
Options to purchase Ordinary Shares, (ii) Share Appreciation Rights which may be
either freestanding or issued in tandem
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with Options, (iii) Restricted Ordinary Shares, (iv) Supplemental Payments which
may be awarded with respect to Options, Share Appreciation Rights and Restricted
Ordinary Shares, or (v) any combination of the foregoing. Awards to employees
under Article V will be in the form of performance awards payable in cash.
Awards to Eligible Directors under Article IV shall be in the form of (i)
Options to purchase Ordinary Shares and Supplemental Payments with respect
thereto, or (ii) solely in the case of Eligible Directors residing in Norway,
freestanding SARs.
1.5 SHARES SUBJECT TO THE PLAN
The aggregate number of Ordinary Shares which may be issued with respect to
awards made under Articles II and III shall not exceed 12,900,000 shares,
reduced by the number of shares which have been issued pursuant to such Articles
prior to the date of this Amendment and Restatement. In addition, the aggregate
number of Ordinary Shares which may be issued with respect to awards made under
Article IV shall not exceed 400,000, reduced by the number of shares which have
been issued pursuant to such Article prior to the date of this Amendment and
Restatement. At no time shall the number of shares issued plus the number of
shares estimated by the Committee to be ultimately issued with respect to
outstanding awards under the Plan exceed the number of shares that may be issued
under the Plan. No employee shall be granted Share Options, freestanding Share
Appreciation Rights, or Restricted Ordinary Shares, or any combination of the
foregoing, with respect to more than 600,000 Ordinary Shares in any fiscal year
(subject to adjustment as provided in Section 6.2). No employee shall be granted
a Supplemental Payment in any fiscal year with respect to more than the number
of Ordinary Shares covered by Share Options, freestanding Share Appreciation
Rights or Restricted Ordinary Shares awards granted to such employee in such
fiscal year. Shares distributed pursuant to the Plan may consist of authorized
but unissued shares or treasury shares of the Company, as shall be determined
from time to time by the Board of Directors.
If any Option under the Plan shall expire, terminate or be canceled
(including cancellation upon the holder's exercise of a related Share
Appreciation Right) for any reason without having been exercised in full, or if
any Restricted Ordinary Shares shall be forfeited to the Company, the
unexercised Options and forfeited Restricted Ordinary Shares shall not count
against the above limit and shall again become available for grants under the
Plan (regardless of whether the holder of such Options or shares received
dividends or other economic benefits with respect to such Options or shares).
Ordinary Shares equal in number to the shares surrendered in payment of the
option price, and Ordinary Shares which are withheld in order to satisfy
federal, state or local tax liability, shall not count against the above limit
and shall again become available for grants under the Plan. Only the number of
Ordinary Shares actually issued upon exercise of a Share Appreciation Right or
payment of a Supplemental Payment shall count against the above limit, and any
shares which were estimated to be used for such purposes and were not in fact so
used shall again become available for grants under the Plan.
Freestanding Share Appreciation Rights which may be settled solely in cash
shall be issued with respect to no more than an aggregate of 250,000 underlying
shares. Such SARs shall not count against the limits set forth above on the
number of Ordinary Shares which may be issued under the Plan. If any
freestanding SAR shall expire, terminate, or be canceled for any reason without
having been exercised in full, the unexercised SARs shall not count against this
limit and shall again become available for grants under the Plan.
1.6 OTHER COMPENSATION PROGRAMS
The existence and terms of the Plan shall not limit the authority of the
Board of Directors in compensating Directors and employees of the Company and
its subsidiaries in such other forms and amounts, including compensation
pursuant to any other plans as may be currently in effect or adopted in the
future, as it may determine from time to time.
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II. SHARE OPTIONS AND SHARE APPRECIATION RIGHTS
2.1 TERMS AND CONDITIONS OF OPTIONS
Subject to the following provisions, all Options granted under the Plan to
employees of the Company and its Subsidiaries shall be in such form and shall
have such terms and conditions as the Committee, in its discretion, may from
time to time determine.
(a) Option Price. The option price per share shall not be less than
the fair market value of the Ordinary Shares (as determined by the
Committee) on the date the Option is granted. Notwithstanding the
foregoing, the option price per share with respect to any Option granted by
the Committee within 90 days of the closing of the initial public offering
of the Company's Ordinary Shares shall be at the initial public offering
price for such Shares.
(b) Term of Option. The term of an Option shall not exceed ten years
from the date of grant, except as provided pursuant to Section 2.1(g) with
respect to the death of an optionee. No Option shall be exercised after the
expiration of its term.
(c) Exercise of Options. Options shall be exercisable at such time or
times and subject to such terms and conditions as the Committee shall
specify in the Option grant. The Committee shall have discretion to at any
time declare all or any portion of the Options held by any optionee to be
immediately exercisable. An Option may be exercised in accordance with its
terms as to any or all shares purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for shares
as to which an Option is exercised to be made in cash, Ordinary Shares, by
"cashless exercise" or in such other manner as the Committee in its
discretion may provide.
(e) Nontransferability of Options. No Option or any interest therein
shall be transferable by the optionee other than by will or by the laws of
descent and distribution. During an optionee's lifetime, all Options shall
be exercisable only by such optionee or by the guardian or legal
representative of the optionee.
(f) Shareholder Rights. The holder of an Option shall, as such, have
none of the rights of a shareholder.
(g) Termination of Employment. The Committee shall have discretion to
specify in the Option grant or an amendment thereof, provisions with
respect to the period during which the Option may be exercised following
the optionee's termination of employment. Notwithstanding the foregoing,
the Committee shall not permit any Option to be exercised beyond the term
of the Option established pursuant to Section 2.1(b), except that the
Committee may provide that, notwithstanding such Option term, an Option
which is outstanding on the date of an optionee's death shall remain
outstanding and exercisable for up to one year after the optionee's death.
(h) Change of Control. Notwithstanding the exercisability schedule
governing any Option, upon the occurrence of a Change of Control (as
defined in Section 6.10) all Options outstanding at the time of such Change
of Control and held by optionees who are employees of the Company or its
Subsidiaries at the time of such Change of Control shall become immediately
exercisable and, unless the optionee agrees otherwise in writing, shall
remain exercisable for the remainder of the Option term.
2.2 SHARE APPRECIATION RIGHTS IN TANDEM WITH OPTIONS
(a) The Committee may, either at the time of grant of an Option or at any
time during the term of the Option, grant Share Appreciation Rights with respect
to all or any portion of the Ordinary Shares covered by such Option. A tandem
Share Appreciation Right may be exercised at any time the Option to which it
relates is then exercisable, but only to the extent the Option to which it
relates is exercisable, and shall be subject to the conditions applicable to
such Option. When a tandem Share Appreciation Right is
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exercised, the Option to which it relates shall cease to be exercisable to the
extent of the number of shares with respect to which the tandem Share
Appreciation Right is exercised. Similarly, when an Option is exercised, the
tandem Share Appreciation Rights relating to the shares covered by such Option
exercise shall terminate. Any tandem Share Appreciation Right which is
outstanding on the last day of the term of the related Option (as determined
pursuant to Section 2.1(b)) shall be automatically exercised on such date for
cash without any action by the optionee.
(b) Upon exercise of a tandem Share Appreciation Right, the holder shall
receive, for each share with respect to which the tandem Share Appreciation
Right is exercised, an amount (the "Appreciation") equal to the amount by which
the fair market value (as defined below) of an Ordinary Share on the date of
exercise of the Share Appreciation Right exceeds the option price per share of
the Option to which the tandem Share Appreciation Right relates. For purposes of
the preceding sentence, the fair market value of an Ordinary Share shall be the
average of the high and low prices of such share as reported on the consolidated
reporting system. The Appreciation shall be payable in cash, Ordinary Shares, or
a combination of both, at the option of the Committee, and shall be paid within
30 days of the exercise of the tandem Share Appreciation Right.
(c) Notwithstanding the foregoing, if a tandem Share Appreciation Right is
exercised within 60 days of the occurrence of a Change of Control, (i) the
Appreciation and any Supplemental Payment (as defined in Section 2.4) to which
the holder is entitled shall be payable solely in cash, and (ii) in addition to
the Appreciation and the Supplemental Payment (if any), the holder shall
receive, in cash, (1) the amount by which the greater of (a) the highest market
price per Ordinary Share during the 60-day period preceding exercise of the
tandem Share Appreciation Right or (b) the highest price per Ordinary Share (or
the cash-equivalent thereof as determined by the Board of Directors) paid by an
acquiring person during the 60-day period preceding a Change of Control, exceeds
the fair market value of an Ordinary Share on the date of exercise of the tandem
Share Appreciation Right, plus (2) if the holder is entitled to a Supplemental
Payment, an additional payment, calculated under the same formula as used for
calculating such holder's Supplemental Payment, with respect to the amount
referred to in clause (1) of this sentence.
2.3 FREESTANDING SHARE APPRECIATION RIGHTS
The Committee may grant Freestanding Share Appreciation Rights to employees
of the Company and its Subsidiaries, in such form and having such terms and
conditions as the Committee, in its discretion, may from time to time determine,
subject to the following provisions.
(a) Base Price and Appreciation. Each freestanding SAR shall be
granted with a base price, which shall not be less than the fair market
value of the Ordinary Shares (as determined by the Committee) on the date
the SAR is granted. Upon exercise of a freestanding SAR, the holder shall
receive, for each share with respect to which the SAR is exercised, an
amount (the "Appreciation") equal to the amount by which the fair market
value (as defined below) of an Ordinary Share on the date of exercise of
the SAR exceeds the base price of the SAR. For purposes of the preceding
sentence, the fair market value of an Ordinary Share shall be the average
of the high and low prices of such share as reported on the New York Stock
Exchange composite tape. The Appreciation shall be payable in cash and
shall be paid within 30 days of the exercise of the SAR.
(b) Term of SAR. The term of a freestanding SAR shall not exceed ten
years from the date of grant, except as provided pursuant to Section 2.3(f)
with respect to the death of the grantee. No SAR shall be exercised after
the expiration of its term. Any freestanding SAR which is outstanding on
the last day of its term (as such term may be extended pursuant to Section
2.3(f)) and as to which the Appreciation is a positive number on such date
shall be automatically exercised on such date for cash without any action
by the grantee.
(c) Exercise of SARs. Freestanding SARs shall be exercisable at such
time or times and subject to such terms and conditions as the Committee may
specify in the SAR grant. The Committee shall have discretion to at any
time declare all or any portion of the freestanding SARs
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then outstanding to be immediately exercisable. A freestanding SAR may be
exercised in accordance with its terms in whole or in part.
(d) Nontransferability of SARs. No SAR or any interest therein shall
be transferable by the grantee other than by will or by the laws of descent
and distribution. During a grantee's lifetime, all SARs shall be
exercisable only by such grantee or by the guardian or legal representative
of the grantee.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none
of the rights of a shareholder.
(f) Termination of Employment. The Committee shall have discretion to
specify in the SAR grant or an amendment thereof, provisions with respect
to the period during which the SAR may be exercised following the grantee's
termination of employment. Notwithstanding the foregoing, the Committee
shall not permit any SAR to be exercised beyond the term of the SAR
established pursuant to Section 2.3(b), except that the Committee may
provide that, notwithstanding such SAR term, an SAR which is outstanding on
the date of a grantee's death shall remain outstanding and exercisable for
up to one year after the grantee's death.
(g) Change of Control. Notwithstanding the exercisability schedule
governing any SAR, upon the occurrence of a Change of Control (as defined
in Section 6.10) all SARs outstanding at the time of such Change of Control
and held by grantees who are employees of the Company or its Subsidiaries
at the time of such Change of Control shall become immediately exercisable
and, unless the grantee agrees otherwise in writing, shall remain
exercisable for the remainder of the SAR term. In addition, the Committee
may provide that if a freestanding SAR is exercised within 60 days of the
occurrence of a Change of Control, in addition to the Appreciation the
holder shall receive, in cash, the amount by which the greater of (a) the
highest market price per Ordinary Share during the 60-day period preceding
exercise of the SAR or (b) the highest price per Ordinary Share (or the
cash equivalent thereof as determined by the Board of Directors) paid by an
acquiring person during the 60-day period preceding a Change of Control,
exceeds the fair market value of an Ordinary Share on the date of exercise
of the SAR.
2.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR SHARE APPRECIATION RIGHTS
The Committee, either at the time of grant or at the time of exercise of
any Option or tandem Share Appreciation Right, may provide for a supplemental
payment (the "Supplemental Payment") by the Company to the optionee with respect
to the exercise of any Option or tandem Share Appreciation Right. The
Supplemental Payment shall be in the amount specified by the Committee, which
shall not exceed the amount necessary to pay the income tax payable to the
national government with respect to both exercise of the Option or tandem Share
Appreciation Right and receipt of the Supplemental Payment, assuming the
optionee is taxed at the maximum effective income tax rate applicable thereto.
The Committee shall have the discretion to grant Supplemental Payments that are
payable solely in cash or Supplemental Payments that are payable in cash,
Ordinary Shares, or a combination of both, as determined by the Committee at the
time of payment. The Supplemental Payment shall be paid within 30 days of the
date of exercise of an Option or Share Appreciation Right (or, if later, within
30 days of the date on which income is recognized for federal income tax
purposes with respect to such exercise).
2.5 STATUTORY OPTIONS
Subject to the limitations on Option terms set forth in Section 2.1, the
Committee shall have the authority to grant (i) incentive stock options within
the meaning of Section 422 of the Code and (ii) Options containing such terms
and conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant. Options granted
pursuant to this Section 2.4 may contain such other terms and conditions
permitted by Article II of this Plan as the Committee, in its discretion, may
from time to time determine (including, without limitation, provision for Share
Appreciation Rights and Supplemental Payments), to the extent that such terms
and conditions do
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not cause the Options to lose their preferential tax treatment. To the extent
the Code and Regulations promulgated thereunder require a plan to contain
specified provisions in order to qualify options for preferential tax treatment,
such provisions shall be deemed to be stated in this Plan.
III. RESTRICTED ORDINARY SHARES
3.1 TERMS AND CONDITIONS OF RESTRICTED ORDINARY SHARES AWARDS
Subject to the following provisions, all awards of Restricted Ordinary
Shares under the Plan to employees of the Company and its Subsidiaries shall be
in such form and shall have such terms and conditions as the Committee, in its
discretion, may from time to time determine.
(a) The Restricted Ordinary Shares award shall specify the number of
Restricted Ordinary Shares to be awarded, the price, if any, to be paid by
the recipient of the Restricted Ordinary Shares, and the date or dates on
which the Restricted Ordinary Shares will vest. The vesting of Restricted
Ordinary Shares may be conditioned upon the completion of a specified
period of service with the Company or its Subsidiaries, upon the attainment
of specified performance goals, or upon such other criteria as the
Committee may determine in its sole discretion.
(b) Share certificates representing the Restricted Ordinary Shares
granted to an employee shall be registered in the employee's name. Such
certificates shall either be held by the Company on behalf of the employee,
or delivered to the employee bearing a legend to restrict transfer of the
certificate until the Restricted Ordinary Shares have vested, as determined
by the Committee. The Committee shall determine whether the employee shall
have the right to vote and/or receive dividends on the Restricted Ordinary
Shares before they have vested. No Restricted Ordinary Shares may be sold,
transferred, assigned, or pledged by the employee until they have vested in
accordance with the terms of the Restricted Ordinary Shares award. In the
event of an employee's termination of employment before all of his
Restricted Ordinary Shares have vested, or in the event other conditions to
the vesting of Restricted Ordinary Shares have not been satisfied prior to
any deadline for the satisfaction of such conditions set forth in the
award, the Restricted Ordinary Shares which have not vested shall be
forfeited and any purchase price paid by the employee shall be returned to
the employee. At the time Restricted Ordinary Shares vest (and, if the
employee has been issued legended certificates of Restricted Ordinary
Shares, upon the return of such certificates to the Company), a certificate
for such vested shares shall be delivered to the employee (or the
Beneficiary designated by the employee in the event of death), free of all
restrictions.
(c) Notwithstanding the vesting conditions set forth in the Restricted
Ordinary Shares award, (i) the Committee may in its discretion accelerate
the vesting of Restricted Ordinary Shares at any time, and (ii) all
Restricted Ordinary Shares shall vest upon a Change of Control of the
Company.
3.2 PERFORMANCE AWARDS UNDER SECTION 162(M) OF THE CODE
The Committee shall have the right to designate awards of Restricted
Ordinary Shares as "Performance Awards." Notwithstanding any other provisions of
this Article III, awards so designated shall be granted and administered in a
manner designed to preserve the deductibility of the compensation resulting from
such awards in accordance with Section 162(m) of the Code. The grant or vesting
of a Performance Award shall be subject to the achievement of performance
objectives (the "Performance Objectives") established by the Committee based on
one or more of the following criteria, in each case applied to the Company on a
consolidated basis and/or to a business unit, and either as an absolute measure
or as a measure of comparative performance relative to a peer group of
companies: sales, operating profits, operating profits before interest expense
and taxes, net earnings, earnings per share, return on equity, return on assets,
return on invested capital, total shareholder return, cash flow, debt to equity
ratio, market share, share price, economic value added, and market value added.
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The Performance Objectives for a particular Performance Award relative to a
particular fiscal year shall be established by the Committee in writing no later
than 90 days after the beginning of such year. The Committee shall have the
authority to determine whether the Performance Objectives and other terms and
conditions of the award are satisfied, and the Committee's determination as to
the achievement of Performance Objectives relating to a Performance Award shall
be made in writing. The Committee shall have discretion to modify or waive the
Performance Objectives or conditions to the grant or vesting of a Performance
Award only to the extent that the exercise of such discretion would not cause
the Performance Award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code.
3.3 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED ORDINARY SHARES
The Committee, either at the time of grant or at the time of vesting of
Restricted Ordinary Shares, may provide for a Supplemental Payment by the
Company to the employee in an amount specified by the Committee which shall not
exceed the amount necessary to pay the federal income tax payable with respect
to both the vesting of the Restricted Ordinary Shares and receipt of the
Supplemental Payment, assuming the employee is taxed at the maximum effective
federal income tax rate applicable thereto and has not elected to recognize
income with respect to the Restricted Ordinary Shares before the date such
Restricted Ordinary Shares vest. The Supplemental Payment shall be paid within
30 days of each date that Restricted Ordinary Shares vest. The Committee shall
have the discretion to grant Supplemental Payments that are payable solely in
cash or Supplemental Payments that are payable in cash, Ordinary Shares, or a
combination of both, as determined by the Committee at the time of payment.
IV. SHARE OPTIONS OR FREESTANDING SHARE APPRECIATION RIGHTS
FOR DIRECTORS
4.1 GRANT OF OPTIONS OR FREESTANDING SARS
Each person who becomes an Eligible Director (other than a person who first
becomes an Eligible Director on the date of an annual meeting of the Company's
shareholders) shall be granted, effective as of the date such person becomes an
Eligible Director, (i) an Option to purchase 4,000 Ordinary Shares, if such
person is not then residing in Norway, or (ii) a freestanding SAR with respect
to 4,000 Ordinary Shares, if such person is then residing in Norway. Each person
who is or becomes an Eligible Director on the date of an annual meeting of the
Company's shareholders and whose service on the Board of Directors will continue
after such meeting shall be granted, effective as of the date of such meeting,
(i) an Option to purchase 4,000 Ordinary Shares, if such person is not then
residing in Norway, or (ii) a freestanding SAR with respect to 4,000 Ordinary
Shares, if such person is then residing in Norway.
4.2 TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Article shall have the following terms and
conditions:
(a) Option Price. The option price per share shall be the closing
sales price of an Ordinary Share on the date the Option is granted (or, if
the Ordinary Shares are not traded on such date, on the immediately
preceding date on which the Ordinary Shares are traded).
(b) Term of Option. Each Option shall expire ten years from the date
of grant, except as provided in Section 4.2(c) with respect to the death of
an optionee. No Option shall be exercised after the expiration of its term.
(c) Exercise of Options. Subject to Section 4.2(g) and the remainder
of this paragraph, each Option shall become exercisable in installments as
follows: (1) a total of 1,333 Ordinary Shares may be purchased through
exercise of the Option on or after the first anniversary of the date of
grant; (2) a total of 2,666 Ordinary Shares may be purchased through
exercise of the Option on or after the second anniversary of the date of
grant; and (3) a total of 4,000 Ordinary Shares may be purchased
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through exercise of the Option on or after the third anniversary of the
date of grant. If a Participant ceases to be a Director of the Company as a
result of death, disability, or retirement from the Board of Directors on
his Retirement Date (as defined in Section 4.2(i)), each Option shall
immediately become fully exercisable and shall remain exercisable for the
remainder of its term, except that an Option which is outstanding on the
date of an optionee's death shall remain outstanding and exercisable for a
term of the greater of ten years from the date of grant or one year after
the optionee's death. If a Participant ceases to be a Director of the
Company for any reason not set forth in the preceding sentence, no
additional portions of the Option will become exercisable, and the portion
of the Option that is then exercisable shall expire if not exercised within
60 days after cessation of service as a Director. An Option may be
exercised in accordance with its terms as to any or all shares purchasable
thereunder.
(d) Payment for Shares. Payment for shares as to which an Option is
exercised shall be made in cash, Ordinary Shares, by "cashless exercise,"
or a combination thereof, in the discretion of the Participant. Ordinary
Shares delivered in payment of the Option price shall be valued at the
average of the high and low prices of such Shares on the date of exercise
(or, if the Ordinary Shares are not traded on such date, at the weighted
average of the high and low prices on the nearest trading dates before and
after such date).
(e) Nontransferability of Options. No Option or any interest therein
shall be transferable by the Participant other than by will or by the laws
of descent and distribution. During a Participant's lifetime, all Options
shall be exercisable only by such Participant or by the guardian or legal
representative of the Participant.
(f) Shareholder Rights. The holder of an Option shall, as such, have
none of the rights of a shareholder.
(g) Change of Control. Notwithstanding any other provisions of the
Plan, upon the occurrence of a Change of Control (as defined in Section
6.10) all Options outstanding at the time of such Change of Control shall
become immediately exercisable and shall remain exercisable for the
remainder of their term.
(h) Tax Status. The Options granted under this Article shall be
"non-qualified" options, and shall not be incentive stock options as
defined in Section 422 of the Code.
(i) Retirement Date. For purposes of this Article, a Participant's
Retirement Date shall mean the date on which the Participant shall be
required to retire from the Board of Directors under the retirement
policies of the Board of Directors as in effect on the date of the
Participant's retirement.
4.3 TERMS AND CONDITIONS OF FREESTANDING SHARE APPRECIATION RIGHTS
Each Freestanding Share Appreciation Right granted under this Article shall
have the following terms and conditions:
(a) Base Price and Appreciation. The base price of the SAR shall be
the closing sales price of an Ordinary Share on the date the SAR is granted
(or, if the Ordinary Shares are not traded on such date, on the immediately
preceding date on which the Ordinary Shares are traded). Upon exercise of
an SAR, the holder shall receive, for each share with respect to which the
SAR is exercised, an amount (the "Appreciation") equal to the amount by
which the fair market value of an Ordinary Share on the date of exercise of
the SAR exceeds the base price of the SAR. For purposes of the preceding
sentence, the fair market value of an Ordinary Share shall be the average
of the high and low prices of such share as reported on the New York Stock
Exchange composite tape. The Appreciation shall be payable in cash and
shall be paid within 30 days of the exercise of the SAR.
(b) Term of SAR. Each SAR shall expire ten years from the date of
grant, except as provided in Section 4.3(c) with respect to the death of a
Participant. No SAR shall be exercised after the expiration of its term.
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(c) Exercise of SARs. Subject to Section 4.3(f) and the remainder of
this paragraph, each SAR shall become exercisable in installments as
follows: (1) the SAR shall be exercisable with respect to a total of 1,333
Ordinary Shares on or after the first anniversary of the date of grant; (2)
the SAR shall be exercisable with respect to a total of 2,666 Ordinary
Shares on or after the second anniversary of the date of grant; and (3) the
SAR shall be exercisable with respect to a total of 4,000 Ordinary Shares
on or after the third anniversary of the date of grant. If a Participant
ceases to be a Director of the Company as a result of death, disability, or
retirement from the Board of Directors on his Retirement Date (as defined
in Section 4.2(i)), each SAR shall immediately become fully exercisable and
shall remain exercisable for the remainder of its term, except that
notwithstanding the term of the SAR, an SAR which is outstanding on the
date of a Participant's death shall remain outstanding and exercisable for
a term of the greater of ten years from the date of grant or one year after
the Participant's death. If a Participant ceases to be a Director of the
Company for any reason not set forth in the preceding sentence, no
additional portions of the SAR will become exercisable, and the portion of
the SAR that is then exercisable shall expire if not exercised within 60
days after cessation of service as a Director. An SAR may be exercised in
accordance with its terms in whole or in part.
(d) Nontransferability of SARs. No SAR or any interest therein shall
be transferable by the Participant other than by will or by the laws of
descent and distribution. During a Participant's lifetime, all SARs shall
be exercisable only by such Participant or by the guardian or legal
representative of the Participant.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none
of the rights of a shareholder.
(f) Change of Control. Notwithstanding any other provisions of the
Plan, upon the occurrence of a Change of Control (as defined in Section
6.10) all SARs outstanding at the time of such Change of Control shall
become immediately exercisable and shall remain exercisable for the
remainder of their term.
(g) Special Provisions. Notwithstanding the foregoing provisions of
Section 4.3, the freestanding SARs granted to Eligible Directors residing
in Norway who were first elected to the Board of Directors in 1996 (and who
waived the grant of an Option to which they were then entitled under the
terms of the Plan as then in effect) with respect to their initial election
to the Board of Directors (i) shall have a base price equal to the closing
sales price of the Ordinary Shares on the date of their initial election,
and (ii) shall have exercise and expiration dates determined as if such
SARs had been granted on the date of their initial election.
4.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF PRIOR AWARDS OF OPTIONS OR SARS
(a) Supplemental Payments. Within 30 days of each date that an Option or
SAR granted prior to the date of this Amendment and Restatement is exercised, a
Supplemental Payment shall be paid to the Participant (or to the Participant's
Beneficiary in the event of death), in cash, in an amount equal to the amount
necessary to pay the income tax payable to the national government where the
Director resides with respect to both the exercise of such Option or SAR and
receipt of the Supplemental Payment, assuming the Participant is taxed at the
maximum effective income tax rate applicable thereto; provided, however, that no
such payment shall be made if the Participant has waived his right to the
payment pursuant to Section 4.4(b).
(b) Waiver. The Committee may grant an additional Option or SAR, as
applicable, to any Participant who agrees in writing to waive the right to
receive a supplemental cash payment under Section 4.4(a). Such Option or SAR
shall be immediately exercisable. All other provisions of Section 4.2 or 4.3
will apply as though the date of acceptance of the Option or SAR were the date
of grant. Notwithstanding the foregoing, however, in no event shall (i) the
number of Ordinary Shares subject to this Section 4.4(b) exceed 50,000, or (ii)
the number of SARs subject to this Section 4.4(b) exceed 50,000.
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V. CASH PERFORMANCE AWARDS
5.1 TERMS AND CONDITIONS OF CASH PERFORMANCE AWARDS
A "Cash Award" is a cash bonus paid solely on account of the attainment of
one or more objective performance goals that have been preestablished by the
Committee. Each Cash Award shall be subject to such terms and conditions,
restrictions and contingencies, if any, as the Committee shall determine.
Restrictions and contingencies limiting the right to receive a cash payment
pursuant to a Cash Award shall be based on the achievement of single or multiple
performance goals over a performance period established by the Committee. No
employee shall receive Cash Awards during any calendar year aggregating in
excess of $1 million.
5.2 PERFORMANCE OBJECTIVES UNDER SECTION 162(m) OF THE CODE
The Committee shall have the right to designate Cash Awards as "Cash
Performance Awards." Notwithstanding any other provisions of this Article V,
awards so designated shall be granted and administered in a manner designed to
preserve the deductibility of the compensation resulting from such awards in
accordance with Section 162(m) of the Code. The payment of a Cash Performance
Award shall be subject to the achievement of performance objectives (the
"Performance Objectives") established by the Committee based on one or more of
the following criteria, in each case applied to the Company on a consolidated
basis and/or to a business unit, and either as an absolute measure or as a
measure of comparative performance relative to a peer group of companies: sales,
operating profits, operating profits before interest expense and taxes, net
earnings, earnings per share, return on equity, return on assets, return on
invested capital, total shareholder return, cash flow, debt to equity ratio,
market share, share price, economic value added, and market value added.
The Performance Objectives for a particular Cash Performance Award relative
to a particular fiscal year shall be established by the Committee in writing no
later than 90 days after the beginning of such year. The Committee shall have
the authority to determine whether the Performance Objectives and other terms
and conditions of the award are satisfied, and the Committee's determination as
to the achievement of Performance Objectives relating to a Cash Performance
Award shall be made in writing.
VI. ADDITIONAL PROVISIONS
6.1 GENERAL RESTRICTIONS
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the Ordinary Shares subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of Ordinary Shares is
necessary or desirable (in connection with any requirement or interpretation of
any federal or state securities law, rule or regulation) as a condition of, or
in connection with, the granting of such award or the issuance, purchase or
delivery of Ordinary Shares thereunder, such award may not be consummated in
whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.
6.2 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a scheme of arrangement, reorganization, recapitalization,
Ordinary Share split, Ordinary Share dividend, combination of shares, rights
offer, liquidation, dissolution, merger, consolidation, spin-off, sale of
assets, payment of an extraordinary cash dividend, or any other change in or
affecting the corporate structure or capitalization of the Company, the
Committee shall make appropriate adjustment in the number and kind of shares
authorized by the Plan (including any limitations on individual awards), in
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the number, price or kind of shares covered by the awards and in any outstanding
awards under the Plan; provided, however, that no such adjustment shall increase
the aggregate value of any outstanding award.
6.3 AMENDMENTS
(a) The Board of Directors may amend the Plan from time to time. No such
amendment shall require approval by the shareholders unless shareholder approval
is required to satisfy Rule 16b-3 under the Securities Exchange Act of 1934 or
Section 162(m) of the Code, or by applicable law or Stock exchange requirements.
(b) The Committee shall have the authority to amend any grant to include
any provision which, at the time of such amendment, is authorized under the
terms of the Plan; however, no outstanding award may be revoked or altered in a
manner unfavorable to the holder without the written consent of the holder.
(c) If a Participant has ceased or will cease to be a Director of the
Company for the convenience of the Company (as determined by the Board of
Directors), the Board of Directors may amend all or any portion of such
Participant's Options or SARs so as to make such Options or SARs fully
exercisable and/or specify a schedule upon which they become exercisable, and/or
permit all or any portion of such Options or SARs to remain exercisable for such
period designated by it, but not beyond the expiration of the term established
pursuant to Section 4.2(b) or 4.3(b). A Participant shall not participate in the
deliberations or vote by the Board of Directors under this paragraph with
respect to his Options or SARs. The exercise periods of Options or SARs
established by the Board of Directors pursuant to this paragraph shall override
the provisions of Section 4.2(c) or 4.3(c) to the extent inconsistent therewith.
6.4 CANCELLATION OF AWARDS
Any award granted under Articles II and III of the Plan may be canceled at
any time with the consent of the holder and a new award may be granted to such
holder in lieu thereof, which award may, in the discretion of the Committee, be
on more favorable terms and conditions than the canceled award; provided,
however, that the Committee may not reduce the exercise or base price of
outstanding Options or SARs where the existing exercise or base price is higher
than the then current market price of the Ordinary Shares.
6.5 BENEFICIARY
An employee or Participant may file with the Company a written designation
of Beneficiary, on such form as may be prescribed by the Committee, to receive
any Options, SARs, Restricted Shares, Ordinary Shares and Supplemental Payments
that become deliverable to the employee or Participant pursuant to the Plan
after the employee's or Participant's death. An employee or Participant may,
from time to time, amend or revoke a designation of Beneficiary. If no
designated Beneficiary survives the employee or Participant, the executor or
administrator of the employee's or Participant's estate shall be deemed to be
the employee's or Participant's Beneficiary.
6.6 WITHHOLDING
(a) Whenever the Company proposes or is required to issue or transfer
Ordinary Shares under the Plan, the Company shall have the right to require the
award holder to remit to the Company an amount sufficient to satisfy any
applicable withholding tax liability prior to the delivery of any certificate
for such shares. Whenever under the Plan payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any withholding tax
liability.
(b) An employee entitled to receive Ordinary Shares under the Plan who has
not received a cash Supplemental Payment may elect to have the withholding tax
liability (or a specified portion thereof) with respect to such Ordinary Shares
satisfied by having the Company withhold from the shares otherwise deliverable
to the employee Ordinary Shares having a value equal to the amount of the tax
liability to be satisfied with respect to the Ordinary Shares. An election to
have all or a portion of the tax liability
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satisfied using Ordinary Shares shall comply with such requirements as may be
imposed by the Committee.
6.7 NON-ASSIGNABILITY
Except as expressly provided in the Plan, no award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution. During the life of the holder, awards under the
Plan shall be exercisable only by such holder or by the guardian or legal
representative of such holder.
6.8 NON-UNIFORM DETERMINATIONS
Determinations by the Committee under the Plan (including, without
limitation, determinations of the persons to receive awards under Articles II
and III; the form, amount and timing of such awards; the terms and provisions of
such awards and the agreements evidencing same; and provisions with respect to
termination of employment) need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, awards under the Plan,
whether or not such persons are similarly situated.
6.9 NO GUARANTEE OF EMPLOYMENT OR DIRECTORSHIP
The grant of an award under the Plan shall not constitute an assurance of
continued employment for any period or any obligation of the Board of Directors
to nominate any Director for re-election by the Company's shareholders.
6.10 CHANGE OF CONTROL
A "Change of Control" means:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding ordinary shares of the
Company (the "Outstanding Company Ordinary Shares") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation or other entity controlled by the Company or (iv) any
acquisition by any corporation or other entity pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 6.10; or
(b) Individuals who, as of the date hereof, constitute the Board of
the Company (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of the Company; provided, however, that for
purposes of this Section 6.10 any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board of the Company; or
(c) Consummation of a scheme of arrangement, reorganization, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Company (a "Business
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Combination"), in each case, unless, following such Business Combination,
(i) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Ordinary Shares
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding ordinary shares or shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation or other entity resulting from such
Business Combination (including, without limitation, a corporation or other
entity which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Ordinary Shares and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any corporation
or other entity resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation or other
entity resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
ordinary shares or shares of common stock of the corporation or other
entity resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation or
other entity except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the action
of the Board of the Company providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
6.11 DURATION AND TERMINATION
(a) The Plan shall be of unlimited duration. Notwithstanding the foregoing,
no incentive Share option (within the meaning of Section 422 of the Code) shall
be granted under the Plan, and no Options or SARs shall be granted under the
Plan to Eligible Directors under Article IV, after May 1, 2003, but awards
granted prior to such dates may extend beyond such dates, and the terms of this
Plan shall continue to apply to all awards granted hereunder.
(b) The Board of Directors may discontinue or terminate the Plan at any
time. Such action shall not impair any of the rights of any holder of any award
outstanding on the date of the Plan's discontinuance or termination without the
holder's written consent.
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6.12 EFFECTIVE DATE
The Plan was originally effective May 1, 1993. The Plan was amended and
restated effective March 13, 1997 and March 12, 1998 and amended effective May
14, 1999. This amendment and restatement of the Plan was adopted by the
Compensation Committee of the Board of Directors effective January 1, 2000, and
the increase in the number of Ordinary Shares reserved for issuance under the
Plan and the increase in the aggregate number of Ordinary Shares subject to
awards of freestanding SARs to employees was approved by the holders of a
majority of issued and outstanding Ordinary Shares at the extraordinary general
shareholders' meeting held on December 10, 1999.
IN WITNESS WHEREOF, this document has been executed effective as of January
1, 2000.
TRANSOCEAN SEDCO FOREX INC.
By: /s/ ERIC B. BROWN
----------------------------------
Eric B. Brown
Corporate Secretary
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ANNEX H
TRANSOCEAN SEDCO FOREX INC.
EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000)
1. PURPOSE
The Transocean Sedco Forex Inc. Employee Stock Purchase Plan (the "Plan")
is designed to encourage and assist all employees of Transocean Sedco Forex
Inc., a Cayman Islands exempted company limited by shares ("Transocean") and
Subsidiaries (as defined in Section 4) (hereinafter collectively referred to as
the "Company"), where permitted by applicable laws and regulations, to acquire
an equity interest in Transocean through the purchase of ordinary shares, par
value US$.01 per share, of Transocean ("Ordinary Shares"). It is intended that
this Plan shall constitute an "employee stock purchase plan" within the meaning
of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered and interpreted by the Finance and Benefits
Committee (the "Committee") appointed by the Board of Directors of Transocean
(the "Board"), which Committee shall consist of at least two (2) persons. The
Committee shall supervise the administration and enforcement of the Plan
according to its terms and provisions and shall have all powers necessary to
accomplish these purposes and discharge its duties hereunder including, but not
by way of limitation, the power to (i) employ and compensate agents of the
Committee for the purpose of administering the accounts of participating
employees; (ii) construe or interpret the Plan; (iii) determine all questions of
eligibility; and (iv) compute the amount and determine the manner and time of
payment of all benefits according to the Plan.
The Committee may act by decision of a majority of its members at a regular
or special meeting of the Committee or by decision reduced to writing and signed
by all members of the Committee without holding a formal meeting. The Committee
may delegate its duties and authority under this Plan to one or more officers of
the Company, and actions taken by such duly authorized officers shall be deemed
to be actions of the Committee.
3. NATURE AND NUMBER OF SHARES
The Ordinary Shares subject to issuance under the terms of the Plan shall
be shares of Transocean's authorized but unissued Ordinary Shares, previously
issued Ordinary Shares reacquired and held by Transocean or Ordinary Shares
purchased on the open market. The aggregate number of Ordinary Shares which may
be issued under the Plan shall not exceed seven hundred fifty thousand (750,000)
Ordinary Shares. All Ordinary Shares purchased under the Plan, regardless of
source, shall be counted against the seven hundred fifty thousand (750,000)
Ordinary Share limitation.
In the event of any scheme of arrangement, reorganization, share split,
reverse share split, share dividend, combination of shares, merger,
consolidation, offering of rights or other similar change in the capital
structure of Transocean, the Committee may make such adjustment, if any, as it
deems appropriate in the number, kind and purchase price of the Ordinary Shares
available for purchase under the Plan and in the maximum number of Ordinary
Shares which may be issued under the Plan, subject to the approval of the Board
and in accordance with Section 19.
4. ELIGIBILITY REQUIREMENTS
Each "Employee" (as hereinafter defined), except as described in the next
following paragraph, shall become eligible to participate in the Plan in
accordance with Section 5 on the first "Enrollment Date" (as defined therein)
following employment by the Company. Participation in the Plan is voluntary.
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The following Employees are not eligible to participate in the Plan:
(i) Employees who would, immediately upon enrollment in the Plan, own
directly or indirectly, or hold options or rights to acquire, an aggregate
of five percent (5%) or more of the total combined voting power or value of
all outstanding shares of all classes of the Company or any subsidiary (in
determining share ownership of an individual, the rules of Section 424(d)
of the Code shall be applied, and the Committee may rely on representations
of fact made to it by the employee and believed by it to be true); and
(ii) Employees of Transocean who are customarily employed for less
than twenty (20) hours per week or less than five (5) months in any
calendar year; and
(iii) Employees of any Subsidiary who are excluded under the terms of
any agreement evidencing the adoption of the Plan; and
(iv) Employees who reside in a country in which the Plan fails to meet
applicable legal and regulatory requirements or in a country whose laws
make participation impractical.
"Employee" shall mean any individual employed by Transocean or any
Subsidiary (as hereinafter defined). "Subsidiary" shall mean any corporation (a)
which is in an unbroken chain of corporations beginning with Transocean if, on
or after the Effective Date, each of the corporations other than the last
corporation in the chain owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain and (b) which has adopted the Plan with the approval
of the Committee.
5. ENROLLMENT
Each eligible Employee of Transocean or any Subsidiary as of May 14, 1998,
(the "Effective Date" herein) may enroll in the Plan as soon as administratively
feasible after the Effective Date, as determined by the Committee. Each other
eligible Employee of Transocean or a participating Subsidiary who thereafter
becomes eligible to participate may enroll in the Plan on the first January 1
following the date he first meets the eligibility requirements of Section 4.
Notwithstanding the foregoing, with respect to the Plan's designated purchase
period (the "Purchase Period") ending December 31, 2000, an eligible employee
must enroll in the Plan prior to the first to occur of (i) January 1, 2000 or,
if later, the date of the consummation of the merger transaction contemplated by
the July 12, 1999 Agreement and Plan of Merger between Schlumberger Limited,
Sedco Forex Holdings Limited, and the Company (the "Merger") or (ii) February
29, 2000. Any eligible Employee not enrolling in the Plan when first eligible
may enroll in the Plan on any subsequent January 1. Any eligible Employee may
enroll or re-enroll in the Plan on the dates hereinabove prescribed or such
other specific dates established by the Committee from time to time ("Enrollment
Dates"). In order to enroll, an eligible Employee must complete, sign and submit
the appropriate form to the person designated by the Committee.
6. METHOD OF PAYMENT
Payment for shares is to be made as of the applicable "Purchase Date" (as
defined in Section 9) through payroll deductions on an after-tax basis (with no
right of prepayment) over the Purchase Period, with the first such deduction
commencing with the first payroll period ending after the Enrollment Date. Each
Purchase Period under the Plan shall be a period of one (1) year beginning on
each January 1 and ending on the following December 31 or such other period as
the Committee may prescribe. Each participating Employee (hereinafter referred
to as a "Participant") will authorize such deductions from his pay for each
month during the Purchase Period, and such amounts will be deducted in
conformity with his employer's payroll deduction schedule; provided, however,
that payroll withholding during the initial Purchase Period will begin as soon
as administratively feasible, after the Effective Date, as is determined by the
Committee in its discretion.
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Each Participant may elect to make contributions each pay period in amounts
not less than two percent (2%) of the Participant's monthly compensation (with
no dollar minimum), not to exceed a monthly contribution equal to twenty percent
(20%) of the Participant's monthly compensation (base pay and overtime pay
associated with base pay, but excluding premium or special pay and overtime
associated therewith) (or such other dollar amounts as the Committee may
establish from time to time before an Enrollment Date for all purchases to occur
during the relevant Purchase Period). In establishing other dollar amounts of
permitted contributions, the Committee may take into account the "Maximum Share
Limitation" (as defined in Section 8). The rate of contribution shall be
designated by the Participant in the enrollment form.
A Participant may elect to increase or decrease the rate of contribution
effective as of the first day of the Purchase Period by giving prior written
notice to the person designated by the Committee on the appropriate form. A
Participant may not elect to increase or decrease the rate of contribution
during a Purchase Period. A Participant may suspend payroll deductions at any
time during the Purchase Period by giving prior written notice to the person
designated by the Committee on the appropriate form. If a Participant elects to
suspend his payroll deductions, such Participant's account will continue to
accrue interest and will be used to purchase shares at the end of the Purchase
Period. A Participant may also elect to withdraw his entire contributions for
the current Purchase Period in accordance with Section 8 by giving prior written
notice to the person designated by the Committee on the appropriate form. Any
Participant who withdraws his contributions will receive, as soon as
practicable, his entire account balance, including interest and dividends, if
any. Any Participant who suspends payroll deductions or withdraws contributions
during any Purchase Period cannot resume payroll deductions during such Purchase
Period and must re-enroll in the Plan in order to participate in the next
Purchase Period.
Any Participant, in accordance with the procedure established by the
Company, can elect to contribute to the Plan by making a cash payment or by
assigning to the Company the right to receive a cash payment. This assignment or
transfer of a cash payment to the Plan must occur after the consummation of the
Merger and not later than February 29, 2000.
Except in case of cancellation of election to purchase, death, resignation
or other terminating event, the amount in a Participant's account at the end of
the Purchase Period will be applied to the purchase of Ordinary Shares.
7. CREDITING OF CONTRIBUTIONS, INTEREST AND DIVIDENDS
Contributions shall be credited to a Participant's account as soon as
administratively feasible after payroll withholding. Unless otherwise prohibited
by laws and regulations, Participant contributions will receive interest at a
rate realized for the investment vehicle or vehicles designated by the Committee
for purposes of the Plan. Interest will be credited to a Participant's account
from the first date on which such Participant's contributions are deposited with
the investment vehicle until the earlier of (i) the end of the Purchase Period
or (ii) in the event of cancellation, death, resignation or other terminating
event, the last day for which interest is allocated for such investment vehicle
prior to the date on which such contributions are returned to the Participant.
Dividends on shares held in a Participant's account in the Plan will be invested
in Ordinary Shares under the Company's Shareholder Dividend Reinvestment Plan.
Any such contributions, interest and dividends shall be deposited in or held by
a bank or financial institution designated by the Committee for this purpose
(the "Custodian").
8. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT
Enrollment in the Plan by an Employee on an Enrollment Date will constitute
the grant by the Company to the Participant of the right to purchase Ordinary
Shares under the Plan. Re-enrollment by a Participant in the Plan will
constitute a grant by the Company to the Participant of a new opportunity to
purchase shares on the Enrollment Date on which such re-enrollment occurs. A
Participant who has not (a) terminated employment, (b) withdrawn his
contributions from the Plan, or (c) notified the Company in writing, by December
1 (or such date as the Committee shall establish), of his election to withdraw
his
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payroll deductions plus interest as of December 31 will have Ordinary Shares
purchased for him on the applicable Purchase Date, and he will automatically be
re-enrolled in the Plan on the Enrollment Date immediately following the
Purchase Date on which such purchase has occurred, unless each Participant
notifies the person designated by the Committee on the appropriate form that he
elects not to re-enroll.
Each right to purchase Ordinary Shares under the Plan during a Purchase
Period shall have the following terms:
(i) the right to purchase Ordinary Shares during a particular Purchase
Period shall expire on the earlier of: (A) the completion of the purchase
of shares on the Purchase Date occurring in the Purchase Period, or (B) the
date on which participation of such Participant in the Plan terminates for
any reason;
(ii) payment for shares purchased will be made through payroll
withholding and the crediting of interest and dividends, if applicable, in
accordance with Sections 6 and 7;
(iii) purchase of shares will be accomplished only in accordance with
Section 9;
(iv) the price per share will be determined as provided in Section 9;
(v) the right to purchase shares (taken together with all other such
rights then outstanding under this Plan and under all other similar stock
purchase plans of Transocean or any Subsidiary) will in no event give the
Participant the right to purchase a number of shares during a calendar year
in excess of the number of Ordinary Shares derived by dividing twenty-five
thousand dollars (US$25,000) by the fair market value of the Ordinary
Shares (the "Maximum Share Limitation") on the applicable Grant Date
determined in accordance with Section 9;
(vi) shares purchased under this Plan may not be sold within three (3)
months of the Purchase Date, unless the Committee, in its sole discretion,
waives this requirement; and
(vii) the right to purchase shares will in all respects be subject to
the terms and conditions of the Plan, as interpreted by the Committee from
time to time.
9. PURCHASE OF SHARES
The right to purchase Ordinary Shares granted by the Company under the Plan
is for the term of a Purchase Period. The fair market value of the Ordinary
Shares ("Fair Market Value") to be purchased during such Purchase Period will be
the closing composite sales price per Ordinary Share in the New York Stock
Exchange Composite Transactions Quotations on the first trading day of the
calendar month of January, or such other trading date designated by the
Committee (the "Grant Date"); provided, however, that for the Purchase Period
which begins on the Effective Date, the Grant Date shall be the Effective Date.
Notwithstanding the foregoing, with respect to the Purchase Period ending
December 31, 2000, the Grant Date shall be the first to occur of (i) January 1,
2000 or, if later, the date of the consummation of the Merger or (ii) February
29, 2000. The Fair Market Value of the Ordinary Shares will again be determined
in the same manner on the last trading day of the calendar month of December, or
such other trading date designated by the Committee (the "Purchase Date");
however, in no event shall the Committee, in the exercise of its discretion,
designate a Purchase Date beyond twelve (12) months from the related Enrollment
Date or otherwise fail to meet the requirements of Section 423(b)(7) of the
Code. These dates constitute the date of grant and the date of exercise for
valuation purposes of Section 423 of the Code.
As of the Purchase Date, the Committee shall apply the funds then credited
to each Participant's account to the purchase of Ordinary Shares. The cost to
the Participant for the shares purchased during a Purchase Period shall be the
lower of:
(i) eighty-five percent (85%) of the Fair Market Value of Ordinary
Shares on the Grant Date; or
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(ii) eighty-five percent (85%) of the Fair Market Value of Ordinary
Shares on the Purchase Date.
Certificates evidencing shares purchased shall be delivered to the
Custodian or to any other bank or financial institution designated by the
Committee for this purpose or delivered to the Participant (if the Participant
has elected by written notice to the Committee to receive the certificate) as
soon as administratively feasible after the Purchase Date; however, certificates
shall not be delivered to the Participant within one (1) year of the Purchase
Date of the underlying shares, except as otherwise provided herein.
Notwithstanding the foregoing, Participants shall be treated as the record
owners of their shares effective as of the Purchase Date. Shares that are held
by the Custodian or any other designated bank or financial institution shall be
held in book entry form. Until such certificates are distributed to the
Participant, the Participant will not be permitted to transfer ownership of the
certificates except as contemplated by Section 10 or Section 14 of the Plan. Any
Participant who terminates employment will receive a certificate for the number
of shares held in his account and a cash refund attributable to amounts equal to
less than the price of a whole share, and any accumulated contributions,
dividends and interest. If for any reason the purchase of shares with a
Participant's allocations to the Plan exceeds or would exceed the Maximum Share
Limitation, such excess amounts shall be refunded to the Participant as soon as
practicable after such excess has been determined to exist.
If as of any Purchase Date the shares authorized for purchase under the
Plan are exceeded, enrollments shall be reduced proportionately to eliminate the
excess. Any funds that cannot be applied to the purchase of shares due to excess
enrollment shall be refunded as soon as administratively feasible, including
interest determined in accordance with Section 7. The Committee in its
discretion may also provide that excess enrollments may be carried over to the
next Purchase Period under this Plan or any successor plan according to the
regulations set forth under Section 423 of the Code.
10. WITHDRAWAL OF SHARES AND SALE OF SHARES
(a) A Participant may elect to withdraw at any time (without withdrawing
from participation in the Plan) shares which have been held in his account for
at least one (1) year by giving notice to the person designated by the Committee
on the appropriate form. Upon receipt of such notice from the person designated
by the Committee, the Custodian, bank or other financial institution designated
by the Committee for this purpose will arrange for the issuance and delivery of
such shares held in the Participant's account as soon as administratively
feasible.
(b) Notwithstanding anything in the Plan to the contrary, a Participant may
sell shares which are held in his account, including shares which have been held
in his account for less than one (1) year, but not less than three (3) months as
provided in Section 8(vi) (unless waived by the Committee), by giving notice to
the person designated by the Committee on the appropriate form. Upon receipt of
such notice from the person designated by the Committee, the Custodian, bank or
other financial institution designated by the Committee for this purpose will
arrange for the sale of such Participant's shares. Any sale will be deemed to
occur as soon as practicable after the Participant provides such notice to the
person designated by the Committee. The proceeds of any sale under this
subsection 10(b), less any associated commissions or required withholding for
taxes, shall be paid to the Participant as soon as practicable after the sale.
11. TERMINATION OF PARTICIPATION
The right to participate in the Plan terminates immediately when a
Participant ceases to be employed by the Company for any reason whatsoever
(including death, unpaid disability or when the Participant's employer ceases to
be a Subsidiary) or the Participant otherwise becomes ineligible. Participation
also terminates immediately when the Participant voluntarily withdraws his
contributions from the Plan. Participation terminates immediately after the
Purchase Date if the Participant is not re-enrolled in the Plan for the next
Purchase Period or if the Participant has suspended payroll deductions during
any Purchase Period and has not re-enrolled in the Plan for the next Purchase
Period. As soon as administratively feasible after termination of participation
due to cessation of employment, the Committee
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shall pay to the Participant or his beneficiary or legal representative all
amounts credited to his account, including interest and dividends, if
applicable, determined in accordance with Section 7, and shall cause a
certificate for the number of shares held in his account to be delivered to the
Participant, subject to the restrictions in Section 9. For purposes of the Plan,
a Participant is not deemed to have terminated his employment if he transfers
employment from Transocean to a Subsidiary, or vice versa, or transfers
employment between Subsidiaries.
12. UNPAID LEAVE OF ABSENCE
Unless the Participant has voluntarily withdrawn his contributions from the
Plan, shares will be purchased for his account on the Purchase Date next
following commencement of an unpaid leave of absence by such Participant,
provided such leave does not constitute a termination of employment. The number
of shares to be purchased will be determined by applying to the purchase the
amount of the Participant's contributions made up to the commencement of such
unpaid leave of absence plus interest on such contributions and dividends, if
applicable, both determined in accordance with Section 7. If the Participant's
unpaid leave of absence both commences and terminates during the same Purchase
Period and he has resumed eligible employment prior to the Purchase Date related
to that Purchase Period, he may also resume payroll deductions immediately, and
shares will be purchased for him on such Purchase Date as otherwise provided in
Section 9.
13. DESIGNATION OF BENEFICIARY
Each Participant may designate one or more beneficiaries in the event of
death and may, in his sole discretion, change such designation at any time. Any
such designation shall be effective upon receipt by the person designated by the
Committee and shall control over any disposition by will or otherwise.
As soon as administratively feasible after the death of a Participant,
amounts credited to his account, including interest and dividends, if
applicable, determined in accordance with Section 7, shall be paid in cash and a
certificate for any shares shall be delivered to the Participant's designated
beneficiaries or, in the absence of such designation, to the executor,
administrator or other legal representative of the Participant's estate. Such
payment shall relieve the Company of further liability to the deceased
Participant with respect to the Plan. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the account
unless the Participant has given express contrary instructions.
14. ASSIGNMENT
Except as provided in Section 13, the rights of a Participant under the
Plan will not be assignable or otherwise transferable by the Participant, other
than by will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order," as defined in Section 414(p) of the Code. No
purported assignment or transfer of such rights of a Participant under the Plan,
whether voluntary or involuntary, by operation of law or otherwise, shall vest
in the purported assignee or transferee any interest or right therein
whatsoever, but immediately upon such assignment or transfer, or any attempt to
make the same, such rights shall terminate and become of no further effect. If
this provision is violated, the Participant's election to purchase Ordinary
Shares shall terminate, and the only obligation of the Company remaining under
the Plan will be to pay to the person entitled thereto the amount then credited
to the Participant's account. No Participant may create a lien on any funds,
securities, rights or other property held for the account of the Participant
under the Plan, except to the extent that there has been a designation of
beneficiaries in accordance with the Plan, and except to the extent permitted by
will or the laws of descent and distribution if beneficiaries have not been
designated. A Participant's right to purchase shares under the Plan shall be
exercisable only during the Participant's lifetime and only by him.
15. COSTS
All costs and expenses incurred in administering this Plan shall be paid by
the Company. Any brokerage fees for the sale of shares purchased under the Plan
shall be paid by the Participant.
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16. REPORTS
At the end of each Purchase Period, the Company shall provide or cause to
be provided to each Participant a report of his contributions, including
interest earned, and the number of Ordinary Shares purchased with such
contributions by that Participant on each Purchase Date.
17. EQUAL RIGHTS AND PRIVILEGES
All eligible Employees shall have equal rights and privileges with respect
to the Plan to the extent necessary to enable the Plan to qualify for U.S. tax
purposes as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and related regulations. Any provision of
the Plan which is inconsistent with Section 423 or any successor provision of
the Code shall without further act or amendment by the Company be reformed to
comply with the requirements of Section 423. This Section 17 shall take
precedence over all other provisions in the Plan.
18. RIGHTS AS SHAREHOLDERS
A Participant will have no rights as a shareholder under the election to
purchase until he becomes a shareholder as herein provided. A Participant will
become a shareholder with respect to shares for which payment has been completed
as provided in Section 9 at the close of business on the last business day of
the Purchase Period.
19. MODIFICATION AND TERMINATION
The Board may amend or terminate the Plan at any time insofar as permitted
by law. No amendment shall be effective unless within one (1) year after it is
adopted by the Board, it is approved by the holders of Transocean's outstanding
shares if and to the extent such amendment is required to be approved by
shareholders in order to cause the rights granted under the Plan to purchase
Ordinary Shares to meet the requirements of Section 423 of the Code (or any
successor provision).
The Plan shall terminate after all Ordinary Shares issued under the Plan
have been purchased, unless terminated earlier by the Board or unless additional
Ordinary Shares are issued under the Plan with the approval of the shareholders.
In the event the Plan is terminated, the Committee may elect to terminate all
outstanding rights to purchase shares under the Plan either immediately or upon
completion of the purchase of shares on the next Purchase Date, unless the
Committee has designated that the right to make all such purchases shall expire
on some other designated date occurring prior to the next Purchase Date. If the
rights to purchase shares under the Plan are terminated prior to expiration, all
funds contributed to the Plan which have not been used to purchase shares shall
be returned to the Participants as soon as administratively feasible, including
interest and dividends, if applicable, determined in accordance with Section 7.
20. BOARD AND SHAREHOLDER APPROVAL; EFFECTIVE DATE
The Plan was originally adopted by the Board on March 12, 1998 and was
effective immediately on such date. The Plan was originally approved by
shareholders at the 1998 annual meeting. This amendment and restatement of the
Plan was adopted by the Compensation Committee of the Board of Directors
effective January 1, 2000, and the increase in the aggregate number of Ordinary
Shares reserved for issuance under the Plan was approved by the holders of a
majority of issued and outstanding Ordinary Shares at the extraordinary general
shareholders' meeting held on December 10, 1999.
21. GOVERNMENTAL APPROVALS OR CONSENTS
This Plan and any offering or sale made to Employees under it are subject
to any governmental approvals or consents that may be or become applicable in
connection therewith. Subject to the provisions of Section 19, the Board may
make such changes in the Plan and include such terms in any offering under the
Plan as may be desirable to comply with the rules or regulations of any
governmental authority.
H-7
<PAGE> 267
22. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board or the Committee shall determine, based on opinion
of legal counsel, that the listing, registration or qualification of the shares
covered by the Plan upon any national securities exchange or reporting system or
under any state or federal law is necessary or desirable as a condition of, or
in connection with, the sale or purchase of shares under the Plan, no shares
will be sold, issued or delivered unless and until such listing, registration or
qualification shall have been effected or obtained, or otherwise provided for,
free of any conditions not acceptable to legal counsel.
23. EMPLOYMENT RIGHTS
The Plan shall neither impose any obligation on Transocean or on any
Subsidiary to continue the employment of any Participant, nor impose any
obligation on any Participant to remain in the employ of Transocean or of any
Subsidiary.
24. WITHHOLDING OF TAXES
The Committee may make such provisions as it may deem appropriate for the
withholding of any taxes which it determines is required in connection with the
purchase of Ordinary Shares under the Plan.
25. SUBSIDIARY TERMS
In addition to changes in eligibility requirements, the adopting
Subsidiaries may make any changes in the terms of this Plan applicable to their
Employees as shall be acceptable to the Committee, provided that such changes do
not cause the Plan to fail to comply with the requirements of Section 423 of the
Code, to the extent it is applicable.
26. GOVERNING LAW
The Plan and rights to purchase shares that may be granted hereunder shall
be governed by and construed and enforced in accordance with the laws of the
State of Texas.
27. USE OF GENDER
The gender of words used in the Plan shall be construed to include
whichever may be appropriate under any particular circumstances of the
masculine, feminine or neuter genders.
28. OTHER PROVISIONS
The agreements to purchase Ordinary Shares under the Plan shall contain
such other provisions as the Committee and the Board shall deem advisable,
provided that no such provision shall in any way be in conflict with the terms
of the Plan.
IN WITNESS WHEREOF, this document has been executed effective as of January
1, 2000.
TRANSOCEAN SEDCO FOREX INC.
By: /s/ ERIC B. BROWN
----------------------------------
Eric B. Brown
Corporate Secretary
H-8
<PAGE> 268
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 34.1 of Transocean Sedco Forex's articles of association provides
that:
No directors of Transocean Sedco Forex will be personally liable to
Transocean Sedco Forex or, if any, its members for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to Transocean Sedco Forex or, if any, to its members,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law or (iii) for any transaction from which
the director derived an improper personal benefit.
Transocean Sedco Forex will indemnify, to the fullest extent permitted by
the laws of the Cayman Islands as from time to time in effect, if any, any
person who was or is a party or is threatened to be made a party to, or
otherwise requires representation by counsel in connection with, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (whether or not an action by or in the right of
Transocean Sedco Forex) by reason of the fact that he is or was a director or
officer of Transocean Sedco Forex, or, while serving as a director or officer of
Transocean Sedco Forex, is or was serving at the request of Transocean Sedco
Forex, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity. The right to
indemnification conferred by Section 34.1 also includes the right of such
persons to be paid in advance by Transocean Sedco Forex for their expenses to
the fullest extent permitted by the laws of the Cayman Islands as from time to
time in effect.
Unless otherwise determined by the Transocean Sedco Forex board of
directors, Transocean Sedco Forex will indemnify to the fullest extent permitted
by the laws of the Cayman Islands as from time to time in effect, if any, any
person who was or is a party or is threatened to be made a party to, or
otherwise requires representation by counsel in connection with, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (whether or not an action by or in the right of
Transocean Sedco Forex), by reason of the fact that he is or was an employee
(other than an officer) or agent of Transocean Sedco Forex, or is or was serving
at the request of Transocean Sedco Forex as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or omitted in
such capacity.
The rights and authority conferred by Section 34.1 are not exclusive of any
other right that any person has or hereafter acquires under any law, provision
of Transocean Sedco Forex's articles of association or memorandum of
association, agreement, vote of members of Transocean Sedco Forex or of the
board of directors of Transocean Sedco Forex or otherwise.
Transocean Sedco Forex also has directors and officers liability insurance
that would indemnify its directors and officers against damages arising out of
certain kinds of claims that might be made against them based on their negligent
acts or omissions while acting in their capacity as such.
The merger agreement provides that, following the merger, Transocean Sedco
Forex will indemnify, defend and hold harmless, to the fullest extent permitted
under applicable law, (1) each person who is, or has been at any time prior to
the effective time of the merger, an officer or director of R&B Falcon or any of
its subsidiaries or divisions and (2) each person who served as a director,
officer, trustee or fiduciary of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or enterprise at the
request of R&B Falcon 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 that arises out of or pertains to actual or alleged acts or
omissions by them in the capacities set forth in (1) and (2) above. Transocean
Sedco Forex's duty to indemnify, defend and hold harmless applies whether or not
such actions are commenced, asserted or claimed prior to the effective time of
the merger. In the event of such claim, action, suit, proceeding or
investigation,
II-1
<PAGE> 269
Transocean Sedco Forex is required to pay the fees and expenses of counsel
selected by the party to be indemnified, to the fullest extent permitted by
applicable law in advance of the final disposition of any such action and
cooperate in the defense of any such matter.
The merger agreement provides that the rights to indemnification will
survive the merger and continue in full force and effect. The merger agreement
also provides that for a period of six years after the effective time of the
merger, Transocean Sedco Forex will maintain officers' and directors' liability
insurance covering those individuals described in (1) and (2) of the preceding
paragraph who were covered prior to the effective time of the merger by
officers' and directors' liability insurance policies maintained by R&B Falcon
on terms substantially no less advantageous to those individuals than the
existing R&B Falcon insurance, provided that Transocean Sedco Forex will not be
required to pay annual premiums in excess of $482,100, in which case Transocean
Sedco Forex will purchase as much coverage as is reasonably practicable for that
amount.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*2.1 -- Agreement and Plan of Merger dated as of August 19, 2000
by and among Transocean Sedco Forex Inc., Transocean
Holdings Inc., TSF Delaware Inc. and R&B Falcon
Corporation (included as Annex A to the Joint Proxy
Statement/ Prospectus contained in this Registration
Statement).
*3.1 -- Memorandum of Association of Transocean Sedco Forex Inc.
(as proposed to be amended, included as Annex E to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
*3.2 -- Articles of Association of Transocean Sedco Forex Inc.
(as proposed to be amended, included as Annex F to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
**5.1 -- Opinion of Walkers regarding the legality of the ordinary
shares and warrants to be issued by Transocean Sedco
Forex Inc.
**8.1 -- Opinion of Cravath, Swaine & Moore regarding certain U.S.
federal income tax consequences.
**8.2 -- Opinion of Baker Botts L.L.P. regarding certain U.S.
federal income tax consequences.
*10.1 -- Long-Term Incentive Plan, as amended and restated, of
Transocean Sedco Forex Inc. (included as Annex G to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
*10.2 -- Employee Stock Purchase Plan, as amended and restated, of
Transocean Sedco Forex Inc. (included as Annex H to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
15.1 -- Letter Regarding Unaudited Interim Financial Information.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of PricewaterhouseCoopers LLP.
23.3 -- Consent of Arthur Andersen LLP.
**23.4 -- Consent of Walkers (included in Exhibit 5.1).
**23.5 -- Consent of Cravath, Swaine & Moore (included in Exhibit
8.1).
*23.6 -- Consent of Simmons & Company International.
</TABLE>
II-2
<PAGE> 270
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*23.7 -- Form of Consent of Goldman, Sachs & Co.
*23.8 -- Consent of Morgan Stanley & Co. Incorporated.
*24.1 -- Powers of Attorney.
**99.1 -- Form of Proxy Card for Transocean Sedco Forex Inc.
**99.2 -- Form of Proxy Card for R&B Falcon Corporation.
</TABLE>
---------------
* Previously filed as an exhibit to Transocean Sedco Forex's Registration
Statement on Form S-4 as filed with the Securities and Exchange Commission
on September 22, 2000.
** To be filed by amendment.
(b) Financial Statement Schedules.
None
ITEM 22. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the
II-3
<PAGE> 271
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(e) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(f) That every prospectus (i) that is filed pursuant to paragraph (e)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as part
of an amendment to the Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(g) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(h) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the Registration Statement when
it became effective.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such of such issue.
II-4
<PAGE> 272
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1933, the registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on October 26, 2000.
TRANSOCEAN SEDCO FOREX INC.
By:
/s/ J. MICHAEL TALBERT
----------------------------------
J. Michael Talbert
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons on
behalf of the registrant in the capacities indicated on October 26, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board of Directors
-----------------------------------------------------
Victor E. Grijalva
/s/ J. MICHAEL TALBERT President, Chief Executive Officer and
----------------------------------------------------- Director
J. Michael Talbert (Principal Executive Officer)
/s/ ROBERT L. LONG Executive Vice President and Chief Financial
----------------------------------------------------- Officer
Robert L. Long (Principal Financial Officer)
/s/ RICARDO ROSA Vice President and Controller
----------------------------------------------------- (Principal Accounting Officer)
Ricardo Rosa
* Director
-----------------------------------------------------
Richard D. Kinder
* Director
-----------------------------------------------------
Ronald L. Kuehn, Jr.
* Director
-----------------------------------------------------
Arthur Lindenauer
* Director
-----------------------------------------------------
Martin B. McNamara
* Director
-----------------------------------------------------
Roberto Monti
* Director
-----------------------------------------------------
Alain Roger
* Director
-----------------------------------------------------
Kristian Siem
* Director
-----------------------------------------------------
Ian C. Strachan
*By /s/ WILLIAM E. TURCOTTE
------------------------------------------------
William E. Turcotte
(Attorney-in-Fact)
</TABLE>
II-5
<PAGE> 273
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*2.1 -- Agreement and Plan of Merger dated as of August 19, 2000
by and among Transocean Sedco Forex Inc., Transocean
Holdings Inc., TSF Delaware Inc. and R&B Falcon
Corporation (included as Annex A to the Joint Proxy
Statement/ Prospectus contained in this Registration
Statement).
*3.1 -- Memorandum of Association of Transocean Sedco Forex Inc.
(as proposed to be amended, included as Annex E to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
*3.2 -- Articles of Association of Transocean Sedco Forex Inc.
(as proposed to be amended, included as Annex F to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
**5.1 -- Opinion of Walkers regarding the legality of the ordinary
shares and warrants to be issued by Transocean Sedco
Forex Inc.
**8.1 -- Opinion of Cravath, Swaine & Moore regarding certain U.S.
federal income tax consequences.
**8.2 -- Opinion of Baker Botts L.L.P. regarding certain U.S.
federal income tax consequences.
*10.1 -- Long-Term Incentive Plan, as amended and restated, of
Transocean Sedco Forex Inc. (included as Annex G to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
*10.2 -- Employee Stock Purchase Plan, as amended and restated, of
Transocean Sedco Forex Inc. (included as Annex H to the
Joint Proxy Statement/Prospectus contained in this
Registration Statement).
15.1 -- Letter Regarding Unaudited Interim Financial Information.
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of PricewaterhouseCoopers LLP.
23.3 -- Consent of Arthur Andersen LLP.
**23.4 -- Consent of Walkers (included in Exhibit 5.1).
**23.5 -- Consent of Cravath, Swaine & Moore (included in Exhibit
8.1).
*23.6 -- Consent of Simmons & Company International.
*23.7 -- Form of Consent of Goldman, Sachs & Co.
*23.8 -- Consent of Morgan Stanley & Co. Incorporated.
*24.1 -- Powers of Attorney.
**99.1 -- Form of Proxy Card for Transocean Sedco Forex Inc.
**99.2 -- Form of Proxy Card for R&B Falcon Corporation.
</TABLE>
---------------
* Previously filed as an exhibit to Transocean Sedco Forex's Registration
Statement on Form S-4 as filed with the Securities and Exchange Commission
on September 22, 2000.
** To be filed by amendment.
