SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Reading & Bates Corporation
____________________________________________________________
(Name of Issuer)
Common Stock, Par Value $0.05 per Share
____________________________________________________________
(Title of Class and Securities)
755281 10 2
__________________________________________________________
(CUSIP Number of Class of Securities)
Leighton E. Moss
Falcon Drilling Company, Inc.
1900 West South Loop
Suite 1800
Houston, Texas 77027
Telephone: (713) 623-8984
_____________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
Copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
Attn: J. Michael Schell, Esq.
July 10, 1997
____________________________________________________________
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the
subject of this Statement because of Rule 13d-1(b)(3) or
(4), check the following: ( )
SCHEDULE 13D
CUSIP No. 755281 10 2
_________________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Falcon Drilling Company, Inc. (76-0351754)
_________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) ( )
_________________________________________________________________
(3) SEC USE ONLY
_________________________________________________________________
(4) SOURCE OF FUNDS
WC, BK, OO
_________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) ( )
__________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_________________________________________________________________
(7) SOLE VOTING POWER
NUMBER OF 14,340,154 1
SHARES ___________________________________
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY None
EACH ___________________________________
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON 14,340,154 1
WITH ___________________________________
(10) SHARED DISPOSITIVE POWER
None
_________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,340,154 1
_________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES ( )
_________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
16.6% 2
_________________________________________________________________
(14) TYPE OF REPORTING PERSON
CO, HC
_________________________________________________________________
1 The shares of common stock of Reading & Bates Corporation
("Issuer") covered by this report are purchasable by Falcon
Drilling Company, Inc. ("FDC") upon exercise of an option (the
"Option") granted to FDC pursuant to the Stock Option
Agreement, dated as of July 10, 1997, between Issuer and FDC
(the "Stock Option Agreement") and described in Item 4 of this
report. Prior to the exercise of the Option, FDC is not
entitled to any rights as a stockholder of the Issuer as to the
shares covered by the Option. The number of shares of common
stock of the Issuer purchasable by FDC under the Option, which
is initially set to equal 14,340,154 shares, will be adjusted
if necessary so that the number of shares purchasable by FDC
upon exercise of the Option is equal to 19.9% of the total
outstanding shares of common stock of the Issuer immediately
prior to the time of such exercise. The Option may only be
exercised upon the happening of certain events, none of which
has occurred as of the date hereof. Prior to such exercise, FDC
expressly disclaims beneficial ownership of the shares of
common stock of the Issuer which are purchasable by FDC upon
exercise of the Option. The number of shares indicated
represents approximately 19.9% of the total outstanding shares
of common stock of the Issuer as of June 30, 1997, excluding
shares issuable upon exercise of the Option, as represented by
the Issuer in the Agreement and Plan of Merger, dated as of
July 10, 1997 among R&B Falcon Corporation, FDC Acquisition
Corp., Reading & Bates Acquisition Corp., FDC and the Issuer.
2 Adjusted to reflect the issuance by the Issuer of 14,340,154
shares of common stock of the Issuer upon exercise of the
Option as described herein.
Item 1. Security and Issuer
This Schedule 13D relates to the common stock, par
value $0.05 per share (the "Common Stock," an individual share of
which is a "Share"), of Reading & Bates Corporation, a Delaware
Corporation (the "Issuer"). The principal offices of the Issuer
are located at 901 Threadneedle, Suite 200, Houston, Texas 77079.
Item 2. Identity and Background
This Schedule 13D is filed by Falcon Drilling Company,
Inc., a Delaware Corporation ("FDC"). FDC is a provider of
contract drilling and workover services for the domestic and
international oil and gas industry. FDC's rig fleet consists of
barge drilling rigs, barge workover rigs, jackup rigs,
submersible rigs, and drillships. FDC's barge rig fleet is the
largest in the world. FDC also owns tugboats, crewboats and
utility barges, which are primarily used in conjunction with its
barge drilling and workover operations. FDC's headquarters are
located at 1900 West Loop South, Suite 1800, Houston, Texas
77027.
Except as set forth below, during the last five years,
neither FDC nor, to the knowledge of FDC, any executive officer
or director of FDC has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or has
been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction resulting in a
judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or
state securities laws, or finding violation with respect to such
laws. In January 1993, Dr. Purnendu Chatterjee, a director of
FDC, without admitting or denying the charges, resolved an action
brought by the Securities and Exchange Commission alleging that
he had disclosed material non-public information by paying a fine
and consenting to an injunction that requires, among other
things, observance of applicable securities laws and regulations.
Certain information concerning the directors and
executive officers of FDC is set forth in Schedule A to this
Schedule 13D and is incorporated herein by reference.
Item 3. Source and Amount of Funds or Other Consideration
This statement relates to an option granted to FDC by
the Issuer to purchase shares of Common Stock from the Issuer as
described in Item 4 below (the "Option"). The Option entitles
FDC to purchase up to 14,340,154 Shares (the "Option Shares")
under the circumstances specified in the Stock Option Agreement
dated as of July 10, 1997 between FDC and the Issuer (the "Stock
Option Agreement") and as described in Item 4 below for a
purchase price of $34.00 per Share (the "Purchase Price"). The
number of Option Shares will be adjusted if necessary so that the
number of Shares purchasable by FDC upon exercise of the Option
is equal to 19.9% of the total outstanding Shares of Common Stock
of the Issuer immediately prior to the time of such exercise.
Reference is made to the Stock Option Agreement, a copy of which
is filed as Exhibit 1 hereto and is incorporated herein by
reference, for the full text of its terms, including the
conditions upon which it may be exercised.
As set forth in the Stock Option Agreement, the Option
was granted by the Issuer as a condition and an inducement to
FDC's willingness to enter into the Agreement and Plan of Merger,
dated as of July 10, 1997 among R&B Falcon Corporation, a
Delaware Corporation (the "Parent"), FDC Acquisition Corp., a
Delaware Corporation ("SubF"), Reading & Bates Acquisition Corp.,
a Delaware Corporation ("SubR"), FDC and the Issuer (the "Merger
Agreement"). A copy of the Merger Agreement is included as
Exhibit 2 hereto and is incorporated herein by reference.
Pursuant to the Merger Agreement and subject to the terms and
conditions set forth therein (including approval by the
stockholders of FDC), SubF will merge with and into FDC (the "FDC
Merger"), with FDC continuing as the surviving corporation, and
each issued and outstanding share of common stock, par value
$0.01 per share, of FDC (the "FDC Common Stock"), will be
converted into one share of common stock, par value $0.01 per
share, of Parent (the "Parent Common Stock"). Pursuant to the
Merger Agreement and subject to the terms and conditions set
forth therein (including approval by the stockholders of the
Issuer), SubR will merge with and into the Issuer (the "R&B
Merger" and, together with the FDC Merger, the "Mergers"), with
the Issuer continuing as the surviving corporation, and each
issued and outstanding share of common stock of the Issuer will
be converted into 1.18 shares of Parent Common Stock. Upon
consummation of the Mergers, each of the Issuer and FDC will
become wholly-owned subsidiaries of Parent. If the Mergers are
consummated in accordance with the terms of the Merger Agreement,
the Option will not be exercised. No monetary consideration was
paid by FDC to the Issuer for the Option.
If FDC elects to exercise the Option, it currently
anticipates that the funds needed to pay the Purchase Price will
be generated by a combination of available working capital, bank
or other borrowings and/or the sale, in whole or in part, of
Option Shares following such exercise.
Item 4. Purpose of Transaction
As stated above, the Option was granted to FDC in
connection with the execution of the Merger Agreement. As an
inducement to the Issuer to enter into the Merger Agreement, FDC
granted to the Issuer a reciprocal option (the "Reciprocal
Option") to purchase up to 15,753,823 shares of FDC Common Stock
under the circumstances specified in the Stock Option Agreement,
dated as of July 10, 1997, between FDC, as issuer, and the
Issuer, as grantee, for a purchase price of $27.78 per share (the
"FDC Stock Option Agreement"), a copy of which is filed as
Exhibit 3 hereto and is incorporated herein by reference.
The Option shall become exercisable upon the occurrence
of certain events set forth in Section (2) of the Stock Option
Agreement, none of which has occurred at the time of this filing.
The exercise of the Option in all events is subject to the
expiration or termination of the waiting period pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and FDC expects to promptly file under the HSR
Act.
If the Mergers are consummated in accordance with the
terms of the Merger Agreement, the Board of Directors of the
Parent shall consist of ten members, five of whom shall be
designated by each of FDC and the Issuer. The current Chief
Executive Officer of FDC shall be a director and the Chief
Executive Officer and President of Parent and the current Chief
Executive Officer of the Issuer shall be Chairman of the Board
of Parent.
FDC has the right to cause the Issuer to prepare and
file up to three registration statements under the Securities Act
of 1933, as amended, in order to permit the sale by FDC of any
Option Shares purchased under the Option.
The description herein of the Stock Option Agreement,
the Merger Agreement and the FDC Stock Option Agreement is
qualified in their entirety by reference to such agreements,
copies of which are filed hereto as Exhibits 1, 2 and 3
respectively, and which are incorporated herein by reference.
Other than as described above, FDC has no plans or
proposals which relate to, or may result in, any of the matters
listed in Items 4(a)-(j) of Schedule 13D.
Item 5. Interest in Securities of the Issuer
As a result of the issuance of the Option, FDC may be
deemed to be the beneficial owner of 14,340,154 Shares, which
would represent approximately 16.6% of the Shares outstanding
after exercise of the Option (based on the number of Shares
outstanding on June 30, 1997, as set forth in the Merger
Agreement). FDC will have sole voting and dispositive power with
respect to such Shares. Nothing herein shall be deemed an
admission by FDC as to the beneficial ownership of any Shares,
and, prior to exercise of the Option, FDC disclaims beneficial
ownership of all Option Shares.
Except as described herein, neither FDC nor, to the
knowledge of FDC, any other person referred to in Schedule A
attached hereto, beneficially owns or has acquired or disposed of
any Shares of the Issuer during the past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer
Except for the Merger Agreement, the Stock Option
Agreement and the FDC Stock Option Agreement, none of the persons
named in Item 2 has any contracts, arrangements, understandings
or relationships (legal or otherwise) with any persons with
respect to any securities of the Issuer, including, but not
limited to, transfers or voting of any securities, finder's fees,
joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving
or withholding of proxies.
Item 7. Materials to be Filed as Exhibits
Materials Description
1 Stock Option Agreement, dated as of July
10, 1997, between Reading & Bates
Corporation, as Issuer, and Falcon
Drilling Company, Inc., as Grantee.
2 Agreement and Plan of Merger, dated as
of July 10, 1997, between R&B Falcon
Corporation, FDC Acquisition Corp.,
Reading & Bates Acquisition Corp.,
Falcon Drilling Company, Inc. and
Reading & Bates Corporation.
3 Stock Option Agreement, dated as of July
10, 1997, between Falcon Drilling
Company, Inc., as Issuer, and Reading &
Bates Corporation, as Grantee.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this Schedule 13D is true, complete and accurate.
July 21, 1997 Falcon Drilling Company, Inc.
By: /s/ Leighton E. Moss
Name: Leighton E. Moss
Title: General Counsel
Schedule A
The name, business address and principal occupation of
each executive officer and director of Falcon Drilling Company,
Inc. are set forth below. Unless otherwise indicated, each
occupation set forth opposite an executive officer's name refers
to employment with FDC. Each of these persons is a United States
citizen.
Name Principal Occupation
and Business Address
Steven A. Webster* Chairman of the Board and Chief
Executive Officer
Bernie W. Stewart* Chief Operating Officer
Robert H. Reeves, Jr.* Executive Vice President
Robert F. Fulton* Executive Vice President
Michael E. Blake* President of the Falcon Workover
Company, Inc.
Rodney W. Meisetschlaeger* Vice President -- Offshore
Operations
Steven R. Meheen* Vice President -- Deepwater
Operations
Lloyd M. Pellegrin* Vice President -- Administration
Don P. Rodney* Vice President -- Finance
Leighton E. Moss* Vice President and General Counsel
Purnendu Chatterjee Director
Principal
The Chatterjee Group
888 Seventh Avenue, Suite 3000
New York, New York 10106
___________________
* The director's or officer's address is Falcon Drilling
Company, Inc., 1900 West Loop South, Suite 1800, Houston,
Texas 77027.
Name Principal Occupation
and Business Address
Douglas A.P. Hamilton Director
Private Investor
Anatar Investments, Inc.
462 Broadway
New York, New York 10013
Kenneth H. Hannan, Jr. Director
President
Colonial Navigation Co., Inc.
750 Lexington Avenue, 26th Floor
New York, New York 10022
James R. Latimer, III Director
The Latimer Companies
6060 N. Central Expressway, Suite 616
Dallas Texas 75206
Michael E. Porter Director
Professor
Harvard Business School
Soldiers Field Road
Boston, Massachusetts 02163
William R. Ziegler Director
Partner
Parson & Brown
666 Third Avenue, 9th Floor
New York, New York 10017
EXHIBIT 1
R&B CORPORATION STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 10, 1997
(the "Agreement"), between READING & BATES CORPORATION, a
Delaware corporation ("Issuer"), and FALCON DRILLING
COMPANY, INC., a Delaware Corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an
Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"; defined terms used but not
defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, each of
FDC and R&B to become subsidiaries of Parent pursuant to
the Mergers;
B. As a condition and inducement to Grantee's
willingness to enter into the Merger Agreement and the
FDC Option Agreement (as defined below), Grantee has
requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below); and
C. As a condition and inducement to Issuer's
willingness to enter into the Merger Agreement and this
Agreement, Issuer has requested that Grantee agree, and
Grantee has agreed to, grant Issuer an option to purchase
shares of Grantee's common stock on substantially the
same terms as the Option (the "FDC Option Agreement");
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants
and agreements set forth herein, Issuer and Grantee agree
as follows:
1. Grant of Option. Subject to the terms and
conditions set forth herein, Issuer hereby grants to
Grantee an irrevocable option (the "Option") to purchase
up to 14,340,154 (as adjusted as set forth herein) shares
(the "Option Shares") of Common Stock, par value $0.05
per share ("Issuer Common Stock"), of Issuer at a
purchase price of $34.00 (as adjusted as set forth
herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise
the Option, with respect to any or all of the Option
Shares at any one time, subject to the provisions of
Section 2(c), after an R&B Takeover Proposal shall have
been made known to R&B or any of its subsidiaries or has
been made directly to its stockholders generally or any
person shall have publicly announced an intention
(whether or not conditional) to make an R&B Takeover
Proposal; provided, however, that (i) except as provided
in the last sentence of this Section 2(a), the Option
will terminate and be of no further force and effect upon
the earliest to occur of (A) the Effective Time, (B) six
months after the date on which the Purchase Event (as
defined herein) occurs, and (C) termination of the Merger
Agreement in accordance with its terms prior to the
occurrence of a Purchase Event, unless, in the case of
clause (C), the Grantee has the right to receive a
Termination Fee following such termination upon the
occurrence of certain events, in which case the Option
will not terminate until the later of (x) six months
following the time such Termination Fee becomes payable
and (y) the expiration of the period in which the Grantee
has such right to receive a Termination Fee, and (ii) any
purchase of Option Shares upon exercise of the Option
will be subject to compliance with HSR and the obtaining
or making of any consents, approvals, orders,
notifications or authorizations, the failure of which to
have obtained or made would have the effect of making the
issuance of Option Shares illegal (the "Regulatory
Approvals"). Notwithstanding the termination of the
Option, Grantee will be entitled to purchase the Option
Shares if it has exercised the Option in accordance with
the terms hereof prior to the termination of the Option,
and the termination of the Option will not affect any
rights hereunder which by their terms do not terminate or
expire prior to or as of such termination.
(b) In the event that Grantee wishes to
exercise the Option, it will send to Issuer a written
notice (an "Exercise Notice"; the date of which being
herein referred to as the "Notice Date") to that effect
which Exercise Notice also specifies the number of Option
Shares, if any, Grantee wishes to purchase pursuant to
this Section 2(b), the number of Option Shares, if any,
with respect to which Grantee wishes to exercise its
Cash-Out Right (as defined herein) pursuant to Section
6(c), the denominations of the certificate or
certificates evidencing the Option Shares which Grantee
wishes to purchase pursuant to this Section 2(b) and a
date not earlier than three business days nor later than
20 business days from the Notice Date for the closing of
such purchase (an "Option Closing Date"). Any Option
Closing will be at an agreed location and time in New
York, New York on the applicable Option Closing Date or
at such later date as may be necessary so as to comply
with clause (ii) of Section 2(a).
(c) Notwithstanding anything to the contrary
contained herein, any exercise of the Option and purchase
of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the
Exercise Notice without first obtaining or making certain
Regulatory Approvals. In such event, if the Option is
otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with
Section 2(b) and Grantee shall acquire the maximum number
of Option Shares specified in the Exercise Notice that
Grantee is then permitted to acquire under the applicable
laws and regulations, and if Grantee thereafter obtains
the Regulatory Approvals to acquire the remaining balance
of the Option Shares specified in the Exercise Notice,
then Grantee shall be entitled to acquire such remaining
balance. Issuer agrees to use its best efforts to assist
Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice
that a Regulatory Approval required for the purchase of
any Option Shares will not be issued or granted or (ii)
such Regulatory Approval has not been issued or granted
within six months of the date of the Exercise Notice,
Grantee shall have the right to exercise its Cash-Out
Right pursuant to Section 6(c) with respect to the Option
Shares for which such Regulatory Approval will not be
issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At
any Option Closing, Grantee will pay to Issuer in
immediately available funds by wire transfer to a bank
account designated in writing by Issuer an amount equal
to the Purchase Price multiplied by the number of Option
Shares to be purchased at such Option Closing.
(b) At any Option Closing, simultaneously with
the delivery of immediately available funds as provided
in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option
Shares to be purchased at such Option Closing, which
Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever.
If at the time of issuance of Option Shares pursuant to
an exercise of the Option hereunder, Issuer shall not
have issued any securities similar to rights under a
shareholder rights plan, then each Option Share issued
pursuant to such exercise will also represent such a
corresponding right with terms substantially the same as
and at least as favorable to Grantee as are provided
under any Issuer shareholder rights agreement or any
similar agreement then in effect.
(c) Certificates for the Option Shares
delivered at an Option Closing will have typed or printed
thereon a restrictive legend which will read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF ANY EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS
SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF
JULY 10, 1997, A COPY OF WHICH MAY BE OBTAINED FROM
THE SECRETARY OF READING & BATES CORPORATION AT ITS
PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to
restrictions arising under the Securities Act in the
above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option
Shares have been registered pursuant to the Securities
Act, such Option Shares have been sold in reliance on and
in accordance with Rule 144 under the Securities Act or
Grantee has delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel in form
and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required
for purposes of the Securities Act and (ii) the reference
to restrictions pursuant to this Agreement in the above
legend will be removed by delivery of substitute
certificate(s) without such reference if the Option
Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance
with the provisions of this Agreement under circumstances
that do not require the retention of such reference.
4. Representations and Warranties of Issuer.
Issuer hereby represents and warrants to Grantee as
follows:
(a) Corporate Authorization. Issuer has the
corporate power and authority to enter into this
Agreement and to carry out its obligations
hereunder. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer, and
no other corporate proceedings on the part of Issuer
are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by
Issuer, and assuming this Agreement constitutes a
valid and binding agreement of Grantee, this
Agreement constitutes a valid and binding agreement
of Issuer, enforceable against Issuer in accordance
with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles
governing the availability of equitable remedies).
(b) Authorized Stock. Issuer has taken all
necessary corporate and other action to authorize
and reserve and, subject to the expiration or
termination of any required waiting period under the
HSR Act, to permit it to issue, and, at all times
from the date hereof until the obligation to deliver
Option Shares upon the exercise of the Option
terminates, shall have reserved for issuance, upon
exercise of the Option, shares of Issuer Common
Stock necessary for Grantee to exercise the Option,
and Issuer will take all necessary corporate action
to authorize and reserve for issuance all additional
shares of Issuer Common Stock or other securities
which may be issued pursuant to Section 6 upon
exercise of the Option. The shares of Issuer Common
Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common
Stock or other securities which may be issuable upon
exercise of the Option or any other securities which
may be issued pursuant to Section 6, upon issuance
pursuant hereto, will be duly and validly issued,
fully paid and nonassessable, and will be delivered
free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever,
including without limitation any preemptive rights
of any stockholder of Issuer.
5. Representations and Warranties of Grantee.
Grantee hereby represents and warrants to Issuer that:
(a) Corporate Authorization. Grantee has the
corporate power and authority to enter into this
Agreement and to carry out its obligations
hereunder. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly and validly
authorized by the Board of Directors of Grantee, and
no other corporate proceedings on the part of
Grantee are necessary to authorize this Agreement
and the transactions contemplated hereby. This
Agreement has been duly and validly executed and
delivered by Grantee, and assuming this Agreement
constitutes a valid and binding agreement of Issuer,
this Agreement constitutes a valid and binding
agreement of Grantee, enforceable against Grantee in
accordance with its terms (except insofar as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights
generally, or by principles governing the
availability of equitable remedies).
(b) Purchase Not for Distribution. Any Option
Shares or other securities acquired by Grantee upon
exercise of the Option will not be transferred or
otherwise disposed of except in a transaction
registered, or exempt from registration, under the
Securities Act.
6. Adjustment upon Changes in Capitalization, Etc.
(a) In the event of any changes in Issuer Common Stock
by reason of a stock dividend, reverse stock split,
merger, recapitalization, combination, exchange of
shares, or similar transaction, the type and number of
shares or securities subject to the Option, and the
Purchase Price therefor, will be adjusted appropriately,
and proper provision will be made in the agreements
governing such transaction, so that Grantee will receive
upon exercise of the Option the number and class of
shares or other securities or property that Grantee would
have received with respect to Issuer Common Stock if the
Option had been exercised immediately prior to such event
or the record date therefor, as applicable. Subject to
Section 1, and without limiting the parties' relative
rights and obligations under the Merger Agreement, if any
additional shares of Issuer Common Stock are issued after
the date of this Agreement (other than pursuant to an
event described in the first sentence of this Section
6(a)), the number of shares of Issuer Common Stock
subject to the Option will be adjusted so that, after
such issuance, it equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant
to the Option.
(b) Without limiting the parties' relative rights
and obligations under the Merger Agreement, in the event
that the Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not
be the continuing or surviving corporation in such
consolidation or merger, (ii) to permit any person, other
than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer will be the continuing or surviving
corporation, but in connection with such merger, the
shares of Issuer Common Stock outstanding immediately
prior to the consummation of such merger will be changed
into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property, or the
shares of Issuer Common Stock outstanding immediately
prior to the consummation of such merger will, after such
merger represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets
to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so
that the Option will, upon the consummation of any such
transaction and upon the terms and condition set forth
herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire
the number and class of shares or other securities or
property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or
transfer, or the record date therefor, as applicable and
make any other necessary adjustments.
(c) If, at any time during the period commencing
on the occurrence of an event as a result of which
Grantee is entitled to receive the Termination Fee
pursuant to Section 8.3 of the Merger Agreement (the
"Purchase Event") and ending on the termination of the
Option in accordance with Section 2, Grantee sends to
Issuer an Exercise Notice indicating Grantee's election
to exercise its right (the "Cash-Out-Right") pursuant to
this Section 6(c), then Issuer shall pay to Grantee, on
the Option Closing Date, in exchange for the cancellation
of the Option with respect to such number of Option
Shares as Grantee specifies in the Exercise Notice, an
amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the average
closing price, for the 10 NYSE trading days commencing on
the 12th NYSE trading day immediately preceding the
Notice Date, per share of Issuer Common Stock as reported
on the NYSE Composite Transactions Tape (or, if not
listed on the NYSE, as reported on any other national
securities exchange or national securities quotation
system on which the Issuer Common Stock is listed or
quoted, as reported in The Wall Street Journal (Northeast
edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the
Purchase Price. Notwithstanding the termination of the
Option, Grantee will be entitled to exercise its rights
under this Section 6(c) if it has exercised such rights
in accordance with the terms hereof prior to the
termination of the Option.
7. Registration Rights. Issuer will, if requested
by Grantee at any time and from time to time within three
years of the exercise of the Option, as expeditiously as
possible prepare and file up to three registration
statements under the Securities Act if such registration
is necessary in order to permit the sale or other
disposition of any or all shares of securities that have
been acquired by or are issuable to Grantee upon exercise
of the Option in accordance with the intended method of
sale or other disposition stated by Grantee, including a
"shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer
will use its best efforts to qualify such shares or other
securities under any applicable state securities laws.
Grantee agrees to use reasonable efforts to cause, and to
cause any underwriters of any sale or other disposition
to cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely
distributed basis so that upon consummation thereof no
purchaser or transferee will own beneficially more than
4.9% of the then outstanding voting power of Issuer.
Issuer will use reasonable efforts to cause each such
registration statement to become effective, to obtain all
consents or waivers of other parties which are required
therefor, and to keep such registration statement
effective for such period not in excess of 180 calendar
days from the day such registration statement first
becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations
of Issuer hereunder to file a registration statement and
to maintain its effectiveness may be suspended for up to
60 calendar days in the aggregate if the Board of
Directors of Issuer shall have determined that the filing
of such registration statement or the maintenance of its
effectiveness would require premature disclosure of
material nonpublic information that would materially and
adversely affect Issuer or otherwise interfere with or
adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction
involving Issuer. Any registration statement prepared
and filed under this Section 7, and any sale covered
thereby, will be at Issuer's expense except for
underwriting discounts or commissions, brokers' fees and
the fees and disbursements of Grantee's counsel related
thereto. Grantee will provide all information reasonably
requested by Issuer for inclusion in any registration
statement to be filed hereunder. If, during the time
periods referred to in the first sentence of this Section
7, Issuer effects a registration under the Securities Act
of Issuer Common Stock for its own account or for any
other stockholders of Issuer (other than on Form S-4 or
Form S-8, or any successor form), it will allow Grantee
the right to participate in such registration, and such
participation will not affect the obligation of Issuer to
effect demand registration statements for Grantee under
this Section 7; provided that, if the managing
underwriters of such offering advise Issuer in writing
that in their opinion the number of shares of Issuer
Common Stock requested to be included in such
registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be
included therein by Grantee pro rata with the shares
intended to be included therein by Issuer. In connection
with any registration pursuant to this Section 7, Issuer
and Grantee will provide each other and any underwriter
of the offering with customary representations,
warranties, covenants, indemnification, and contribution
in connection with such registration.
8. Transfers. The Option Shares may not be sold,
assigned, transferred, or otherwise disposed of except
(i) in an underwritten public offering as provided in
Section 7 or (ii) to any purchaser or transferee who
would not, to the knowledge of the Grantee after
reasonable inquiry, immediately following such sale,
assignment, transfer or disposal beneficially own more
than 4.9% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be
permitted to sell any Option Shares if such sale is made
pursuant to a tender or exchange offer that has been
approved or recommended by a majority of the members of
the Board of Directors of Issuer (which majority shall
include a majority of directors who were directors as of
the date hereof).
9. Listing. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are
then listed on the NYSE (or any other national securities
exchange or national securities quotation system), Issuer,
upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or
other securities to be acquired upon exercise of the Option
on the NYSE (and any such other national securities exchange
or national securities quotation system) and will use
reasonable efforts to obtain approval of such listing as
promptly as practicable.
10. Miscellaneous. (a) Expenses. Except as
otherwise provided in the Merger Agreement, each of the
parties hereto will pay all costs and expenses incurred by
it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants
and counsel.
(b) Amendment. This Agreement may not be amended,
except by an instrument in writing signed on behalf of each
of the parties.
(c) Extension; Waiver. Any agreement on the part of
a party to waive any provision of this Agreement, or to
extend the time for performance, will be valid only if set
forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the Merger Agreement (including the
documents and instruments attached thereto as exhibits or
schedules or delivered in connection therewith) and the
Confidentiality Agreement (i) constitute the entire
agreement, and supersede all prior agreements and
understandings, both written and oral, between the parties
with respect to the subject matter of this Agreement, and
(ii) except as provided in Section 9.9 of the Merger
Agreement, are not intended to confer upon any person other
than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed
by, and construed in accordance with, the laws of the State
of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflict of laws
thereof.
(f) Notices. All notices, requests, claims,
demands, and other communications under this Agreement must
be in writing and will be deemed given if delivered
personally, telecopied (which is confirmed), or sent by
overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Issuer to:
Reading & Bates Corporation
901 Threadneedle
Suite 200
Houston, Texas 77079
Attention: Chairman and Chief Executive Officer
Fax: (281) 496-0285
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson
Fax: (212) 474-3700
If to Grantee to:
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Attention: Chairman and Chief Executive Officer
Fax: (713) 623-8103
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Fax: (212) 735-2000
(g) Assignment. Neither this Agreement, the
Option nor any of the rights, interests, or obligations
under this Agreement may be assigned, transferred or
delegated, in whole or in part, by operation of law or
otherwise, by Issuer or Grantee without the prior written
consent of the other. Any assignment, transfer or
delegation in violation of the preceding sentence will be
void. Subject to the first and second sentences of this
Section 10(g), this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
(h) Further Assurances. In the event of any
exercise of the Option by Grantee, Issuer and Grantee
will execute and deliver all other documents and
instruments and take all other action that may be
reasonably necessary in order to consummate the
transactions provided for by such exercise.
(i) Enforcement. The parties agree that
irreparable damage would occur and that the parties would
not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties will
be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in Delaware
state court, the foregoing being in addition to any other
remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (i) consents to
submit itself to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this
Agreement, (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, and (iii) agrees
that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting
in the State of Delaware or a Delaware state court.
IN WITNESS WHEREOF, Issuer and Grantee have caused
this Agreement to be signed by their respective officers
thereunto duly authorized as of the day and year first
written above.
READING & BATES CORPORATION
By: /s/ Paul B. Loyd, Jr.
------------------------------
Name: Paul B. Loyd, Jr.
Title: Chief Executive Officer
FALCON DRILLING COMPANY, INC.
By: /s/ Steven A. Webster
------------------------------
Name: Steven A. Webster
Title: Chief Executive Officer
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
among
R&B FALCON CORPORATION
FDC ACQUISITION CORP.
READING & BATES ACQUISITION CORP.
FALCON DRILLING COMPANY, INC.
and
READING & BATES CORPORATION
Dated as of July 10, 1997
TABLE OF CONTENTS
ARTICLE I
The Mergers . . . . . . . . . . . . . . . . . . . . . 3
Section 1.1. The FDC Merger . . . . . . . . . . 3
Section 1.2. The R&B Merger . . . . . . . . . . 4
Section 1.3. Closing . . . . . . . . . . . . . 4
Section 1.4. Effective Time . . . . . . . . . . 4
Section 1.5. Effects of the Mergers . . . . . . 5
Section 1.6. Directors . . . . . . . . . . . . 5
Section 1.7. Parent Charter Documents . . . . . 5
ARTICLE II
Effect of the Mergers on the Stock of
FDC and R&B; Exchange of Certificates . . . . . . . 6
Section 2.1. Effect on FDC Stock . . . . . . . 6
Section 2.2. Effect on R&B Stock . . . . . . . 6
Section 2.3. Exchange of Certificates . . . . . 8
ARTICLE III
Governance . . . . . . . . . . . . . . . . . . . . . 14
Section 3.1. Board of Directors of Parent . . . 14
Section 3.2. Key Executive Officers of Parent . 14
Section 3.3. Name . . . . . . . . . . . . . . . 14
ARTICLE IV
Representations and Warranties of R&B . . . . . . . . 15
Section 4.1. Organization, Qualification,
Etc. . . . . . . . . . . . . . . 15
Section 4.2. Capital Stock . . . . . . . . . . 16
Section 4.3. Corporate Authority Relative to
this Agreement; No Violation . . 17
Section 4.4. Reports and Financial
Statements. . . . . . . . . . . . 18
Section 4.5. No Undisclosed Liabilities. . . . 19
Section 4.6. No Violation of Law. . . . . . . . 19
Section 4.7. Environmental Laws and
Regulations. . . . . . . . . . . 20
Section 4.8. No Undisclosed Employee Benefit
Plan Liabilities or Severance
Arrangements . . . . . . . . . . 20
Section 4.9. Absence of Certain Changes or
Events. . . . . . . . . . . . . . 21
Section 4.10. Litigation. . . . . . . . . . . . 21
Section 4.11. Joint Proxy Statement; Regis-
tration Statement; Other
Information . . . . . . . . . . . 21
Section 4.12. R&B Rights Plan . . . . . . . . . 22
Section 4.13. Lack of Ownership of FDC Common
Stock . . . . . . . . . . . . . . 22
Section 4.14. Tax Matters . . . . . . . . . . . 22
Section 4.15. Opinion of Financial Advisor . . . 24
Section 4.16. Required Vote of R&B Stock-
holders . . . . . . . . . . . . . 24
Section 4.17. Pooling of Interests . . . . . . . 24
ARTICLE V
Representations and Warranties of FDC . . . . . . . . 24
Section 5.1. Organization, Qualification,
Etc. . . . . . . . . . . . . . . 25
Section 5.2. Capital Stock . . . . . . . . . . 25
Section 5.3. Corporate Authority Relative to
this Agreement; No Violation . . 26
Section 5.4. Reports and Financial Statements . 28
Section 5.5. No Undisclosed Liabilities . . . . 29
Section 5.6. No Violation of Law . . . . . . . 29
Section 5.7. Environmental Laws and Regu-
lations . . . . . . . . . . . . . 29
Section 5.8. No Undisclosed Employee Benefit
Plan Liabilities or Severance
Arrangements . . . . . . . . . . 29
Section 5.9. Absence of Certain Changes or
Events . . . . . . . . . . . . . 30
Section 5.10. Litigation . . . . . . . . . . . . 30
Section 5.11. Joint Proxy Statement;
Registration Statement; Other
Information . . . . . . . . . . . 30
Section 5.12. Lack of Ownership of R&B Common
Stock . . . . . . . . . . . . . . 31
Section 5.13. FDC Rights Plan . . . . . . . . . 31
Section 5.14. Tax Matters . . . . . . . . . . . 31
Section 5.15. Opinion of Financial Advisor . . . 32
Section 5.16. Required Vote of FDC Stock-
holders . . . . . . . . . . . . . 33
Section 5.17. Pooling of Interests . . . . . . . 33
ARTICLE VI
Covenants and Agreements . . . . . . . . . . . . . . 33
Section 6.1. Conduct of Business by R&B and
FDC . . . . . . . . . . . . . . . 33
Section 6.2. Investigation . . . . . . . . . . 39
Section 6.3. Cooperation . . . . . . . . . . . 40
Section 6.4. Affiliate Agreements . . . . . . . 42
Section 6.5. R&B Employee Stock Options,
Incentive and Benefit Plans . . . 43
Section 6.6. FDC Employee Stock Options,
Incentive and Benefit Plans . . . 44
Section 6.7. Filings; Other Action . . . . . . 46
Section 6.8. Further Assurances . . . . . . . . 46
Section 6.9. Takeover Statute . . . . . . . . . 46
Section 6.10. No Solicitation by R&B . . . . . . 47
Section 6.11. No Solicitation by FDC . . . . . . 49
Section 6.12. Public Announcements . . . . . . . 52
Section 6.13. Indemnification and Insurance . . 52
Section 6.14. Accountants' "Comfort" Letters . . 53
Section 6.15. Additional Reports . . . . . . . . 53
Section 6.16. Stockholder Rights Plans . . . . . 54
Section 6.17. Stockholder Litigation . . . . . . 54
ARTICLE VII
Conditions to the Mergers . . . . . . . . . . . . . . 54
Section 7.1. Conditions to Each Party's
Obligation to Effect the Merger . 54
Section 7.2. Conditions to Obligations of R&B
to Effect the R&B Merger. . . . . 55
Section 7.3. Conditions to Obligations of FDC
to Effect the FDC Merger . . . . 56
ARTICLE VIII
Termination, Waiver, Amendment and Closing . . . . . 57
Section 8.1. Termination or Abandonment . . . . 57
Section 8.2. Effect of Termination . . . . . . 58
Section 8.3. Termination Fee . . . . . . . . . 58
Section 8.4. Amendment or Supplement . . . . . 61
Section 8.5. Extension of Time, Waiver, Etc. . 61
ARTICLE IX
Miscellaneous . . . . . . . . . . . . . . . . . . . . 62
Section 9.1. No Survival of Representations
and Warranties . . . . . . . . . 62
Section 9.2. Expenses . . . . . . . . . . . . . 62
Section 9.3. Counterparts; Effectiveness . . . 62
Section 9.4. Governing Law . . . . . . . . . . 62
Section 9.5. Notices . . . . . . . . . . . . . 62
Section 9.6. Assignment; Binding Effect . . . . 63
Section 9.7. Severability . . . . . . . . . . . 64
Section 9.8. Enforcement of Agreement . . . . . 64
Section 9.9. Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . 64
Section 9.10. Headings . . . . . . . . . . . . . 64
Section 9.11. Definitions. . . . . . . . . . . . 64
Section 9.12. Finders or Brokers . . . . . . . . 65
Exhibit A -- Form of R&B Affiliate Letter
Exhibit B -- Form of FDC Affiliate Letter
THIS AGREEMENT AND PLAN OF MERGER, dated as of
July 10, 1997 (the "Agreement"), among R&B FALCON
CORPORATION, a Delaware corporation ("Parent"), FDC
ACQUISITION CORP., a Delaware corporation ("SubF"),
READING & BATES ACQUISITION CORP., a Delaware corporation
("SubR"), FALCON DRILLING COMPANY, INC., a Delaware
corporation ("FDC"), and READING & BATES CORPORATION, a
Delaware corporation ("R&B").
WHEREAS, (i) Parent is a newly formed
corporation organized and existing under the laws of the
State of Delaware, one-half of the issued and outstanding
capital stock of which is owned by each of FDC and R&B;
(ii) FDC is a corporation organized and existing under
the laws of the State of Delaware; and (iii) R&B is a
corporation organized and existing under the laws of the
State of Delaware;
WHEREAS, FDC and R&B have caused Parent to form
SubF and SubR, each a wholly owned subsidiary of Parent,
and all the outstanding capital stock of each of SubF and
SubR is owned by Parent; and
WHEREAS, the Board of Directors of each of FDC
and R&B deem it advisable and in the best interests of
their stockholders that each of FDC and R&B become
subsidiaries of Parent pursuant to the Mergers (as
hereinafter defined) as provided for in this Agreement;
WHEREAS, the parties desire to make certain
representations, warranties, covenants and agreements in
connection with the Mergers and also to prescribe various
conditions to the Mergers;
WHEREAS, for federal income tax purposes, it is
intended that the transactions contemplated hereby
constitute transactions described in Section 351 and/or
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, for financial accounting purposes, it
is intended that the transactions contemplated by this
Agreement will be accounted for as a pooling of interests
transaction;
WHEREAS, immediately following the execution
and delivery of this Agreement, FDC and R&B will enter
into a stock option agreement (the "R&B Stock Option
Agreement"), pursuant to which R&B will grant FDC the
option (the "R&B Option") to purchase shares of R&B
Common Stock (as hereinafter defined), upon the terms and
subject to the conditions set forth therein;
WHEREAS, immediately following the execution
and delivery of this Agreement, FDC and R&B will enter
into a stock option agreement (the "FDC Stock Option
Agreement" and, together with the R&B Stock Option
Agreement, the "Option Agreements"), pursuant to which
FDC will grant R&B the option (the "FDC Option") to
purchase shares of FDC Common Stock, upon the terms and
subject to the conditions set forth therein.
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements
contained in this Agreement, the parties agree as
follows:
ARTICLE I
The Mergers
Section 1.1. The FDC Merger. (a) Upon the
terms and subject to the conditions set forth in this
Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), SubF shall merge with and
into FDC (the "FDC Merger") at the Effective Time (as
defined in Section 1.4), and each outstanding share of
FDC Common Stock shall be converted into one share of
common stock, par value $.01 per share, of Parent (the
"Parent Common Stock"). FDC shall be the surviving
corporation in the FDC Merger (the "FDC Surviving
Corporation") and shall become a wholly owned subsidiary
of Parent. From and after the Effective Time, the
identity and separate existence of SubF shall cease.
(b) In connection with the FDC Merger, FDC and
R&B shall take such actions as may be necessary to cause
Parent to reserve sufficient shares of Parent Common
Stock, prior to the FDC Merger, to permit the issuance of
shares of Parent Common Stock (i) to the holders of FDC
Common Stock as of the Effective Time in accordance with
the terms of this Agreement and (ii) upon the exercise of
FDC Stock Options (as defined in Section 6.6(a)) to be
assumed by Parent in accordance with Section 6.6 hereof.
Section 1.2. The R&B Merger. (a) Upon the
terms and subject to the conditions set forth in this
Agreement and in accordance with the DGCL, SubR shall
merge with and into R&B (the "R&B Merger," and together
with the FDC Merger, the "Mergers") at the Effective
Time, and each outstanding share of R&B Common Stock
shall be converted into 1.18 share of Parent Common
Stock. R&B shall be the surviving corporation in the R&B
Merger (the "R&B Surviving Corporation" and together
with the FDC Surviving Corporation, the "Surviving
Corporations") and shall become a wholly owned subsidiary
of Parent. From and after the Effective Time, the
identity and separate existence of SubR shall cease.
(b) In connection with the R&B Merger, R&B and
FDC shall take such actions as may be necessary to cause
Parent to reserve sufficient shares of Parent Common
Stock prior to the R&B Merger to permit the issuance of
shares of Parent Common Stock (i) to the holders of R&B
Common Stock as of the Effective Time in accordance with
the terms of this Agreement and (ii) upon the exercise of
R&B Stock Options (as defined in Section 6.5(a)) to be
assumed by Parent in accordance with Section 6.5 hereof.
Section 1.3. Closing. The closing of the
Mergers (the "Closing") will take place at 10:00 a.m. on
a date to be specified by the parties (the "Closing
Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set
forth in Article VIII, unless another time or date is
agreed to by the parties hereto. The Closing will be
held at such location as is agreed to by the parties
hereto.
Section 1.4. Effective Time. Subject to the
provisions of this Agreement, as soon as practicable on
or after the Closing Date, the parties shall file a
certificate of merger (individually, a "Certificate of
Merger" with respect to one of the Mergers, and
collectively with respect to both Mergers, the
"Certificates of Merger") executed in accordance with the
relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL in order to
effect both Mergers. Each Merger shall become effective
at such time as is specified in the Certificate of Merger
(the time at which both Mergers have become fully
effective being hereinafter referred to as the "Effective
Time").
Section 1.5. Effects of the Mergers.
(a) DGCL. Each of the Mergers shall have the
effects set forth in Section 259 of the DGCL.
(b) Names of Surviving Corporations. The
names of the Surviving Corporations from and after the
Effective Time shall be "Falcon Drilling Company, Inc."
and "Reading & Bates Corporation," respectively, until
changed or amended in accordance with applicable law.
(c) Charter Documents. At the Effective Time
(i) the Certificate of Incorporation and Bylaws of SubF,
as in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation and Bylaws,
respectively, of the FDC Surviving Corporation, and (ii)
the Certificate of Incorporation and Bylaws of SubR, as
in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation and Bylaws,
respectively, of the R&B Surviving Corporation.
Section 1.6. Directors. (a) SubF. The
directors of SubF at the Effective Time shall be the
directors of the FDC Surviving Corporation until the next
annual meeting of stockholders of FDC (or their earlier
resignation or removal) and until their respective
successors are duly elected and qualified, as the case
may be.
(b) SubR. The directors of SubR at the
Effective Time shall be the directors of the R&B
Surviving Corporation until the next annual meeting of
stockholders of R&B (or their earlier resignation or
removal) and until their respective successors are duly
elected and qualified, as the case may be.
Section 1.7. Parent Charter Documents. At the
Effective Time (i) the Certificate of Incorporation and
Bylaws of Parent shall be in form and substance
satisfactory to each of FDC and R&B prior to the mailing
of the Joint Proxy Statement (as defined in Section
4.11), and (ii) Parent shall adopt a stockholder rights
plan in a customary form, satisfactory to each of FDC and
R&B (the "Parent Rights Plan").
ARTICLE II
Effect of the Mergers on the Stock of
FDC and R&B; Exchange of Certificates
Section 2.1. Effect on FDC Stock. As of the
Effective Time, by virtue of the FDC Merger and without
any action on the part of SubF, FDC or the holders of any
securities of SubF or FDC:
(a) Cancellation of Treasury Stock and R&B
Owned Stock. Each share of FDC Common Stock that is
owned directly by FDC or by R&B shall automatically be
cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of FDC Common Stock. Subject
to Section 2.3(e), each issued and outstanding share of
FDC Common Stock (other than shares to be cancelled in
accordance with Section 2.1(a)) shall be converted into
one fully paid and nonassessable share of Parent Common
Stock (the "FDC Merger Consideration"). As of the
Effective Time, all such shares of FDC Common Stock shall
no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each
holder of a certificate or certificates which immediately
prior to the Effective Time represented outstanding
shares of FDC Common Stock (the "FDC Certificates") shall
cease to have any rights with respect thereto, except the
right to receive (i) certificates ("Parent Certificates")
representing the number of whole shares of Parent Common
Stock into which such shares have been converted, (ii)
certain dividends and other distributions in accordance
with Section 2.3(c), and (iii) cash in lieu of fractional
shares of Parent Common Stock in accordance with Section
2.3(e), without interest.
(c) Conversion of Common Stock of SubF. Each
issued and outstanding share of common stock, par value
$.01 per share, of SubF shall be converted into one
validly issued, fully paid and nonassessable share of
common stock of the FDC Surviving Corporation.
Section 2.2. Effect on R&B Stock. As of the
Effective Time, by virtue of the R&B Merger and without
any action on the part of SubR, R&B or the holders of any
securities of SubR or R&B:
(a) Cancellation of Treasury Stock and FDC
Owned Stock. Each share of R&B Common Stock that is
owned directly by R&B or by FDC shall automatically be
cancelled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of R&B Common Stock. Subject
to Section 2.3(e), each issued and outstanding share of
R&B Common Stock (other than shares to be cancelled in
accordance with Section 2.2(a)) shall be converted into
1.18 fully paid and nonassessable share of Parent Common
Stock (the "R&B Merger Consideration"). As of the
Effective Time, all such shares of R&B Common Stock shall
no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each
holder of a certificate or certificates which immediately
prior to the Effective Time represented outstanding
shares of R&B Common Stock (the "R&B Certificates") shall
cease to have any rights with respect thereto, except the
right to receive (i) Parent Certificates, (ii) certain
dividends and other distributions in accordance with
Section 2.3(c), and (iii) cash in lieu of fractional
shares of Parent Common Stock in accordance with Section
2.3(e), without interest.
(c) Conversion of R&B Class A Stock. If the
holders thereof grant the requisite voting approval of
the R&B Merger specified in the R&B Certificate of
Incorporation, each issued and outstanding share of R&B
Class A Stock (as defined in Section 4.2) shall be
converted into 1.18 of a fully paid and nonassessable
share of Parent Common Stock. If such holders do not
grant such approval, each issued and outstanding share of
R&B Class A Stock shall be converted into the right to
receive an amount of money in cash from R&B equal to the
sum of (i) $12 plus (ii) the amount of all unpaid
cumulative dividends accrued or in arrears to the
Effective Time. In the event the holders of R&B Class A
Stock are entitled to receive Parent Common Stock upon
conversion of their shares of R&B Class A Stock, such
stockholders shall be subject to the same exchange
procedures as holders of R&B Common Stock set forth in
Section 2.3. As of the Effective Time, all such shares
of R&B Class A Stock shall no longer be outstanding and
shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate or
certificates which immediately prior to the Effective
Time represented outstanding shares of R&B Class A Stock
(the "R&B Class A Certificates," and together with the
R&B Certificates and the FDC Certificates, the
"Certificates") shall cease to have any rights with
respect thereto, except the right to receive (i) Parent
Certificates or cash in the amount described in this
Section 2.2(c), (ii) certain dividends and other
distributions in accordance with Section 2.3(c), and
(iii) cash in lieu of fractional shares of Parent Common
Stock in accordance with Section 2.3(e), without
interest.
(d) Conversion of Common Stock of SubR. Each
issued and outstanding share of common stock, par value
$.01 per share, of SubR shall be converted into one
validly issued, fully paid and nonassessable share of
common stock of the R&B Surviving Corporation.
Section 2.3. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time,
Parent shall enter into an agreement with such bank or
trust company as may be designated by FDC and R&B (the
"Exchange Agent"), which shall provide that Parent shall
deposit with the Exchange Agent as of the Effective Time,
for the benefit of the holders of shares of FDC Common
Stock and shares of R&B Common Stock, for exchange in
accordance with this Article II, through the Exchange
Agent, Parent Certificates representing the number of
whole shares of Parent Common Stock (such shares of
Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date
after the Effective Time, any Excess Shares (as defined
in Section 2.3(e)) and any cash (including cash proceeds
from the sale of the Excess Shares) payable in lieu of
any fractional shares of Parent Common Stock being
hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1 in exchange for outstanding
shares of FDC Common Stock and pursuant to Section 2.2 in
exchange for outstanding shares of R&B Common Stock.
(b) Exchange Procedures. As soon as
reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted into the FDC
Merger Consideration, pursuant to Section 2.1, or the R&B
Merger Consideration, pursuant to Section 2.2
(collectively, the "Merger Consideration") (i) a 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 FDC and R&B may
reasonably specify), and (ii) instructions for use in
effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by
the Exchange Agent, the holder of such Certificate shall
be entitled to receive in exchange therefor a Parent
Certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II,
certain dividends or other distributions in accordance
with Section 2.3(c) and cash in lieu of any fractional
share in accordance with Section 2.3(e), and the
Certificate so surrendered shall forthwith be cancelled.
In the event of a transfer of ownership of FDC Common
Stock not registered in the transfer records of FDC or of
R&B Common Stock not registered in the transfer records
of R&B, a Parent Certificate representing the proper
number of shares of Parent Common Stock may be issued to
a person other than the person in whose name the
Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such
issuance shall pay any transfer or other non-income taxes
required by reason of the issuance of shares of Parent
Common Stock to a person other than the registered holder
of such Certificate or establish to the satisfaction of
Parent that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.3,
each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive
upon such surrender Parent Certificates representing the
number of whole shares of Parent Common Stock into which
the shares of FDC Common Stock or R&B Common Stock
formerly represented by such Certificate have been
converted, certain dividends or other distributions in
accordance with Section 2.3(c) and cash in lieu of any
fractional share in accordance with Section 2.3(e). No
interest will be paid or will accrue on any cash payable
to holders of Certificates pursuant to the provisions of
this Article II.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions with respect
to Parent Common Stock with a record date after the
Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of
Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.3(e), and all such
dividends, other distributions and cash in lieu of
fractional shares of Parent Common Stock shall be paid by
Parent to the Exchange Agent and shall be included in the
Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Article II. Subject
to the effect of applicable escheat or similar laws,
following surrender of any such Certificate there shall
be paid to the holder of the Parent Certificate
representing whole shares of Parent Common Stock issued
in exchange therefor, 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 paid with respect to such whole shares of
Parent Common Stock and the amount of any cash payable in
lieu of a fractional share of Parent Common Stock to
which such holder is entitled pursuant to Section 2.3(e)
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 such surrender and with a
payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
Parent shall make available to the Exchange Agent cash
for these purposes.
(d) No Further Ownership Rights in FDC Common
Stock and R&B Common Stock. All shares of Parent Common
Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article
II (including any cash paid pursuant to this Article II)
shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of
FDC Common Stock and R&B Common Stock theretofore
represented by such Certificates, subject, however, to
the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record
date prior to the Effective Time which may have been
authorized or made by FDC on such shares of FDC Common
Stock or by R&B on such shares of R&B Common Stock, as
the case may be, which remain unpaid at the Effective
Time, and there shall be no further registration of
transfers on the stock transfer books of the applicable
Surviving Corporation of the shares of FDC Common Stock
and R&B Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective
Time, Certificates are presented to a Surviving
Corporation or the Exchange Agent for any reason, they
shall be cancelled and exchanged as provided in this
Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No Parent
Certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender
for exchange of Certificates, no dividend or distribution
of Parent shall relate to such fractional share interests
and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder
of Parent.
(ii) As promptly as practicable following the
Effective Time, the Exchange Agent will determine the
excess of (A) the number of whole shares of Parent Common
Stock delivered to the Exchange Agent by Parent pursuant
to Section 2.3(a) over (B) the aggregate number of whole
shares of Parent Common Stock to be distributed to
holders of FDC Common Stock, R&B Common Stock and R&B
Class A Stock pursuant to Section 2.3(b) (such excess
being herein called the "Excess Shares"). Following the
Effective Time, the Exchange Agent will, on behalf of
former stockholders of FDC, if any, and R&B, sell the
Excess Shares at then-prevailing prices on the New York
Stock Exchange, Inc. (the "NYSE"), all in the manner
provided in Section 2.3(e)(iii).
(iii) The sale of the Excess Shares by the
Exchange Agent will be executed on the NYSE through one
or more member firms of the NYSE and will be executed in
round lots to the extent practicable. The Exchange Agent
will use reasonable efforts to complete the sale of the
Excess Shares as promptly following the Effective Time
as, in the Exchange Agent's sole judgment, is practicable
consistent with obtaining the best execution of such
sales in light of prevailing market conditions. Until
the net proceeds of such sale or sales have been
distributed to the holders of FDC Common Stock and R&B
Common Stock, the Exchange Agent will hold such proceeds
in trust for the holders of FDC Common Stock and R&B
Common Stock (the "Common Shares Trust"). The Surviving
Corporations will pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent incurred
in connection with such sale of the Excess Shares. The
Exchange Agent will determine the portion of the Common
Shares Trust to which each holder of FDC Common Stock and
R&B Common Stock is entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction, the numerator of which
is the amount of the fractional share interest to which
such holder of FDC Common Stock or R&B Common Stock is
entitled (after taking into account all shares of FDC
Common Stock or R&B Common Stock held at the Effective
Time by such holder) and the denominator of which is the
aggregate amount of fractional share interests to which
all holders of FDC Common Stock and R&B Common Stock are
entitled.
(iv) Notwithstanding the provisions of Section
2.3(e)(ii) and (iii), the Surviving Corporations may
elect at their option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares
and the making of the payments hereinabove contemplated,
to pay each holder of FDC Common Stock or R&B Common
Stock an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which
such holder (after taking into account all shares of FDC
Common Stock or R&B Common Stock held at the Effective
Time by such holder) would otherwise be entitled by (B)
the closing price for a share of Parent Common Stock as
reported on the NYSE Composite Transactions Tape (as
reported in The Wall Street Journal, or, if not reported
thereby, any other authoritative source) on the Closing
Date, and, in such case, all references herein to the
cash proceeds of the sale of the Excess Shares and
similar references will be deemed to mean and refer to
the payments calculated as set forth in this Section
2.3(e)(iv).
(v) As soon as practicable after the
determination of the amount of cash, if any, to be paid
to holders of FDC Common Stock and R&B Common Stock with
respect to any fractional share interests, the Exchange
Agent will make available such amounts to such holders of
FDC Common Stock and R&B Common Stock subject to and in
accordance with the terms of Section 2.3(c).
(f) Termination of Exchange Fund. Any portion
of the Exchange Fund which remains undistributed to the
holders of the Certificates for six months after the
Effective Time shall be delivered to Parent upon demand,
and any holders of the Certificates who have not
theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim
for Merger Consideration, any cash in lieu of fractional
shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(g) No Liability. None of Parent, FDC, R&B or
the Exchange Agent shall be liable to any person in
respect of any shares of Parent Common Stock (or
dividends or distributions with respect thereto) or cash
from the Exchange Fund in each case delivered to a public
official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate shall not
have been surrendered prior to seven years after the
Effective Time (or immediately prior to such earlier date
on which any Merger Consideration, any cash payable to
the holder of such Certificate pursuant to this Article
II or any dividends or distributions payable to the
holder of such Certificate would otherwise escheat to or
become the property of any governmental body or
authority) any such Merger Consideration or cash,
dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable law, become
the property of the related Surviving Corporation, free
and clear of all claims or interest of any person
previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange
Agent shall invest any cash included in the Exchange
Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments
shall be paid to Parent.
(i) Lost Certificates. If 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 related Surviving Corporation,
the posting by such person of a bond in such reasonable
amount as the Surviving Corporation 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 the Merger Consideration and, if applicable,
any cash in lieu of fractional shares, and unpaid
dividends and distributions on shares of Parent Common
Stock deliverable in respect thereof, pursuant to this
Agreement.
ARTICLE III
Governance
Section 3.1. Board of Directors of Parent.
The Board of Directors of Parent shall have 10 members
and shall be divided into three classes, Class I, Class
II and Class III, with the term of Class I expiring at
Parent's first annual meeting following the Effective
Time (the "Annual Meeting"), the term of Class II
expiring one year following the Annual Meeting and the
term of Class III expiring two years following the Annual
Meeting. The Board of Directors of each of R&B and FDC
shall select from among the current members of the Board
of Directors of R&B and FDC, respectively, five
individuals for nomination as directors of Parent. If an
individual so selected consents to serve as a director,
such individual shall be elected as a director of Parent,
effective as of the Effective Time, for a term expiring
at Parent's next annual meeting of stockholders following
the Effective Time at which the term of the class to
which such director belongs expires, subject to being
renominated as a director at the discretion of Parent's
Board of Directors. Two designees of FDC and one
designee of R&B shall be in Class I, two designees of R&B
and one designee of FDC shall be in Class II, and Mr.
Loyd, one other designee of R&B, Mr. Webster and one
other designee of FDC shall be in Class III. Each
committee of the Board of Directors shall consist of an
equal number of designees of FDC and of R&B.
Section 3.2. Key Executive Officers of Parent.
Immediately following the Effective Time, Mr. Paul B.
Loyd shall be the Chairman of the Board of Parent, and
Mr. Steven A. Webster shall be the Chief Executive
Officer and President of Parent. Mr. Loyd shall also be
the Chairman and Chief Executive Officer of Reading &
Bates Development Co. ("Devco").
Section 3.3. Name. Effective as of the
Effective Time the name of Parent shall be R&B Falcon
Corporation. FDC and R&B agree that, after the Effective
Time, Parent will, in connection with its business
operations, use the name "Falcon" in connection with its
domestic operations and the name "Reading & Bates" in
connection with its international and deep water
operations.
ARTICLE IV
Representations and Warranties of R&B
Except as set forth on the Disclosure Schedule
delivered by R&B to FDC prior to the execution of this
Agreement (the "R&B Disclosure Schedule"), R&B represents
and warrants to FDC that:
Section 4.1. Organization, Qualification, Etc.
R&B is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware
and has the corporate power and authority to own its
properties and assets and to carry on its business as it
is now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in
which the ownership of its properties or the conduct of
its business requires such qualification, except for
jurisdictions in which the failure to be so qualified or
in good standing would not, individually or in the
aggregate, have a Material Adverse Effect (as hereinafter
defined) on R&B. As used in this Agreement, any
reference to any state of facts, event, change or effect
having a "Material Adverse Effect" on or with respect to
R&B or Parent, as the case may be, means such state of
facts, event, change or effect that has had, or would
reasonably be expected to have, a material adverse effect
on the business, results of operations or financial
condition of R&B and its Subsidiaries (as defined in
Section 10.11), taken as a whole, or Parent and its
Subsidiaries, taken as a whole, as the case may be. The
copies of R&B's certificate of incorporation and by-laws
which have been delivered to FDC are complete and correct
and in full force and effect on the date hereof. Each of
R&B's Significant Subsidiaries (as defined in Section
10.11) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction
of incorporation or organization, has the power and
authority to own 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 in each
jurisdiction in which the ownership of its property or
the conduct of its business requires such qualification,
except for jurisdictions in which the failure to be so
qualified or in good standing would not, individually or
in the aggregate, have a Material Adverse Effect on R&B.
All the outstanding shares of capital stock of, or other
ownership interests in, R&B's Significant Subsidiaries
are validly issued, fully paid and non-assessable and are
owned by R&B, directly or indirectly, free and clear of
all liens, claims, charges or encumbrances, except for
restrictions contained in credit agreements and similar
instruments to which R&B is a party under which no event
of default has occurred or arisen. There are no existing
options, rights of first refusal, preemptive rights,
calls or commitments of any character relating to the
issued or unissued capital stock or other securities of,
or other ownership interests in, any Significant
Subsidiary of R&B other than options to purchase common
stock of Devco issued pursuant to the Reading & Bates
Development Co. 1997 Incentive Plan (the "Devco Plan").
Section 4.2. Capital Stock. The authorized
stock of R&B consists of 425,000,000 shares of common
stock, par value $.05 per share ("R&B Common Stock"),
10,000,000 shares of preferred stock, par value $1.00 per
share ("R&B Preferred Stock"), of which 1,000,000 shares
have been designated as Series B Junior Participating
Preferred Stock ("R&B Series B Preferred Stock") and 285
shares of Class A Cumulative Convertible Capital Stock,
no par value ("R&B Class A Stock"). As of June 30, 1997,
72,061,079 shares of R&B Common Stock, and 60 shares of
R&B Class A Stock were issued and outstanding and no
shares of R&B Preferred Stock were issued or outstanding.
All the outstanding shares of R&B Common Stock have been
validly issued and are fully paid and non-assessable. As
of July 10, 1997, there were no outstanding
subscriptions, options, warrants, rights or other
arrangements or commitments obligating R&B to issue any
shares of its stock other than:
(a) rights to acquire shares of R&B Series B
Preferred Stock pursuant to the Rights Agreement, dated
as of March 15, 1995, between R&B and American Stock
Transfer & Trust Company (the "R&B Rights Plan");
(b) rights to convert shares of R&B Class A
Stock into an aggregate of 81 shares of R&B Common Stock;
(c) options and other rights to receive or
acquire 2,567,400 shares of R&B Common Stock granted on
or prior to July 10, 1997, pursuant to employee incentive
or benefit plans, programs and arrangements and non-
employee director plans; and
(d) rights to acquire shares of R&B Common
Stock upon conversion of R&B's 8% Senior Subordinated
Convertible Debentures due December 31, 1998.
Except for the issuance of shares of R&B Common
Stock pursuant to the options and other rights referred
to in clauses 4.2(b), (c) and (d), since June 30, 1997,
no shares of R&B Common Stock or R&B Preferred Stock have
been issued.
Section 4.3. Corporate Authority Relative to
this Agreement; No Violation. R&B has the corporate
power and authority to enter into this Agreement and the
R&B Stock Option Agreement and to carry out its
obligations hereunder and thereunder. The execution and
delivery of this Agreement and the R&B Stock Option
Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors of R&B and,
except for the adoption of this Agreement by its
stockholders, no other corporate proceedings on the part
of R&B are necessary to authorize the consummation of the
transactions contemplated hereby and thereby. The Board
of Directors of R&B has taken all appropriate action so
that none of Parent, R&B or SubR will be an "interested
stockholder" within the meaning of Section 203 of the
DGCL by virtue of Parent, R&B and SubR entering into this
Agreement or R&B entering into the R&B Stock Option
Agreement and consummating the transactions contemplated
hereby and thereby. The Board of Directors of R&B has
determined that the transactions contemplated by this
Agreement and the R&B Stock Option Agreement are in the
best interest of R&B and its stockholders and to
recommend to such stockholders that they adopt this
Agreement. This Agreement and the R&B Stock Option
Agreement have been duly and validly executed and
delivered by R&B and, assuming this Agreement and the R&B
Stock Option Agreement, as applicable, constitutes a
valid and binding agreement of the other parties hereto
and thereto, this Agreement and the R&B Stock Option
Agreement constitute valid and binding agreements of R&B,
enforceable against R&B in accordance with their terms
(except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of
equitable remedies). R&B is not subject to or obligated
under any charter, by-law or contract provision or any
license, franchise or permit, or subject to any order or
decree, which would be breached or violated by its
executing or, subject to the adoption of this Agreement
by its stockholders, carrying out the transactions
contemplated by this Agreement and the R&B Stock Option
Agreement, except for any breaches or violations which
would not, individually or in the aggregate, have a
Material Adverse Effect on R&B. Other than in connection
with or in compliance with the provisions of the DGCL,
the Securities Act of 1933, as amended (the "Securities
Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"),
Section 4043 of ERISA (as defined in Section 4.8), and
any non-United States competition, antitrust and
investment laws and the securities or blue sky laws of
the various states (collectively, the "R&B Required
Approvals"), no authorization, consent or approval of, or
filing with, any governmental body or authority is
necessary for the consummation by R&B of the transactions
contemplated by this Agreement, except for such
authorizations, consents, approvals or filings, the
failure to obtain or make which would not, individually
or in the aggregate, have a Material Adverse Effect on
R&B or substantially impair or delay the consummation of
the transactions contemplated hereby.
Section 4.4. Reports and Financial Statements.
R&B has previously furnished to FDC true and complete
copies of:
(a) R&B's Annual Reports on Form 10-K filed
with the Securities and Exchange Commission (the "SEC")
for each of the years ended December 31, 1994 through
1996;
(b) R&B's Quarterly Report on Form 10-Q filed
with the SEC for the quarter ended March 31, 1997;
(c) each definitive proxy statement filed by
R&B with the SEC since December 31, 1994;
(d) each final prospectus filed by R&B with
the SEC since December 31, 1994, except any final
prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by
R&B with the SEC since January 1, 1997.
As of their respective dates, such reports,
proxy statements and prospectuses (collectively, the "R&B
SEC Reports") (i) complied as to form in all material
respects with the applicable requirements of the
Securities Act, the Exchange Act and the rules and
regulations promulgated 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 therein, in light of the
circumstances under which they were made, not misleading.
Except to the extent that information contained in any
R&B SEC Report has been revised or superseded by a later
filed R&B SEC Report, none of the R&B SEC Reports
contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein
or necessary in order to make the statements therein, in
light of the circumstances under which they were made,
not misleading. The audited consolidated financial
statements and unaudited consolidated interim financial
statements included in the R&B SEC Reports (including any
related notes and schedules) fairly present the financial
position of R&B and its consolidated Subsidiaries as of
the dates thereof and the results of operations and cash
flows for the periods or as of the dates then ended
(subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past
practice and generally accepted accounting principles in
the United States ("GAAP") consistently applied during
the periods involved (except as otherwise disclosed in
the notes thereto). Since January 1, 1996, R&B has
timely filed all material reports, registration
statements and other filings required to be filed by it
with the SEC under the rules and regulations of the SEC.
Section 4.5. No Undisclosed Liabilities.
Neither R&B nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, except (a) liabilities
or obligations reflected in the R&B SEC Reports filed
prior to the date hereof ("R&B Filed SEC Reports") and
(b) liabilities or obligations which would not,
individually or in the aggregate, have a Material Adverse
Effect on R&B.
Section 4.6. No Violation of Law. The
businesses of R&B and its Subsidiaries are not being
conducted in violation of any law, ordinance or
regulation of any governmental body or authority
(provided that no representation or warranty is made in
this Section 4.6 with respect to Environmental Laws (as
hereinafter defined)) except (a) as described in the R&B
Filed SEC Reports and (b) for violations or possible
violations which would not, individually or in the
aggregate, have a Material Adverse Effect on R&B.
Section 4.7. Environmental Laws and Regulations.
Except as described in the R&B Filed SEC Reports, (a) R&B
and each of its Subsidiaries is in compliance with all
applicable international, federal, state, local and
foreign laws and regulations relating to pollution or
protection of human health or the environment (including,
without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively,
"Environmental Laws"), which compliance includes, but is
not limited to, the possession by R&B and its
Subsidiaries of all material permits and other
governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and
conditions thereof, except for non-compliance which would
not, individually or in the aggregate, have a Material
Adverse Effect on R&B; (b) neither R&B nor any of its
Subsidiaries has received written notice of, or, to the
knowledge of R&B, is the subject of, any actions, causes
of action, claims, investigations, demands or notices by
any Person asserting an obligation to conduct
investigations or clean-up activities under Environmental
Law or alleging liability under or non-compliance with
any Environmental Law (collectively, "Environmental
Claims") which would, individually or in the aggregate,
have a Material Adverse Effect on R&B; and (c) to the
knowledge of R&B, there are no facts, circumstances or
conditions in connection with the operation of its
business or any currently or formerly owned, leased or
operated facilities that are reasonably likely to lead to
any such Environmental Claims in the future.
Section 4.8. No Undisclosed Employee Benefit
Plan Liabilities or Severance Arrangements. Except as
described in the R&B Filed SEC Reports, all "employee
benefit plans," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), maintained or contributed to by R&B or
its Subsidiaries are in compliance with all applicable
provisions of ERISA and the Code, and R&B and its
Subsidiaries do not have any liabilities or obligations
with respect to any such employee benefit plans, whether
or not accrued, contingent or otherwise, except (a) as
described in the R&B Filed SEC Reports, and (b) for
instances of noncompliance or liabilities or obligations
that would not, individually or in the aggregate, have a
Material Adverse Effect on R&B. No employee of R&B will
be entitled to any additional benefits or any
acceleration of the time of payment or vesting of any
benefits under any employee incentive or benefit plan,
program or arrangement as a result of the transactions
contemplated by this Agreement.
Section 4.9. Absence of Certain Changes or
Events. Other than as disclosed in the R&B Filed SEC
Reports, since December 31, 1996 the businesses of R&B
and its Subsidiaries have been conducted in all material
respects in the ordinary course consistent with past
practice, and there has not been any event, occurrence,
development or state of circumstances or facts that has
had, or would have, a Material Adverse Effect on R&B.
Section 4.10. Litigation. Except as described
in the R&B Filed SEC Reports, there are no actions, suits
or proceedings pending (or, to R&B's knowledge,
threatened) against or affecting R&B or its Subsidiaries,
or any of their respective properties at law or in
equity, or before any federal, state, local or foreign
governmental body or authority, which, individually or in
the aggregate, are reasonably likely to have a Material
Adverse Effect on R&B.
Section 4.11. Joint Proxy Statement;
Registration Statement; Other Information. None of the
information with respect to R&B or its Subsidiaries to be
included in the Joint Proxy Statement or the Registration
Statement (as defined in Section 7.3(a)(i)) will, in the
case of the Joint Proxy Statement or any amendments
thereof or supplements thereto, at the time of the
mailing of the Joint Proxy Statement or any amendments or
supplements thereto, and at the time of the R&B Meeting
and the FDC Meeting, or, in the case of the Registration
Statement, at the time it becomes effective, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading,
except that no representation is made by R&B with respect
to information supplied in writing by FDC or any
affiliate of FDC specifically for inclusion in the Joint
Proxy Statement. The Joint Proxy Statement will comply
as to form in all material respects with the provisions
of the Exchange Act and the rules and regulations
promulgated thereunder. The letters to stockholders,
notices of meeting, joint proxy statement and forms of
proxies to be distributed to stockholders in connection
with the Mergers and any schedules required to be filed
with the SEC in connection therewith are collectively
referred to herein as the "Joint Proxy Statement".
Section 4.12. R&B Rights Plan. Under the
terms of the R&B Rights Plan, as amended prior to the
execution of this Agreement and the R&B Option Agreement,
the transactions contemplated by this Agreement will not
cause a Distribution Date (as such term is defined in the
FDC Rights Plan) to occur or cause the rights issued
pursuant to the R&B Rights Plan to become exercisable.
R&B shall cause the R&B Rights Plan to be amended such
that the "Final Expiration Date" (as defined in the R&B
Rights Plan) shall occur immediately prior to the
Effective Time.
Section 4.13. Lack of Ownership of FDC Common
Stock. Except for the FDC Option, neither R&B nor any of
its Subsidiaries owns any shares of FDC Common Stock or
other securities convertible into shares of FDC Common
Stock (exclusive of any shares owned by R&B's employee
benefit plans).
Section 4.14. Tax Matters. (a) All federal,
state, local and foreign Tax Returns required to be filed
by or on behalf of R&B, each of its Subsidiaries, and
each affiliated, combined, consolidated or unitary group
of which R&B or any of its Subsidiaries (i) is a member
(a "Current R&B Group") or (ii) has been a member within
six years prior to the date hereof but is not currently a
member, but only insofar as any such Tax relates to a
taxable period ending on a date within the last six years
(a "Past R&B Group", together with Current R&B Groups, an
"R&B Affiliated Group") have been timely filed, and all
returns filed are complete and accurate except to the
extent any failure to file or any inaccuracies in filed
returns would not, individually or in the aggregate, have
a Material Adverse Effect on R&B (it being understood
that the representations made in this Section, to the
extent that they relate to Past R&B Groups, are made to
the knowledge of R&B). All Taxes due and owing by R&B,
any Subsidiary of R&B or any R&B Affiliated Group have
been paid, or adequately reserved for, except to the
extent any failure to pay or reserve would not,
individually or in the aggregate, have a Material Adverse
Effect on R&B. There is no audit examination,
deficiency, refund litigation, proposed adjustment or
matter in controversy with respect to any Taxes due and
owing by R&B, any Subsidiary of R&B or any R&B Affiliated
Group which would, individually or in the aggregate, have
a Material Adverse Effect on R&B. All assessments for
Taxes due and owing by R&B, any Subsidiary of R&B or any
R&B Affiliated Group with respect to completed and
settled examinations or concluded litigation have been
paid. As soon as practicable after the public
announcement of the execution of the Merger Agreement,
R&B will provide FDC with written schedules of (i) the
taxable years of R&B for which the statutes of
limitations with respect to federal income Taxes have not
expired, and (ii) with respect to federal income Taxes,
those years for which examinations have been completed,
those years for which examinations are presently being
conducted, and those years for which examinations have
not yet been initiated. R&B and each of its Subsidiaries
have complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except
to the extent any such failure to comply would not,
individually or in the aggregate, have a Material Adverse
Effect on R&B.
(b) Neither R&B nor any of its Subsidiaries
knows of any fact or has taken any action that could
reasonably be expected to prevent the Mergers from
constituting transactions described in Sections 351
and/or 368(a) of the Code.
(c) Any amount or other entitlement that could
be received (whether in cash or property or the vesting
of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer
or director of R&B or any of its affiliates who is a
"disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any
employee benefit plan or other compensation arrangement
currently in effect would not be characterized as an
"excess parachute payment" or a "parachute payment" (as
such terms are defined in Section 280G(b)(1) of the
Code).
For purposes of this Agreement: (i) "Taxes"
means any and all federal, state, local, foreign or other
taxes of any kind (together with any and all interest,
penalties, additions to tax and additional amounts
imposed with respect thereto) imposed by any taxing
authority, including, without limitation, taxes or other
charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property,
sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment
compensation, or net worth, and taxes or other charges in
the nature of excise, withholding, ad valorem or value
added, and (ii) "Tax Return" means any return, report or
similar statement (including the attached schedules)
required to be filed with respect to any Tax, including,
without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
Section 4.15. Opinion of Financial Advisor.
The Board of Directors of R&B has received the opinion of
Morgan Stanley & Co. Incorporated, dated the date of this
Agreement, substantially to the effect that, as of such
date, the R&B Merger Consideration is fair to the holders
of R&B Common Stock from a financial point of view.
Section 4.16. Required Vote of R&B
Stockholders. The affirmative vote of the holders of
shares of R&B Common Stock and R&B Class A Stock
representing a majority of the votes entitled to be cast
by the holders of the outstanding shares of R&B Common
Stock and R&B Class A Stock, voting together as a class
(the "R&B Stockholder Approval") is required to adopt the
Merger Agreement. No other vote of the stockholders of
R&B is required by law, the charter or by-laws of R&B or
otherwise in order for R&B to consummate the R&B Merger
and the transactions contemplated hereby and by the R&B
Stock Option Agreement.
Section 4.17. Pooling of Interests. To the
knowledge of R&B, neither it nor any of its Subsidiaries
has taken any action or failed to take any action which
action or failure (without giving effect to any actions
or failures to act by FDC or any of its Subsidiaries)
would prevent the treatment of the transactions
contemplated hereby as a pooling of interests for
accounting purposes.
ARTICLE V
Representations and Warranties of FDC
Except as set forth on the Disclosure Schedule
delivered by FDC to R&B prior to the execution of this
Agreement (the "FDC Disclosure Schedule," together with
the R&B Disclosure Schedule, the "Disclosure Schedule"),
FDC represents and warrants to R&B that:
Section 5.1. Organization, Qualification, Etc.
FDC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware
and has the corporate power and authority to own its
properties and assets and to carry on its business as it
is now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in
which the ownership of its properties or the conduct of
its business requires such qualification, except for
jurisdictions in which the failure to be so qualified or
in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on FDC. The
copies of FDC's Restated Certificate of Incorporation and
by-laws which have been delivered to R&B are complete and
correct and in full force and effect on the date hereof.
Each of FDC's Significant Subsidiaries is duly organized,
validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization, has
the power and authority to own 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
in each jurisdiction in which the ownership of its
property or the conduct of its business requires such
qualification, except for jurisdictions in which the
failure to be so qualified or in good standing would not,
individually or in the aggregate, have a Material Adverse
Effect on FDC. All the outstanding shares of capital
stock of, or other ownership interests in, FDC's
Significant Subsidiaries are validly issued, fully paid
and non-assessable and are owned by FDC, directly or
indirectly, free and clear of all liens, claims, charges
or encumbrances, except for restrictions contained in
credit agreements and similar instruments to which FDC is
a party under which no event of default has occurred or
arisen. There are no existing options, rights of first
refusal, preemptive rights, calls or commitments of any
character relating to the issued or unissued capital
stock or other securities of, or other ownership
interests in, any Significant Subsidiary of FDC.
Section 5.2. Capital Stock. The authorized
capital stock of FDC consists of 100,000,000 shares of
common stock, par value $0.01 per share ("FDC Common
Stock"), and 526,489 shares of preferred stock, no par
value ("FDC Preferred Stock") of which 100,000 shares
have been designated as Series C Junior Participating
Preferred Stock ("FDC Series C Preferred Stock"). As of
July 9, 1997, 79,164,944 shares (after giving effect to
the two-for-one stock split referred to in Section
5.2(a)) of FDC Common Stock and no shares of FDC
Preferred Stock were issued and outstanding, and no
shares of FDC Common Stock were held in FDC's treasury.
All the outstanding shares of FDC Common Stock have been
validly issued and are fully paid and non-assessable. As
of July 10, 1997, there were no outstanding
subscriptions, options, warrants, rights or other
arrangements or commitments obligating FDC to issue any
shares of its capital stock other than:
(a) shares of FDC Common Stock issuable to
holders of record of FDC Common Stock on July 9, 1997, to
effect a two-for-one stock split;
(b) rights ("FDC Rights") to acquire shares of
FDC Series C Preferred Stock pursuant to the Rights
Agreement, dated as of June 25, 1997, between FDC and
American Stock Transfer & Trust Company (the "FDC Rights
Plan") to be distributed to holders of record of FDC
Common Stock on July 16, 1997; and
(c) options and other rights to receive or
acquire 1,171,878 shares (after giving effect to the two-
for-one stock split referred to in Section 5.2(a)) of FDC
Common Stock granted on or prior to July 10, 1997,
pursuant to employee incentive or benefit plans, programs
and arrangements and non-employee director plans.
Except for the issuance of shares of FDC Common
Stock pursuant to the options and other rights referred
to in clause 5.2 (a), (b) and (c), since June 30, 1997,
no shares of FDC Common Stock or FDC Preferred Stock have
been issued.
Section 5.3. Corporate Authority Relative to
this Agreement; No Violation. FDC has the corporate
power and authority to enter into this Agreement and the
FDC Stock Option Agreement, and to carry out its
obligations hereunder and thereunder. The execution and
delivery of this Agreement and the FDC Stock Option
Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors of FDC and,
except for the adoption of this Agreement by its
stockholders, no other corporate proceedings on the part
of FDC are necessary to authorize the consummation of the
transactions contemplated hereby and thereby. The Board
of Directors of FDC has taken all appropriate action so
that none of Parent, FDC or SubF will be an "interested
stockholder" within the meaning of Section 203 of the
DGCL by virtue of Parent, FDC and SubF entering into this
Agreement or FDC entering into the FDC Stock Option
Agreement and consummating the transactions contemplated
hereby and thereby. The Board of Directors of FDC has
determined that the transactions contemplated by this
Agreement are in the best interest of FDC and its
stockholders and to recommend to such stockholders that
they adopt this Agreement. This Agreement and the FDC
Stock Option Agreement have been duly and validly
executed and delivered by FDC and, assuming this
Agreement and the FDC Stock Option Agreement, as
applicable, constitutes a valid and binding agreement of
the other parties hereto and thereto, this Agreement and
the FDC Stock Option Agreement constitute valid and
binding agreements of FDC, enforceable against FDC in
accordance with their terms (except insofar as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting creditors, rights generally, or by principles
governing the availability of equitable remedies). FDC
is not subject to or obligated under any charter, by-law
or contract provision or any license, franchise or
permit, or subject to any order or decree, which would be
breached or violated by its executing or, subject to the
adoption of this Agreement by its stockholders, carrying
out the transactions contemplated by this Agreement and
the FDC Stock Option Agreement, except for any breaches
or violations which would not, individually or in the
aggregate, have a Material Adverse Effect on FDC. Other
than in connection with or in compliance with the
provisions of the DGCL, the Securities Act, the Exchange
Act, the HSR Act, The Shipping Act (46 U.S.C. SECTIONS 801 et
seq), Section 4043 of ERISA and any non-United States
competition, antitrust and investments laws and the
securities or blue sky laws of the various states
(collectively, the "FDC Required Approvals"), no
authorization, consent or approval of, or filing with,
any governmental body or authority is necessary for the
consummation by FDC of the transactions contemplated by
this Agreement, except for such authorizations, consents,
approvals or filings, the failure to obtain or make which
would not, individually or in the aggregate, have a
Material Adverse Effect on FDC or substantially impair or
delay the consummation of the transactions contemplated
hereby.
Section 5.4. Reports and Financial Statements.
FDC has previously furnished to R&B true and complete
copies of:
(a) FDC's Annual Reports on Form 10-K filed
with the SEC for each of the years ended December 31,
1994 through 1996;
(b) FDC's Quarterly Report on Form 10-Q filed
with the SEC for the quarter ended March 31, 1997;
(c) each definitive proxy statement filed by
FDC with the SEC since December 31, 1994;
(d) each final prospectus filed by FDC with
the SEC since December 31, 1994, except any final
prospectus on Form S-8; and
(e) all Current Reports on Form 8-K filed by
FDC with the SEC since January 1, 1997.
As of their respective dates, such reports,
proxy statements and prospectuses (collectively, "FDC SEC
Reports") (i) complied as to form in all material
respects with the applicable requirements of the
Securities Act, the Exchange Act, and the rules and
regulations promulgated 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 therein, in light of the
circumstances under which they were made, not misleading.
Except to the extent that information contained in any
FDC SEC Report has been revised or superseded by a later
filed FDC SEC Report, none of the FDC SEC Reports
contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein
or necessary in order to make the statement therein, in
light of the circumstances under which they were made,
not misleading. The audited consolidated financial
statements and unaudited consolidated interim financial
statements included in the FDC SEC Reports (including any
related notes and schedules) fairly present the financial
position of FDC and its consolidated Subsidiaries as of
the dates thereof and the results of their operations and
their cash flows for the periods or as of the dates then
ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past
practice and GAAP consistently applied during the periods
involved (except as otherwise disclosed in the notes
thereto). Since January 1, 1996, FDC has timely filed
all material reports, registration statements and other
filings required to be filed by it with the SEC under the
rules and regulations of the SEC.
Section 5.5. No Undisclosed Liabilities.
Neither FDC nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, except (a) liabilities
or obligations reflected in the FDC SEC Reports filed
prior to the date hereof ("FDC Filed SEC Reports") and
(b) liabilities or obligations which would not,
individually or in the aggregate, have a Material Adverse
Effect on FDC.
Section 5.6. No Violation of Law. The
businesses of FDC and its Subsidiaries are not being
conducted in violation of any law, ordinance or
regulation of any governmental body or authority
(provided that no representation or warranty is made in
this Section 5.6 with respect to Environmental Laws)
except (a) as described in the FDC Filed SEC Reports and
(b) for violations or possible violations which would
not, individually or in the aggregate, have a Material
Adverse Effect on FDC.
Section 5.7. Environmental Laws and
Regulations. Except as described in the FDC Filed SEC
Reports, (a) FDC and each of its Subsidiaries is in
compliance with all applicable Environmental Laws, which
compliance includes, but is not limited to, the
possession by FDC and its Subsidiaries of all material
permits and other governmental authorizations required
under applicable Environmental Laws, and compliance with
the terms and conditions thereof, except for non-
compliance which would not, individually or in the
aggregate, have a Material Adverse Effect on FDC; (b)
neither FDC nor any of its Subsidiaries has received
written notice of, or, to the knowledge of FDC, is the
subject of, any Environmental Claims which would,
individually or in the aggregate, have a Material Adverse
Effect on FDC; and (c) to the knowledge of FDC, there are
no facts, circumstances or conditions in connection with
the operation of its business or any currently or
formerly owned, leased or operated facilities that are
reasonably likely to lead to any such Environmental
Claims in the future.
Section 5.8. No Undisclosed Employee Benefit
Plan Liabilities or Severance Arrangements. Except as
described in the FDC Filed SEC Reports, all "employee
benefit plans," as defined in Section 3(3) of ERISA,
maintained or contributed to by FDC or its Subsidiaries
are in compliance with all applicable provisions of ERISA
and the Code, and FDC and its Subsidiaries do not have
any liabilities or obligations with respect to any such
employee benefit plans, whether or not accrued,
contingent or otherwise, except (a) as described in the
FDC Filed SEC Reports and (b) for instances of non-
compliance or liabilities or obligations that would not,
individually or in the aggregate, have a Material Adverse
Effect on FDC. No employee of FDC will be entitled to
any additional benefits or any acceleration of the time
of payment or vesting of any benefits under any employee
incentive or benefit plan, program or arrangement as a
result of the transactions contemplated by this Agreement.
Section 5.9. Absence of Certain Changes or
Events. Other than as disclosed in the FDC Filed SEC
Reports, since December 31, 1996 the businesses of FDC
and its Subsidiaries have been conducted in all material
respects in the ordinary course consistent with past
practice, and there has not been any event, occurrence,
development or state of circumstances or facts that has
had, or would have, a Material Adverse Effect on FDC.
Section 5.10. Litigation. Except as described
in the FDC Filed SEC Reports or previously disclosed in
writing to R&B, there are no actions, suits or
proceedings pending (or, to FDC's knowledge, threatened)
against or affecting FDC or its Subsidiaries, or any of
their respective properties at law or in equity, or
before any federal, state, local or foreign governmental
body or authority which, individually or in the
aggregate, are reasonably likely to have a Material
Adverse Effect on FDC.
Section 5.11. Joint Proxy Statement;
Registration Statement; Other Information. None of the
information with respect to FDC to be included in the
Joint Proxy Statement or the Registration Statement will,
in the case of the Joint Proxy Statement or any
amendments thereof or supplements thereto, at the time of
the mailing of the Joint Proxy Statement or any
amendments or supplements thereto, and at the time of the
R&B Meeting and the FDC Meeting, or, in the case of the
Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein
or necessary in order to make the statements therein, in
light of the circumstances under which they were made,
not misleading, except that no representation is made by
FDC with respect to information supplied in writing by
R&B or any affiliate of R&B specifically for inclusion in
the Joint Proxy Statement. The Joint Proxy Statement
will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and
regulations promulgated thereunder.
Section 5.12. Lack of Ownership of R&B Common
Stock. Except for the R&B Option, neither FDC nor any of
its Subsidiaries owns any shares of R&B Common Stock or
other securities convertible into shares of R&B Common
Stock (exclusive of any shares owned by FDC's employee
benefit plans).
Section 5.13. FDC Rights Plan. Under the
terms of the FDC Rights Plan, as amended prior to the
execution of this Agreement and the FDC Option Agreement,
the transactions contemplated by this Agreement will not
cause a Distribution Date (as such term is defined in the
FDC Rights Plan) to occur or cause the rights issued
pursuant to the FDC Rights Plan to become exercisable.
Section 5.14. Tax Matters. (a) All federal,
state, local and foreign Tax Returns required to be filed
by or on behalf of FDC, each of its Subsidiaries, and
each affiliated, combined, consolidated or unitary group
of which FDC or any of its Subsidiaries (i) is a member
(a "Current FDC Group") or (ii) has been a member within
six years prior to the date hereof but is not currently a
member, but only insofar as any such Tax relates to a
taxable period ending on a date within the last six years
(a "Past FDC Group", together with Current FDC Groups, a
"FDC Affiliated Group") have been timely filed, and all
returns filed are complete and accurate except to the
extent any failure to file or any inaccuracies in filed
returns would not, individually or in the aggregate, have
a Material Adverse Effect on FDC (it being understood
that the representations made in this Section, to the
extent that they relate to Past FDC Groups, are made to
the knowledge of FDC). All Taxes due and owing by FDC,
any Subsidiary of FDC or any FDC Affiliated Group have
been paid, or adequately reserved for, except to the
extent any failure to pay or reserve would not,
individually or in the aggregate, have a Material Adverse
Effect on FDC. There is no audit examination,
deficiency, refund litigation, proposed adjustment or
matter in controversy with respect to any Taxes due and
owing by FDC, any Subsidiary of FDC or any FDC Affiliated
Group which would, individually or in the aggregate, have
a Material Adverse Effect on FDC. All assessments for
Taxes due and owing by FDC, any Subsidiary of FDC or any
FDC consolidated group with respect to completed and
settled examinations or concluded litigation have been
paid. As soon as practicable after the public
announcement of the execution of the Merger Agreement,
FDC will provide R&B with written schedules of (i) the
taxable years of FDC for which the statutes of
limitations with respect to federal income Taxes have not
expired, and (ii) with respect to federal income Taxes,
those years for which examinations have been completed,
those years for which examinations are presently being
conducted, and those years for which examinations have
not yet been initiated. FDC and each of its Subsidiaries
have complied in all material respects with all rules and
regulations relating to the withholding of Taxes, except
to the extent any such failure to comply would not,
individually or in the aggregate, have a Material Adverse
Effect on FDC.
(b) Neither FDC nor any of its Subsidiaries
knows of any fact or has taken any action that could
reasonably be expected to prevent the Mergers from
constituting transactions described in Sections 351
and/or 368(a) of the Code.
(c) Any amount or other entitlement that could
be received (whether in cash or property or the vesting
of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer
or director of FDC or any of its affiliates who is a
"disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any
employee benefit plan or other compensation arrangement
currently in effect would not be characterized as an
"excess parachute payment" or a "parachute payment" (as
such terms are defined in Section 280G(b)(1) of the
Code).
Section 5.15. Opinion of Financial Advisor.
The Board of Directors of FDC has received the opinion of
Credit Suisse First Boston Corporation dated the date of
this Agreement that, as of such date and based upon and
subject to the matters set forth therein, the FDC Merger
Consideration was fair to FDC's stockholders from a
financial point of view.
Section 5.16. Required Vote of FDC
Stockholders. The affirmative vote of the holders of a
majority of the outstanding shares of FDC Common Stock
(the "FDC Stockholder Approval") is required to adopt the
Merger Agreement. No other vote of the stockholders of
FDC is required by law, the charter or by-laws of FDC or
otherwise in order for FDC to consummate the FDC Merger
and the transactions contemplated hereby and by the FDC
Stock Option Agreement.
Section 5.17. Pooling of Interests. To the
knowledge of FDC, neither it nor any of its Subsidiaries
has taken any action or failed to take any action which
action or failure (without giving effect to any actions
or failures to act by R&B or any of its Subsidiaries)
would prevent the treatment of the transactions
contemplated hereby as a pooling of interests for
accounting purposes.
ARTICLE VI
Covenants and Agreements
It is further agreed as follows:
Section 6.1. Conduct of Business by R&B and
FDC. From and after the date hereof and prior to the
Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 8.1
(the "Termination Date"), and except as may be agreed in
writing by the other parties hereto or as may be
permitted pursuant to this Agreement:
(a) R&B:
(i) shall, and shall cause each of its
Subsidiaries to, conduct its operations according to
their ordinary and usual course of business in
substantially the same manner as heretofore conducted;
(ii) shall use its reasonable best efforts,
and cause each of its Subsidiaries to use its reasonable
best efforts, to preserve intact its business
organizations and goodwill (except that any of its
Subsidiaries may be merged with or into, or be
consolidated with any of its other Subsidiaries or may be
liquidated into R&B or any of its Subsidiaries), keep
available the services of its current officers and other
key employees and preserve its relationships with those
persons having business dealings with R&B and its
Subsidiaries;
(iii) shall confer at such times as FDC may
reasonably request with one or more representatives of
FDC to report material operational matters and the
general status of ongoing operations (to the extent FDC
reasonably requires such information);
(iv) shall notify FDC of any emergency or
other change in the normal course of its or its
Subsidiaries, respective businesses or in the operation
of its or its Subsidiaries, respective properties and of
any complaints or hearings (or communications indicating
that the same may be contemplated) of any governmental
body or authority if such emergency, change, complaint,
investigation or hearing would have a Material Adverse
Effect on R&B;
(v) shall not, and shall not (except in the
ordinary course of business consistent with past
practice) permit any of its Subsidiaries that is not
wholly owned to, authorize or pay any dividends on or
make any distribution with respect to its outstanding
shares of stock (other than Arcade Drilling AS ("Arcade")
in accordance with and to the extent permitted by the
Facility Agreement, dated as of February 21, 1991, as
amended to date, between Arcade, Chase Investment Bank
Limited, The Chase Manhattan Bank, N.A., and the other
parties thereto);
(vi) shall not, and shall not permit any of
its Subsidiaries to, except (i) in the ordinary course of
business consistent with past practice or (ii) as
otherwise provided in this Agreement, enter into or amend
any employment, severance or similar agreements or
arrangements with any of their respective directors or
executive officers or enter into, adopt or amend any
bonus, deferred compensation, stock purchase, stock
option, pension, retirement or other employee benefit
plan, program, agreement or arrangement ("Plan") other
than with respect to the previously authorized grants of
options under the Devco Plan;
(vii) shall not, and shall not permit any of
its Subsidiaries to, authorize, propose or announce an
intention to authorize or propose, or enter into an
agreement with respect to, any merger, consolidation or
business combination (other than the R&B Merger and any
mergers, consolidations or business combinations with
R&B's Subsidiaries entered into in the ordinary course of
business consistent with past practice), any acquisition
of a material amount of assets or securities, any
disposition of a material amount of assets or securities
or any release or relinquishment of any material contract
rights, in each case not in the ordinary course of
business;
(viii) shall not propose or adopt any
amendments to its corporate charter or by-laws;
(ix) shall not, and shall not permit any of
its Significant Subsidiaries to, issue or authorize the
issuance of, or agree to issue or sell any shares of
their capital stock of any class (whether through the
issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except
as specifically set forth in Section 4.2 and the R&B
Disclosure Schedule relating thereto and except with
respect to the previously authorized grants of options
under the Devco Plan;
(x) shall not, and shall not permit any of its
Subsidiaries to, except in the ordinary course of
business in connection with employee incentive and
benefit plans, programs or arrangements in existence on
the date hereof, purchase or redeem any shares of its
stock (other than R&B Class A Stock) or any rights,
warrants or options to acquire any such shares;
(xi) shall not, and shall not permit any of
its Subsidiaries to, take any actions which would, or
would be reasonably likely to, prevent accounting for the
Mergers in accordance with the pooling of interests
method of accounting under the requirements of Opinion
No. 16 "Business Combinations" of the Accounting
Principles Board of the American Institute of Certified
Public Accountants, as amended by applicable
pronouncements by the Financial Accounting Standards
Board ("APB No. 16");
(xii) shall not, and shall not permit any of
its Subsidiaries to, incur, assume or prepay any
indebtedness or any other material liabilities, other
than in the ordinary course of business consistent with
past practice (except that R&B shall have the right to
conclude definitive agreements, and financing and liens
related thereto, with respect to: (a) agreements in
principle with Shell Deepwater Development Inc. with
respect to the acquisition of an RBS-6 design semi-
submersible drilling unit and with Statoil with respect
to a deepwater drillship; and (b) financings (and related
guarantees and liens) for two joint ventures with
affiliates of Conoco Inc. for two deepwater drillships
and Maritime Administration Title XI financing for the
upgrade of RIG 41);
(xiii) shall not sell, lease, license,
mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets
(including securitizations), other than in the ordinary
course of business consistent with past practice (except
that R&B shall have the right to conclude definitive
agreements, and financing and liens related thereto, with
respect to: (a) agreements in principle with Shell
Deepwater Development Inc. with respect to the
acquisition of an RBS-6 design semi-submersible drilling
unit and with Statoil with respect to a deepwater
drillship; and (b) financings (and related guarantees and
liens) for two joint ventures with affiliates of Conoco
Inc. for two deepwater drillships and Maritime
Administration Title XI financing for the upgrade of RIG
41);
(xiv) shall not, and shall not permit any of
its Subsidiaries to make any material Tax election or
settle or compromise any material Tax liability, other
than in connection with currently pending proceedings or
other than in the ordinary course of business; and
(xv) shall not, and shall not permit any of
its Subsidiaries to, agree, in writing or otherwise, to
take any of the foregoing actions or take any action
which would (y) make any representation or warranty in
Article IV hereof untrue or incorrect or (z) result in
any of the conditions to the Mergers set forth in Article
VIII not being satisfied.
(b) FDC:
(i) shall, and shall cause each of its
Subsidiaries to, conduct its operations according to
their ordinary and usual course of business in
substantially the same manner as heretofore conducted;
(ii) shall use its reasonable best efforts,
and cause each of its Subsidiaries to use its reasonable
best efforts, to preserve intact its business
organizations and goodwill (except that any of its
Subsidiaries may be merged with or into, or be
consolidated with any of its other Subsidiaries or may be
liquidated into FDC or any of its Subsidiaries), keep
available the services of its current officers and other
key employees, and preserve its relationships with those
persons having business dealings with FDC and its
Subsidiaries;
(iii) shall confer at such times as R&B may
reasonably request with one or more representatives of
R&B to report material operational matters and the
general status of ongoing operations (to the extent R&B
reasonably requires such information);
(iv) shall notify R&B of any emergency or
other change in the normal course of its or its
Subsidiaries, respective businesses or in the operation
of its or its Subsidiaries, respective properties and of
any complaints or hearings (or communications indicating
that the same may be contemplated) of any governmental
body or authority if such emergency, change, complaint,
investigation or hearing would have a Material Adverse
Effect on FDC;
(v) shall not, and shall not (except in the
ordinary course of business consistent with past
practice) permit any of its Subsidiaries that is not
wholly owned to, declare or pay any dividends on or make
any distribution with respect to their outstanding shares
of capital stock, other than in the case of FDC for the
stock dividend to holders of record on July 9, 1997, and
the distribution of Rights to holders of record on July
16, 1997;
(vi) shall not, and shall not permit any of
its Subsidiaries to, except (i) in the ordinary course of
business consistent with past practice or (ii) as
otherwise provided in this Agreement, enter into or amend
any Plan;
(vii) shall not, and shall not permit any of
its Subsidiaries to, authorize, propose or announce an
intention to authorize or propose, or enter into an
agreement with respect to, any merger, consolidation or
business combination (other than the FDC Merger and any
mergers, consolidations or business combinations with
FDC's Subsidiaries entered into in the ordinary course of
business consistent with past practice), any acquisition
of a material amount of assets or securities, any
disposition of a material amount of assets or securities
or any release or relinquishment of any material contract
rights, in each case not in the ordinary course of
business;
(viii) shall not propose or adopt any
amendments to its corporate charter or by-laws;
(ix) shall not, and shall not permit any of
its Significant Subsidiaries to, issue or authorize the
issuance of, or agree to issue or sell any shares of
their capital stock of any class (whether through the
issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except
as specifically set forth in Section 5.2 and the FDC
Disclosure Schedule relating thereto;
(x) shall not, and shall not permit any of its
Subsidiaries to, except in the ordinary course of
business in connection with employee incentive and
benefit plans, programs or arrangements in existence on
the date hereof, purchase or redeem any shares of its
stock or any rights, warrants or options to acquire any
such shares;
(xi) shall not, and shall not permit any of
its Subsidiaries to, take any actions which would, or
would be reasonably likely, to, prevent accounting for
the Mergers in accordance with the pooling of interests
method of accounting under the requirements of APB No.
16;
(xii) shall not, and shall not permit any of
its Subsidiaries to, incur, assume or prepay any
indebtedness or any other material liabilities, other
than in the ordinary course of business consistent with
past practice (except that FDC shall have the right to
enter into a credit facility or facilities in an
aggregate amount not to exceed $400 million (the "FDC
Credit Facility"));
(xiii) shall not sell, lease, license, mortgage
or otherwise encumber or subject to any Lien or otherwise
dispose of any of its properties or assets (including
securitizations), other than in the ordinary course of
business consistent with past practice (except that in
connection with the FDC Credit Facility, FDC shall have
the right to subject its properties or assets to Liens);
(xiv) shall not, and shall not permit any of
its Subsidiaries to make any material Tax election or
settle or compromise any material Tax liability, other
than in connection with currently pending proceedings or
other than in the ordinary course of business; and
(xv) shall not, and shall not permit any of
its Subsidiaries to, agree, in writing or otherwise, to
take any of the foregoing actions or take any action
which would (y) make any representation or warranty in
Article V hereof untrue or incorrect or (z) result in any
of the conditions to the Mergers set forth in Article VII
not being satisfied.
Section 6.2. Investigation. Each of R&B and
FDC shall afford to one another and to one another's
officers, employees, accountants, counsel and other
authorized representatives full and complete access
during normal business hours, throughout the period prior
to the earlier of the Effective Time or the date of
termination of this Agreement, to its and its
Subsidiaries' rigs, vessels, properties, contracts,
commitments, books, and records (including but not
limited to Tax Returns) and any report, schedule or other
document filed or received by it pursuant to the
requirements of federal or state securities laws and
shall use their reasonable best efforts to cause their
respective representatives to furnish promptly to one
another such additional financial and operating data and
other information as to its and its Subsidiaries'
respective businesses and properties as the other or its
duly authorized representatives may from time to time
reasonably request; provided, that nothing herein shall
require either R&B or FDC or any of their respective
Subsidiaries to disclose any information to the other
that would cause significant competitive harm to such
disclosing party or its affiliates if the transactions
contemplated by this Agreement are not consummated. The
parties hereby agree that each of them will treat any
such information in accordance with the Confidentiality
Agreements, dated as of April 29, 1997, between R&B and
FDC (the "Confidentiality Agreements"). Notwithstanding
any provision of this Agreement to the contrary, no party
shall be obligated to make any disclosure in violation of
applicable laws or regulations, including any such laws
or regulations, including any such laws or regulations
pertaining to the treatment of classified information.
Section 6.3. Cooperation (a) R&B and FDC
shall together, or pursuant to an allocation of
responsibility to be agreed upon between them:
(i) prepare and file with the SEC as soon as
is reasonably practicable the Joint Proxy Statement and
promptly prepare and cause Parent to file with the SEC a
registration statement on Form S-4 under the Securities
Act with respect to the Parent Common Stock issuable in
the Mergers (the "Registration Statement"), and shall use
their reasonable best efforts to have the Joint Proxy
Statement cleared by the SEC under the Exchange Act and
the Registration Statement declared effective by the SEC
under the Securities Act;
(ii) as soon as is reasonably practicable
cause Parent to take all such action as may be required
under state blue sky or securities laws in connection
with the issuance of shares of Parent Common Stock in the
Mergers and as contemplated by this Agreement;
(iii) promptly prepare and file with the NYSE
and such other stock exchanges as shall be agreed upon
listing applications covering the shares of Parent Common
Stock issuable in the Mergers or upon exercise of R&B and
FDC stock options, warrants, conversion rights or other
rights or vesting or payment of other R&B and FDC equity-
based awards and use its reasonable best efforts to
obtain, prior to the Effective Time, approval for the
listing of such Parent Common Stock, subject only to
official notice of issuance;
(iv) cooperate with one another in order to
lift any injunctions or remove any other impediment to
the consummation of the transactions contemplated herein;
and
(v) cooperate with one another in obtaining
opinions of Cravath, Swaine & Moore, counsel to R&B and
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to FDC,
dated as of the Effective Time, to the effect that the
Mergers will constitute transactions described in
Sections 351 and/or 368(a) of the Code. In connection
therewith, each of R&B, FDC and Parent shall deliver to
Cravath, Swaine & Moore and Skadden, Arps, Slate, Meagher
& Flom LLP customary representation letters in form and
substance reasonably satisfactory to such counsel and R&B
and FDC shall use their reasonable best efforts to obtain
any representation letters drafted by their counsel from
their respective appropriate stockholders and shall
deliver any such letters obtained to Cravath, Swaine &
Moore and Skadden, Arps, Slate, Meagher & Flom LLP (the
representation letters referred to in this sentence are
collectively, the "Tax Certificates").
(b) Subject to the limitations contained in
Section 6.2, R&B and FDC shall each furnish to one
another and to one another's counsel all such information
as may be required in order to effect the foregoing
actions and each represents and warrants to the other
that no information furnished by it in connection with
such actions or otherwise in connection with the
consummation of the transactions contemplated by this
Agreement will contain any untrue statement of a material
fact or omit to state a material fact required to be
stated in order to make any information so furnished, in
light of the circumstances under which it is so
furnished, not misleading.
(c)(i) R&B shall cause the Joint Proxy
Statement to be mailed to R&B's stockholders, and FDC
shall cause the Joint Proxy Statement to be mailed to
FDC's stockholders, in each case as promptly as
practicable after the Registration Statement is declared
effective under the Securities Act.
(ii) R&B shall, as soon as practicable
following the date of this Agreement, duly call, give
notice of, convene and hold a meeting of its stockholders
(the "R&B Stockholders Meeting") for the purpose of
obtaining the R&B Stockholder Approval and shall, through
its Board of Directors, recommend to its stockholders the
adoption of this Agreement, the R&B Merger and the other
transactions contemplated hereby. Without limiting the
generality of the foregoing but subject to its rights to
terminate this Agreement pursuant to Section 6.10(b), R&B
agrees that its obligations pursuant to the first
sentence of this Section 6.3(c)(ii) shall not be affected
by the commencement, public proposal, public disclosure
or communication to R&B of any R&B Takeover Proposal.
(iii) FDC shall, as soon as practicable
following the date of this Agreement, duly call, give
notice of, convene and hold a meeting of its stockholders
(the "FDC Stockholders Meeting") for the purpose of
obtaining the FDC Stockholder Approval and shall, through
its Board of Directors, recommend to its stockholders the
adoption of this Agreement, the FDC Merger and the other
transactions contemplated hereby. Without limiting the
generality of the foregoing but subject to its rights to
terminate this Agreement pursuant to Section 6.11(b), FDC
agrees that its obligations pursuant to the first
sentence of this Section 6.3(c)(iii) shall not be
affected by the commencement, public proposal, public
disclosure or communication to FDC of any FDC Takeover
Proposal.
(iv) Each of FDC and R&B will use their best
efforts to hold the R&B Stockholders Meeting and the FDC
Stockholders Meeting on the same date and as soon as
practicable after the date hereof.
(v) Each of FDC and R&B shall cause Parent to
adopt this Agreement and take all additional actions as
may be necessary to cause Parent to effect the
transactions contemplated hereby.
Section 6.4. Affiliate Agreements. (a) R&B
shall, as soon as practicable, deliver to FDC a list
(reasonably satisfactory to counsel for FDC), setting
forth the names and addresses of all persons who will be,
at the time of the R&B Meeting, in R&B's reasonable
judgment, "affiliates" of R&B for purposes of Rule 145
under the Securities Act or under applicable SEC
accounting releases with respect to pooling of interests
accounting treatment. R&B shall furnish such information
and documents as FDC may reasonably request for the
purpose of reviewing such list. R&B shall use its
reasonable best efforts to cause each person who is
identified as an "affiliate" in the list furnished
pursuant to this Section 6.4 to execute a written
agreement on or prior to the mailing of the Joint Proxy
Statement, in substantially the form of Exhibit A hereto.
(b) FDC shall, as soon as practicable, deliver
to R&B a list (reasonably satisfactory to counsel for
R&B) setting forth the names and addresses of all persons
who will be, at the time of the FDC Meeting, in FDC's
reasonable judgment, "affiliates" of FDC for purposes of
Rule 145 under the Securities Act or under applicable SEC
accounting releases with respect to pooling of interests
accounting treatment. FDC shall furnish such information
and documents as R&B may reasonably request for the
purpose of reviewing such list. FDC shall use its
reasonable best efforts to cause each person who is
identified as an "affiliate" in the list furnished
pursuant to this Section 6.4 to execute a written
agreement on or prior to the mailing of the Joint Proxy
Statement, in substantially the form of Exhibit B hereto.
Section 6.5. R&B Employee Stock Options,
Incentive and Benefit Plans. (a) Simultaneously with the
R&B Merger, (i) each outstanding option ("R&B Stock
Options")(and related stock appreciation right ("R&B
SAR"), if any) to purchase or acquire a share of R&B
Common Stock under employee incentive or benefit plans,
programs or arrangements and non-employee director plans
presently maintained by R&B ("R&B Option Plans") shall be
converted into an option (together with a related stock
appreciation right of Parent, if applicable) to purchase
the number of shares of Parent Common Stock equal to 1.18
times the number of shares of R&B Common Stock which
could have been obtained prior to the Effective Time upon
the exercise of each such option, at an exercise price
per share equal to the exercise price for each such share
of R&B Common Stock subject to an option (and related R&B
SAR, if any) under the R&B Option Plans divided by 1.18,
and all references in each such option (and related R&B
SAR, if any) to R&B shall be deemed to refer to Parent,
where appropriate, and (ii) Parent shall assume the
obligations of R&B under the R&B Option Plans. The other
terms of each such option and R&B SAR, and the plans
under which they were issued, shall continue to apply in
accordance with their terms, including any provisions
providing for acceleration.
(b) Simultaneously with the R&B Merger, each
outstanding award (including restricted stock, stock
equivalents and stock units) ("R&B Award") under any
employee incentive or benefit plans, programs or
arrangements and non-employee director plans presently
maintained by R&B which provide for grants of equity-
based awards shall be amended or converted into a similar
instrument of Parent, in each case with such adjustments
to the terms of such R&B Awards as are appropriate to
preserve the value inherent in such R&B Awards with no
detrimental effects on the holders thereof. The other
terms of each R&B Award, and the plans or agreements
under which they were issued, shall continue to apply in
accordance with their terms, including any provisions
providing for acceleration. With respect to any
restricted stock awards as to which the restrictions
shall have lapsed on or prior to the Effective Time in
accordance with the terms of the applicable plans or
award agreements, shares of such previously restricted
stock shall be converted in accordance with the
provisions of Section 2.2(b).
(c) R&B agrees that employee incentive or
benefit plans, programs and arrangements and non-employee
director plans shall be amended, to the extent necessary
and appropriate, to reflect the transactions contemplated
by this Agreement, including, but not limited to the
conversion of shares of R&B Common Stock held or to be
awarded or paid pursuant to such benefit plans, programs
or arrangements into shares of Parent Common Stock on a
basis consistent with the transactions contemplated by
this Agreement. The actions to be taken by R&B pursuant
to this Section 6.5(c) shall include the submission by
R&B of the amendments to the plans, programs or
arrangements referred to herein to its stockholders at
the R&B Meeting, if such submission is determined to be
necessary or advisable by counsel to R&B; provided,
however, that such approval shall not be a condition to
the consummation of the R&B Merger.
(d) FDC and R&B agree that each officer
subject to an employment agreement set forth in Section
4.8 of the R&B Disclosure Schedule shall be treated by
R&B as if such officer was involuntarily terminated
without cause by R&B as of the Effective Time for
purposes of such agreement and for purposes of any
agreement relating to the purchase of options to purchase
R&B Common Stock. FDC and R&B agree that R&B shall pay
the total amount due under such agreements to all such
executive officers at the Effective Time.
Notwithstanding the foregoing, following the Effective
Time, Parent or R&B may offer continuing employment to
any or all of the officers covered by such employment
agreements upon such terms and conditions as Parent or
R&B deems appropriate.
Section 6.6. FDC Employee Stock Options,
Incentive and Benefit Plans. (a) Simultaneously with the
FDC Merger, (i) each outstanding option ("FDC Stock
Options")(and related stock appreciation right ("FDC
SAR"), if any) to purchase or acquire a share of FDC
Common Stock under employee incentive or benefit plans,
programs or arrangements and non-employee director plans
presently maintained by FDC ("FDC Option Plans") shall be
converted into an option (together with a related stock
appreciation right of FDC, if applicable) to purchase the
number of shares of Parent Common Stock equal to the
number of shares of FDC Common Stock which could have
been obtained prior to the Effective Time upon the
exercise of each such option, at an exercise price per
share equal to the exercise price for each such share of
FDC Common Stock subject to an option (and related FDC
SAR, if any) under the FDC Option Plans, and all
references in each such option (and related FDC SAR, if
any) to FDC shall be deemed to refer to Parent, where
appropriate, and (ii) Parent shall assume the obligations
of FDC under the FDC Option Plans. The other terms of
each such option and FDC SAR, and the plans under which
they were issued, shall continue to apply in accordance
with their terms, including any provisions providing for
acceleration.
(b) Simultaneously with the FDC Merger, each
outstanding award (including restricted stock, stock
equivalents and stock units) ("FDC Award") under any
employee incentive or benefit plans, programs or
arrangements and non-employee director plans presently
maintained by FDC which provide for grants of equity-
based awards shall be amended or converted into a similar
instrument of Parent, in each case with such adjustments
to the terms of such FDC Awards as are appropriate to
preserve the value inherent in such FDC Awards with no
detrimental effects on the holders thereof. The other
terms of each FDC Award, and the plans or agreements
under which they were issued, shall continue to apply in
accordance with their terms, including any provisions
providing for acceleration. With respect to any
restricted stock awards as to which the restrictions
shall have lapsed on or prior to the Effective Time in
accordance with the terms of the applicable plans or
award agreements, shares of such previously restricted
stock shall be converted in accordance with the
provisions of Section 2.1(b).
(c) FDC agrees that its employee incentive or
benefit plans, programs and arrangements and non-employee
director plans shall be amended, to the extent necessary
and appropriate, to reflect the transactions contemplated
by this Agreement, including, but not limited to the
conversion of shares of FDC Common Stock held or to be
awarded or paid pursuant to such benefit plans, programs
or arrangements into shares of Parent Common Stock on a
basis consistent with the transactions contemplated by
this Agreement. The actions to be taken by FDC pursuant
to this Section 6.6(c) shall include the submission by
FDC of the amendments to the plans, programs or
arrangements referred to herein to its stockholders at
the FDC Meeting, if such submission is determined to be
necessary or advisable by counsel to FDC; provided,
however, that such approval shall not be a condition to
the consummation of the FDC Merger.
Section 6.7. Filings; Other Action. Subject to
the terms and conditions herein provided, R&B and FDC
shall (a) promptly make their respective filings and
thereafter make any other required submissions under the
HSR Act, (b) use reasonable efforts to cooperate with one
another in (i) determining whether any filings are
required to be made with, or consents, permits,
authorizations or approvals are required to be obtained
from, any third party or other governmental or regulatory
bodies or authorities of federal, state, local and
foreign jurisdictions in connection with the execution
and delivery of this Agreement and the consummation of
the transactions contemplated hereby and thereby and (ii)
timely making all such filings and timely seeking all
such consents, permits, authorizations or approvals, and
(c) use reasonable efforts to take, or cause to be taken,
all other actions and do, or cause to be done, all other
things necessary, proper or advisable to consummate and
make effective the transactions contemplated hereby,
including, without limitation, taking all such further
action as reasonably may be necessary to resolve such
objections, if any, as the Federal Trade Commission, the
Antitrust Division of the Department of Justice, state
antitrust enforcement authorities or competition
authorities of any other nation or other jurisdiction or
any other person may assert under relevant antitrust or
competition laws with respect to the transactions
contemplated hereby and to ensure that it is a "poolable
entity" eligible to participate in a transaction to be
accounted for under the pooling of interests method of
accounting.
Section 6.8. Further Assurances. In case at
any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this
Agreement, the proper officers of R&B and FDC shall take
all such necessary action.
Section 6.9. Takeover Statute. If any "fair
price," "moratorium," "control share acquisition" or
other form of antitakeover statute or regulation shall
become applicable to the transactions contemplated
hereby, each of R&B and FDC and the members of their
respective Boards of Directors shall grant such approvals
and take such actions as are reasonably necessary so that
the transactions contemplated hereby may be consummated
as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions
contemplated hereby.
Section 6.10. No Solicitation by R&B. (a)
R&B shall not, nor shall it authorize or permit any of
its directors or officers or any investment banker,
financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly
through another person, (i) solicit, initiate or
encourage (including by way of furnishing information),
or take any other action designed to facilitate, any
inquiries or the making of any proposal which constitutes
any R&B Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding
any R&B Takeover Proposal; provided, however, that if, at
any time during the 20 business days prior to the
publicly announced date of the R&B Stockholders Meeting
(as defined in Section 6.3(c)(ii)) (the "R&B Applicable
Period"), the Board of Directors of R&B determines in
good faith, after consultation with outside counsel, that
it is necessary to do so in order to comply with its
fiduciary duties to R&B's stockholders under applicable
law, R&B may, in response to an R&B Superior Proposal (as
defined in Section 6.10(b)) which was not solicited by it
or which did not otherwise result from a breach of this
Section 6.10(a), and subject to providing prior written
notice of its decision to take such action to FDC (the
"R&B Notice") and compliance with Section 6.10(c), for a
period of five business days following delivery of the
R&B Notice (x) furnish information with respect to R&B
and its subsidiaries to any person making an R&B Superior
Proposal pursuant to a customary confidentiality
agreement (as determined by R&B after consultation with
its outside counsel) and (y) participate in discussions
or negotiations regarding such R&B Superior Proposal.
For purposes of this Agreement, "R&B Takeover Proposal"
means any inquiry, proposal or offer (or any improvement,
restatement, amendment, renewal or reiteration thereof)
from any person relating to any direct or indirect
acquisition or purchase of a business or shares of any
class of equity securities of R&B or any of its
subsidiaries (other than Devco), any tender offer or
exchange offer that if consummated would result in any
person beneficially owning any class of equity securities
of R&B or any of its subsidiaries (other than Devco), or
any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving R&B or any of its subsidiaries
(other than Devco), other than the transactions
contemplated by this Agreement. R&B shall be permitted
to deliver only one R&B Notice with respect to each
person making an R&B Superior Proposal.
(b) Except as expressly permitted by this
Section 6.10, neither the Board of Directors of R&B nor
any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner
adverse to FDC, the approval or recommendation by such
Board of Directors or such committee of the R&B Merger or
this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any R&B Takeover
Proposal, or (iii) cause R&B to enter into any letter of
intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "R&B Acquisition
Agreement") related to any R&B Takeover Proposal.
Notwithstanding the foregoing, in the event that during
the R&B Applicable Period the Board of Directors of R&B
determines in good faith that there is a substantial
probability that the adoption of this Agreement by
holders of R&B Common Stock will not be obtained due to
the existence of an R&B Superior Proposal, the Board of
Directors of R&B may (subject to this and the following
sentences) terminate this Agreement (and concurrently
with or after such termination, if it so chooses, cause
R&B to enter into any R&B Acquisition Agreement with
respect to any R&B Superior Proposal), but only at a time
that is during the R&B Applicable Period and is after the
fifth business day following FDC's receipt of written
notice advising FDC that the Board of Directors of R&B is
prepared to accept an R&B Superior Proposal, specifying
the material terms and conditions of such R&B Superior
Proposal and identifying the person making such R&B
Superior Proposal. For purposes of this Agreement, a
"R&B Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, all
outstanding shares of R&B Common Stock then outstanding
or all or substantially all of the assets of R&B and
otherwise on terms which the Board of Directors of R&B
determines in its good faith judgment (based on the
advice of a financial advisor of nationally recognized
reputation) to be more favorable to R&B's stockholders
than the R&B Merger and for which financing, to the
extent required, is then committed or as to which the
Board of Directors of R&B has received a "highly
confident letter" from a nationally recognized investment
bank or financial institution.
(c) In addition to the obligations of R&B set
forth in paragraphs (a) and (b) of this Section 6.10, R&B
shall immediately advise FDC orally and in writing of any
request for information or of any R&B Takeover Proposal,
the material terms and conditions of such request or R&B
Takeover Proposal and the identity of the person making
such request or R&B Takeover Proposal. R&B will keep
Parent reasonably informed of the status and details
(including amendments or proposed amendments) of any such
request or R&B Takeover Proposal.
(d) Nothing contained in this Section 6.10
shall prohibit R&B from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to R&B's stockholders if, in the good faith
judgment of the Board of Directors of R&B, after
consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under
applicable law; provided, however, that neither R&B nor
its Board of Directors nor any committee thereof shall
withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement, the
R&B Merger, the issuance of Parent Common Stock in
connection with the R&B Merger, or approve or recommend,
or propose publicly to approve or recommend, an R&B
Takeover Proposal.
Section 6.11. No Solicitation by FDC. (a) FDC
shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorize or permit any of its
directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries
to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of
furnishing information), or take any other action
designed to facilitate, any inquiries or the making of
any proposal which constitutes any FDC Takeover Proposal
(as defined below) or (ii) participate in any discussions
or negotiations regarding any FDC Takeover Proposal;
provided, however, that if, at any time during the 20
business days prior to the publicly announced date of the
FDC Stockholders Meeting (as defined in Section
6.3(c)(iii) (the "FDC Applicable Period"), the Board of
Directors of FDC determines in good faith, after
consultation with outside counsel, that it is necessary
to do so in order to comply with its fiduciary duties to
FDC's stockholders under applicable law, FDC may, in
response to an FDC Superior Proposal (as defined in
Section 6.11(b)) which was not solicited by it or which
did not otherwise result from a breach of this Section
6.11(a), and subject to providing prior written notice of
its decision to take such action to R&B (the "FDC
Notice") and compliance with Section 6.11(c), for a
period of five business days following delivery of the
FDC Notice (x) furnish information with respect to FDC
and its subsidiaries to any person making an FDC Superior
Proposal pursuant to a customary confidentiality
agreement (as determined by FDC after consultation with
its outside counsel) and (y) participate in discussions
or negotiations regarding such FDC Superior Proposal.
For purposes of this Agreement, "FDC Takeover Proposal"
means any inquiry, proposal or offer (or any improvement,
restatement, amendment, renewal or reiteration thereof)
from any person relating to any direct or indirect
acquisition or purchase of a business, or shares of any
class of equity securities of FDC or any of its
subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owing
any class of equity securities of FDC or any of its
subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution
or similar transaction involving FDC or any of its
subsidiaries, other than the transactions contemplated by
this Agreement. FDC shall be permitted to deliver only
one FDC Notice with respect to each person making an FDC
Superior Proposal.
(b) Except as expressly permitted by this
Section 6.11, neither the Board of Directors of FDC nor
any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner
adverse to FDC, the approval or recommendation by such
Board of Directors or such committee of the FDC Merger or
this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any FDC Takeover
Proposal, or (iii) cause FDC to enter into any letter of
intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "FDC Acquisition
Agreement") related to any FDC Takeover Proposal.
Notwithstanding the foregoing, in the event that during
the FDC Applicable Period the Board of Directors of FDC
determines in good faith that there is a substantial
probability that the adoption of this Agreement by
holders of FDC Common Stock will not be obtained due to
the existence of an FDC Superior Proposal, the Board of
Directors of FDC may (subject to this and the following
sentences) terminate this Agreement (and concurrently
with or after such termination, if it so chooses, cause
FDC to enter into any FDC Acquisition Agreement with
respect to any FDC Superior Proposal), but only at a time
that is during the FDC Applicable Period and is after the
fifth business day following R&B's receipt of written
notice advising R&B that the Board of Directors of FDC is
prepared to accept an FDC Superior Proposal, specifying
the material terms and conditions of such FDC Superior
Proposal and identifying the person making such FDC
Superior Proposal. For purposes of this Agreement, a
"FDC Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, all
outstanding shares of FDC Common Stock then outstanding
or all or substantially all the assets of FDC and
otherwise on terms which the Board of Directors of FDC
determine in its good faith judgement (based on the
advice of a financial adviser of nationally recognized
reputation) to be more favorable to FDC's stockholders
than the FDC Merger and for which financing, to the
extent required, is then committed or as to which the
Board of Directors of FDC has received a "highly
confident letter" from a nationally recognized investment
bank or financial institution.
(c) In addition to the obligations of FDC set
forth in paragraphs (a) and (b) of this Section 6.11, FDC
shall immediately advise R&B orally and in writing of any
request for information or of any FDC Takeover Proposal,
the material terms and conditions of such request or FDC
Takeover Proposal and the identity of the person making
such request or FDC Takeover Proposal. FDC will keep R&B
reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or
FDC Takeover Proposal.
(d) Nothing contained in this Section 6.11,
shall prohibit FDC from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any
disclosure to FDC's stockholders if, in the good faith
judgement of the Board of Directors of FDC, after
consultation with outside counsel, failure so to disclose
would be inconsistent with its obligations under
applicable law; provided, however, that neither FDC nor
its Board of Directors nor any committee thereof shall
withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement, the
FDC Merger, the issuance of Parent Common Stock in
connection with the FDC Merger, or approve or recommend,
or propose publicly to approve or recommend, an FDC
Takeover Proposal.
Section 6.12. Public Announcements. R&B and
FDC will consult with and provide each other the
opportunity to review and comment upon any press release
prior to the issuance of any press release relating to
this Agreement or the transactions contemplated herein
and shall not issue any such press release prior to such
consultation except as may be required by law or by
obligations pursuant to any listing agreement with any
national securities exchange.
Section 6.13. Indemnification and Insurance.
(a) Parent agrees that all rights to
exculpation and indemnification for acts or omissions
occurring prior to the Effective Time now existing in
favor of the current or former directors or officers (the
"R&B Indemnified Parties") of R&B as provided in its
charter or by-laws or in any agreement shall survive the
R&B Merger and shall continue in full force and effect in
accordance with their terms. For six years from the
Effective Time, Parent shall indemnify the R&B
Indemnified Parties to the same extent as such R&B
Indemnified Parties are entitled to indemnification
pursuant to the preceding sentence.
(b) For three years from the Effective Time,
Parent shall maintain in effect R&B's current directors'
and officers' liability insurance policy (the "R&B
Policy") covering those persons who are currently covered
by the R&B Policy (a copy of which has been heretofore
delivered to Parent); provided, however, that in no event
shall Parent be required to expend in any one year an
amount in excess of 150% of the annual premiums currently
paid by R&B for such insurance, and, provided, further,
that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost
not exceeding such amount.
(c) Parent agrees that all rights to
exculpation and indemnification for acts or omissions
occurring prior to the Effective Time now existing in
favor of the current or former directors or officers (the
"FDC Indemnified Parties") of FDC as provided in its
charter or by-laws or in any agreement shall survive the
FDC Merger and shall continue in full force and effect in
accordance with their terms. For six years from the
Effective Time, Parent shall indemnify the FDC
Indemnified Parties to the same extent as such FDC
Indemnified Parties are entitled to indemnification
pursuant to the preceding sentence.
(d) For three years from the Effective Time,
Parent shall maintain in effect FDC's directors' and
officers' liability insurance policy (the "FDC Policy"),
which policy FDC shall obtain prior to the Effective Time
and which policy shall be substantially similar to the
R&B Policy, covering those persons who are covered by the
FDC Policy and persons who are directors of Parent;
provided, however, that in no event shall Parent be
required to expend in any one year an amount in excess of
150% of the annual premiums to be paid by FDC for such
insurance, and, provided, further, that if the annual
premiums of such insurance coverage exceed such amount,
Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such
amount.
Section 6.14. Accountants' "Comfort" Letters.
R&B and FDC will each use reasonable best efforts to
cause to be delivered to each other letters from their
respective independent accountants, dated a date within
two business days before the date of the Registration
Statement, in form reasonably satisfactory to the
recipient and customary in scope for comfort letters
delivered by independent accountants in connection with
registration statements on Form S-4 under the Securities
Act.
Section 6.15. Additional Reports. R&B and FDC
shall each furnish to the other copies of any reports of
the type referred to in Sections 4.4 and 5.4 which it
files with the SEC on or after the date hereof, and each
of R&B and FDC, as the case may be, represents and
warrants that as of the respective dates thereof, such
reports will 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 statement
therein, in light of the circumstances under which they
were made, not misleading. Any unaudited consolidated
interim financial statements included in such reports
(including any related notes and schedules) will fairly
present the financial position of R&B and its
consolidated Subsidiaries or FDC and its consolidated
Subsidiaries, as the case may be, as of the dates thereof
and the results of operations and changes in financial
position or other information included therein for the
periods or as of the date then ended (subject, where
appropriate, to normal year-end adjustments), in each
case in accordance with past practice and GAAP
consistently applied during the periods involved (except
as otherwise disclosed in the notes thereto).
Section 6.16. Stockholder Rights Plans. (a)
R&B will take all actions necessary to ensure that the
R&B Rights Plan is amended in accordance with Section
4.12 prior to the Effective Time.
(b) R&B and FDC will take all actions
necessary to cause Parent to adopt the Parent Rights Plan
prior to the Effective Time.
Section 6.17. Stockholder Litigation. Each of
R&B and FDC shall give the other the reasonable
opportunity to participate in the defense of any
stockholder litigation against R&B or FDC, as applicable,
and its directors relating to the transactions
contemplated by this Agreement and the Option Agreements.
ARTICLE VII
Conditions to the Mergers
Section 7.1. Conditions to Each Party's
Obligation to Effect the Mergers. The respective
obligations of each party to effect the Mergers shall be
subject to the fulfillment at or prior to the Effective
Time of the following conditions:
(a) The R&B Stockholder Approval and the FDC
Stockholder Approval shall have been obtained all in
accordance with applicable law.
(b) No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced by any court or
other tribunal or governmental body or authority which
prohibits the consummation of the Mergers substantially
on the terms contemplated hereby. In the event any
order, decree or injunction shall have been issued, each
party shall use its reasonable efforts to remove any such
order, decree or injunction.
(c) The Registration Statement shall have
become effective in accordance with the provisions of the
Securities Act and no stop order suspending such
effectiveness shall have been issued and remain in
effect.
(d) The shares of Parent Common Stock issuable
in the Mergers shall have been approved for listing on
the NYSE, subject only to official notice of issuance.
(e) Any applicable waiting period under the
HSR Act shall have expired or been terminated and any
other R&B Required Approvals and FDC Required Approvals
shall have been obtained, except where the failure to
obtain such other R&B Required Approvals and FDC Required
Approvals would not have a Material Adverse Effect on R&B
or FDC, as the case may be.
(f) Each of FDC and R&B shall have received an
opinion of its tax counsel, Skadden, Arps, Slate, Meagher
& Flom LLP and Cravath, Swaine & Moore, respectively, in
form and substance reasonably satisfactory to it, and
dated as of the Effective Time, to the effect that the
Mergers will constitute transactions described in
Sections 351 and/or Section 368(a) of the Code and that
none of FDC, R&B, holders of FDC Common Stock or holders
of R&B Common Stock shall recognize gain or loss for
federal income tax purposes as a result of the Mergers
(other than with respect to any cash paid in lieu of
fractional shares of FDC Common Stock or R&B Common
Stock). In rendering such opinions, Skadden, Arps,
Slate, Meagher & Flom LLP and Cravath, Swaine & Moore may
require delivery of and rely upon the Tax Certificates.
Section 7.2. Conditions to Obligations of R&B
to Effect the R&B Merger. The obligation of R&B to
effect the R&B Merger is further subject to the
conditions that (a) the representations and warranties of
FDC contained herein shall be true and correct in all
respects (but without regard to any materiality
qualifications or references to Material Adverse Effect
contained in any specific representation or warranty) as
of the Effective Time with the same effect as though made
as of the Effective Time except (i) for changes
specifically permitted by the terms of this Agreement,
(ii) that the accuracy of representations and warranties
that by their terms speak as of the date of this
Agreement or some other date will be determined as of
such date and (iii) where any such failure of the
representations and warranties in the aggregate to be
true and correct in all respects would not have a
Material Adverse Effect on FDC, (b) FDC shall have
performed in all material respects all obligations and
complied with all covenants required by this Agreement to
be performed or complied with by it prior to the
Effective Time and (c) FDC shall have delivered to R&B a
certificate, dated the Effective Time and signed by its
Chairman of the Board and Chief Executive Officer or a
Senior Vice President, certifying to both such effects.
Section 7.3. Conditions to Obligations of FDC
to Effect the FDC Merger. The obligation of FDC to
effect the FDC Merger is further subject to the
conditions that (a) the representations and warranties of
R&B contained herein shall be true and correct in all
respects (but without regard to any materiality
qualifications or references to Material Adverse Effect
contained in any specific representation or warranty) as
of the Effective Time with the same effect as though made
as of the Effective Time except (i) for changes
specifically permitted by the terms of this Agreement,
(ii) that the accuracy of representations and warranties
that by their terms speak as of the date of this
Agreement or some other date will be determined as of
such date and (iii) where any such failure of the
representations and warranties in the aggregate to be
true and correct in all respects would not have a
Material Adverse Effect on R&B, (b) R&B shall have
performed in all material respects all obligations and
complied with all covenants required by this Agreement to
be performed or complied with by it prior to the
Effective Time and (c) R&B shall have delivered to FDC a
certificate, dated the Effective Time and signed by its
Chairman of the Board, Chief Executive officer and
President or a Senior Vice President, certifying to both
such effects.
ARTICLE VIII
Termination, Waiver, Amendment and Closing
Section 8.1. Termination or Abandonment. This
Agreement may be terminated at any time prior to the
Effective Time, whether before or after any approval of
the matters presented in connection with the Mergers by
the respective stockholders of R&B and FDC:
(a) by the mutual written consent of R&B and
FDC;
(b) by either FDC or R&B if the Effective Time
shall not have occurred on or before January 31, 1998;
provided, that the party seeking to terminate this
Agreement pursuant to this clause 8.1(b) shall not have
breached in any material respect its obligations under
this Agreement in any manner that shall have proximately
contributed to the failure to consummate the Mergers on
or before such date;
(c) by either FDC or R&B if (i) a statute,
rule, regulation or executive order shall have been
enacted, entered or promulgated prohibiting the
consummation of the Mergers substantially on the terms
contemplated hereby or (ii) an order, decree, ruling or
injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the
consummation of the Mergers substantially on the terms
contemplated hereby and such order, decree, ruling or
injunction shall have become final and non-appealable;
provided, that the party seeking to terminate this
Agreement pursuant to this clause 8.1(c)(ii) shall have
used its reasonable best efforts to remove such
injunction, order or decree;
(d) by either FDC or R&B, if the approvals of
the stockholders of either FDC or R&B contemplated by
this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held
meeting of stockholders or of any adjournment thereof;
(e) by FDC in accordance with Section 6.11(b);
provided that, in order for the termination of this
Agreement pursuant to this paragraph (e) to be deemed
effective, FDC shall have complied with all provisions
contained in Section 6.11, including the notice
provisions therein, and with applicable requirements,
including the payment of the Termination Fee, of Section
8.3;
(f) by FDC, if R&B or any of its directors or
officers shall participate in discussion or negotiations
in breach of Section 6.10;
(g) by R&B in accordance with Section 6.10(b);
provided that, in order for the termination of this
Agreement pursuant to this paragraph (g) to be deemed
effective, R&B shall have complied with all provisions of
Section 6.10, including the notice provisions therein,
and with applicable requirements, including the payment
of the Termination Fee, of Section 8.3;
(h) by R&B, if FDC or any of its directions or
officers shall participate in discussions or negotiations
in breach of Section 6.11; or
(i) by R&B or FDC if there shall have been a
material breach by the other of any of its
representations, warranties, covenants or agreements
contained in this Agreement and such breach shall not
have been cured within 30 days after notice thereof shall
have been received by the party alleged to be in breach.
Section 8.2. Effect of Termination. In the
event of termination of this Agreement pursuant to
Section 8.1, this Agreement shall terminate (except for
the provisions of Sections 6.2, 8.3 and 9.2), and there
shall be no other liability on the part of FDC or R&B to
the other except liability arising out of a willful and
material breach of this Agreement or as provided for in
the Confidentiality Agreements.
Section 8.3. Termination Fee. (a) In the event
that (i) after the date hereof and prior to the R&B
Stockholders Meeting an R&B Takeover Proposal shall have
been made known to R&B or shall have been made directly
to its stockholders generally or any person shall have
publicly announced an intention (whether or not
conditional) to make an R&B Takeover Proposal and
thereafter this Agreement is terminated by either FDC or
R&B pursuant to Section 8.1(b) or 8.1(d) (provided that
the basis for such termination is that the R&B
Stockholder Approval shall not have been obtained and
provided, further, that the FDC stockholders shall not
have voted to disapprove this Agreement) or (ii) this
Agreement is terminated (x) by R&B pursuant to Section
8.1(g) or (y) by FDC pursuant to Section 8.1(f), then R&B
shall promptly, but in no event later than two days after
the date of such termination, pay FDC a fee equal to $100
million (the "Termination Fee"), payable by wire transfer
of same day funds (for purposes of the foregoing, the
references to 20% in the exception in the parenthetical
to the next succeeding proviso shall be deemed to be
references to 15%); provided, however, that no
Termination Fee shall be payable to FDC in any
circumstance in which FDC stockholders vote to disapprove
this Agreement and provided further, that no Termination
Fee shall be payable to FDC pursuant to clause (i) of
this paragraph (a) or pursuant to a termination by FDC
pursuant to Section 8.1(f) unless and until within 18
months of such termination R&B or any of its subsidiaries
enters into any R&B Acquisition Agreement or consummates
any R&B Takeover Proposal (for the purposes of the
foregoing proviso the terms "R&B Acquisition Agreement"
and "R&B Takeover Proposal" shall have the meanings
assigned to such terms in Section 6.10 (except that the
reference to the "acquisition or purchase of a business
or shares of any class of equity securities of R&B or any
of its subsidiaries" in the definition of "R&B Takeover
Proposal" in Section 6.10 shall be deemed to be a
reference to the "acquisition or purchase of a business
that constitutes 20% or more of the net revenues, net
income or the assets of R&B and its subsidiaries, taken
as a whole, or 20% of any class of equity securities of
R&B or any of its subsidiaries")) in which event the
Termination Fee shall be payable upon the first to occur
of such events. R&B acknowledges that the agreements
contained in this Section 8.3(a) are an integral part of
the transactions contemplated by this Agreement, and
that, without these agreements, FDC would not enter into
this Agreement; accordingly, if R&B fails promptly to pay
the amount due pursuant to this Section 8.3(a), and, in
order to obtain such payment, FDC commences a suit which
results in a judgment against R&B for the fee set forth
in this Section 8.3(a), R&B shall pay to FDC its costs
and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank N.A. in
effect on the date such payment was required to be made.
(b) In the event that (i) after the date
hereof and prior to the FDC Stockholders Meeting an FDC
Takeover Proposal shall have been made known to FDC or
any of its subsidiaries or shall have been made directly
to its stockholders generally or any person shall have
publicly announced an intention (whether or not
conditional) to make an FDC Takeover Proposal and
thereafter this Agreement is terminated by either FDC or
R&B pursuant to Section 8.1(b) or 8.1(d) (provided that
the basis for such termination is that the FDC
Stockholder Approval shall not have been obtained and
provided, further, that the R&B stockholders shall not
have voted to disapprove this Agreement) or (ii) this
Agreement is terminated (x) by FDC pursuant to Section
8.1(e) or (y) by R&B pursuant to Section 8.1(h), then FDC
shall promptly, but in no event later than two days after
the date of such termination, pay R&B the Termination
Fee, payable by wire transfer of same day funds (for
purposes of the foregoing, the references to 20% in the
exception in the parenthetical to the next succeeding
proviso shall be deemed to be references to 15%);
provided, however, that no Termination Fee shall be
payable to R&B in any circumstance in which R&B
stockholders vote to disapprove this Agreement and
provided further, that no Termination Fee shall be
payable to R&B pursuant to clause (i) of this paragraph
(b) or pursuant to a termination by R&B pursuant to
Section 8.1(h) unless and until within 18 months of such
termination FDC or any of its subsidiaries enters into
any FDC Acquisition Agreement or consummates any FDC
Takeover Proposal (for the purposes of the foregoing
proviso the terms "FDC Acquisition Agreement" and "FDC
Takeover Proposal" shall have the meanings assigned to
such terms in Section 6.11 (except that the reference to
the "acquisition or purchase of a business or shares of
any class of equity securities of FDC or any of its
subsidiaries" in the definition of "FDC Takeover
Proposal" in Section 6.11 shall be deemed to be a
reference to the "acquisition or purchase of a business
that constitutes 20% or more of the net revenues, net
income or the assets of FDC and its subsidiaries, taken
as a whole, or 20% of any class of equity securities of
FDC or any of its subsidiaries"), in which event the
Termination Fee shall be payable upon the first to occur
of such events. FDC acknowledges that the agreements
contained in this Section 8.3(b) are an integral part of
the transactions contemplated by this Agreement, and
that, without these agreements, R&B would not enter into
this Agreement; accordingly, if FDC fails promptly to pay
the amount due pursuant to this Section 8.3(b), and, in
order to obtain such payment, R&B commences a suit which
results in a judgment against FDC for the fee set forth
in this Section 8.3(b), FDC shall pay to R&B its costs
and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank N.A. in
effect on the date such payment was required to be made.
Section 8.4. Amendment or Supplement. At any
time before or after approval of the matters presented in
connection with the Mergers by the respective
stockholders of R&B and FDC and prior to the Effective
Time, this Agreement may be amended or supplemented in
writing by R&B and FDC with respect to any of the terms
contained in this Agreement; provided, however that
following approval by the stockholders of R&B and FDC
there shall be no amendment or change to the provisions
hereof with respect to the conversion ratio of shares of
R&B Common Stock, R&B Class A Stock or FDC Common Stock
into shares of Parent Common Stock as provided herein nor
any amendment or change not permitted under applicable
law, without further approval by the stockholders of R&B
and FDC.
Section 8.5. Extension of Time, Waiver, Etc.
At any time prior to the Effective Time, and party may:
(a) extend the time for the performance of any
of the obligations or acts of the other party;
(b) waive any inaccuracies in the
representations and warranties of the other party
contained herein or in any document delivered pursuant
hereto; or
(c) subject to the proviso of Section 8.4
waive compliance with any of the agreements or conditions
of the other party contained herein.
Notwithstanding the foregoing no failure or
delay by R&B or Parent in exercising any right hereunder
shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right
hereunder. 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 IX
Miscellaneous
Section 9.1. No Survival of Representations and
Warranties. None of the representations, warranties and
agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the
Mergers, except for the agreements set forth in Article
II and Article III, the agreements of "affiliates" of R&B
and FDC to be delivered pursuant to Section 6.4, the
provisions of Sections 6.5, 6.6, 6.12 and 6.13 and this
Article IX.
Section 9.2. Expenses. Whether or not the
Mergers are consummated, all costs and expenses incurred
in connection with the Mergers, this Agreement and the
Option Agreements and the transactions contemplated
hereby and thereby shall be paid by the party incurring
such expenses, except that (a)(i) the filing fee in
connection with any HSR Act filing, (ii) the commissions
and other out-of-pocket transaction costs, including the
expenses and compensation of the Exchange Agent, incurred
in connection with the sale of Excess Shares, (iii) the
expenses incurred in connection with the printing and
mailing of the Joint Proxy Statement, and (iv) all
transfer taxes shall be shared equally by R&B and FDC.
Section 9.3. Counterparts; Effectiveness. This
Agreement may be executed in two or more consecutive
counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto
were upon the same instrument, and shall become effective
when one or more counterparts have been signed by each of
the parties and delivered (by telecopy or otherwise) to
the other parties.
Section 9.4. Governing Law. This Agreement
shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
Section 9.5. Notices. All notices and other
communications hereunder shall be in writing (including
telecopy or similar writing) and shall be effective (a)
if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section 9.5 and
the appropriate telecopy confirmation is received or (b)
if given by any other means, when delivered at the
address specified in this Section 9.5:
To FDC:
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Attention: Chairman and Chief
Executive Officer
Telecopy: (713) 623-8103
copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell, Esq.
Telecopy: (212) 735-2000
To R&B:
Reading & Bates Corporation
901 Threadneedle
Suite 200
Houston, Texas 77079
Attention: Chairman and Chief Executive
Officer
Telecopy: (281) 496-0285
copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson, Esq.
Telecopy: (212) 474-3700
Section 9.6. Assignment; Binding Effect.
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.
Section 9.7. 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 in any other jurisdiction. If any
provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be
only so broad as is enforceable.
Section 9.8. Enforcement of Agreement. The
parties hereto agree that money damages or other remedy
at law would not be sufficient or adequate remedy for any
breach or violation of, or a default under, this
Agreement by them and that in addition to all other
remedies available to them, each of them shall be
entitled to the fullest extent permitted by law to an
injunction restraining such breach, violation or default
or threatened breach, violation or default and to any
other equitable relief, including, without limitation,
specific performance, without bond or other security
being required.
Section 9.9. Entire Agreement; No Third-Party
Beneficiaries. This Agreement, the Confidentiality
Agreements and the Option Agreements constitute the
entire agreement, and supersede all other prior
agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the
subject matter hereof and thereof and except for the
provisions of Sections 6.5, 6.6, and 6.13 hereof, is not
intended to and shall not confer upon any Person other
than the parties hereto any rights or remedies hereunder.
Section 9.10. Headings. Headings of the
Articles and Sections of this Agreement are for
convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 9.11. Definitions. References in this
Agreement to "Subsidiaries" of R&B or FDC shall mean any
corporation or other form of legal entity of which more
than 50% of the outstanding voting securities are on the
date hereof directly or indirectly owned by R&B or FDC,
as the case may be. References in this Agreement to
"Significant Subsidiaries" shall mean Subsidiaries (as
defined above) which constitute "significant
subsidiaries" under Rule 405 promulgated by the SEC under
the Securities Act. References in this Agreement (except
as specifically otherwise defined) to "affiliates" shall
mean, as to any person, any other person which, directly
or indirectly, controls, or is controlled by, or is under
common control with, such person. As used in this
definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control
with") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of
management or policies of a Person, whether through the
ownership of securities or partnership of other ownership
interests, by contract or otherwise. References in the
Agreement to "person" shall mean an individual, a
corporation, a partnership, an association, a trust or
any other entity or organization, including, without
limitation, a governmental body or authority.
Notwithstanding the foregoing, Parent shall not be deemed
to be an "affiliate" or a "subsidiary" of either FDC or
R&B.
Section 9.12. Finders or Brokers. Except for
Morgan Stanley & Co. Incorporated with respect to R&B, a
copy of whose engagement agreement has been or will be
provided to FDC, and Credit Suisse First Boston
Corporation with respect to FDC, a copy of whose
engagement agreement has been or will be provided to R&B,
neither R&B nor FDC nor any of their respective
Subsidiaries has employed any investment banker, broker,
finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to
any fee or any commission in connection with or upon
consummation of the Mergers.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and delivered
as of the date first above written.
R&B FALCON CORPORATION
By: /s/ Steven A. Webster
Name: Steven A. Webster
Title: Chief Executive Officer
FDC ACQUISITION CORP.
By: /s/ Steven A. Webster
Name: Steven A. Webster
Title: President
READING & BATES ACQUISITION CORP.
By: /s/ Steven A. Webster
Name: Steven A. Webster
Title: President
FALCON DRILLING COMPANY, INC.
By: /s/ Steven A. Webster
Name: Steven A. Webster
Title: Chief Executive Officer
READING & BATES CORPORATION
By: /s/ Paul B. Loyd, Jr.
Name: Paul B. Loyd, Jr.
Title: Chief Executive Officer
EXHIBIT 3
FDC CORPORATION STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 10, 1997
(the "Agreement"), between FALCON DRILLING COMPANY, INC.,
a Delaware corporation ("Issuer"), and READING & BATES
CORPORATION, a Delaware Corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an
Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"; defined terms used but not
defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, each of
FDC and R&B to become subsidiaries of Parent pursuant to
the Mergers;
B. As a condition and inducement to Grantee's
willingness to enter into the Merger Agreement and the
R&B Option Agreement (as defined below), Grantee has
requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below); and
C. As a condition and inducement to Issuer's
willingness to enter into the Merger Agreement and this
Agreement, Issuer has requested that Grantee agree, and
Grantee has agreed to, grant Issuer an option to purchase
shares of Grantee's common stock on substantially the
same terms as the Option (the "R&B Option Agreement");
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants
and agreements set forth herein, Issuer and Grantee agree
as follows:
1. Grant of Option. Subject to the terms and
conditions set forth herein, Issuer hereby grants to
Grantee an irrevocable option (the "Option") to purchase
up to 15,753,823 (after giving effect to the two-for-one
stock split to holders of record of FDC Common Stock on
July 9, 1997) (as adjusted as set forth herein) shares
(the "Option Shares") of Common Stock, par value $0.01
per share ("Issuer Common Stock"), of Issuer at a
purchase price of $27.78 (as adjusted as set forth
herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise
the Option, with respect to any or all of the Option
Shares at any one time, subject to the provisions of
Section 2(c), after an FDC Takeover Proposal shall have
been made known to FDC or any of its subsidiaries or has
been made directly to its stockholders generally or any
person shall have publicly announced an intention
(whether or not conditional) to make an FDC Takeover
Proposal; provided, however, that (i) except as provided
in the last sentence of this Section 2(a), the Option
will terminate and be of no further force and effect upon
the earliest to occur of (A) the Effective Time, (B) six
months after the first occurrence of a Purchase Event (as
defined herein) occurs, and (C) termination of the Merger
Agreement in accordance with its terms prior to the
occurrence of a Purchase Event, unless, in the case of
clause (C), the Grantee has the right to receive a
Termination Fee following such termination upon the
occurrence of certain events, in which case the Option
will not terminate until the later of (x) six months
following the time such Termination Fee becomes payable
and (y) the expiration of the period in which the Grantee
has such right to receive a Termination Fee, and (ii) any
purchase of Option Shares upon exercise of the Option
will be subject to compliance with HSR and the obtaining
or making of any consents, approvals, orders,
notifications or authorizations, the failure of which to
have obtained or made would have the effect of making the
issuance of Option Shares illegal (the "Regulatory
Approvals"). Notwithstanding the termination of the
Option, Grantee will be entitled to purchase the Option
Shares if it has exercised the Option in accordance with
the terms hereof prior to the termination of the Option,
and the termination of the Option will not affect any
rights hereunder which by their terms do not terminate or
expire prior to or as of such termination.
(b) In the event that Grantee wishes to
exercise the Option, it will send to Issuer a written
notice (an "Exercise Notice"; the date of which being
herein referred to as the "Notice Date") to that effect
which Exercise Notice also specifies the number of Option
Shares, if any, Grantee wishes to purchase pursuant to
this Section 2(b), the number of Option Shares, if any,
with respect to which Grantee wishes to exercise its
Cash-Out Right (as defined herein) pursuant to Section
6(c), the denominations of the certificate or
certificates evidencing the Option Shares which Grantee
wishes to purchase pursuant to this Section 2(b) and a
date not earlier than three business days nor later than
20 business days from the Notice Date for the closing of
such purchase (an "Option Closing Date"). Any Option
Closing will be at an agreed location and time in New
York, New York on the applicable Option Closing Date or
at such later date as may be necessary so as to comply
with clause (ii) of Section 2(a).
(c) Notwithstanding anything to the contrary
contained herein, any exercise of the Option and purchase
of Option Shares shall be subject to compliance with
applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the
Exercise Notice without first obtaining or making certain
Regulatory Approvals. In such event, if the Option is
otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with
Section 2(b) and Grantee shall acquire the maximum number
of Option Shares specified in the Exercise Notice that
Grantee is then permitted to acquire under the applicable
laws and regulations, and if Grantee thereafter obtains
the Regulatory Approvals to acquire the remaining balance
of the Option Shares specified in the Exercise Notice,
then Grantee shall be entitled to acquire such remaining
balance. Issuer agrees to use its best efforts to assist
Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice
that a Regulatory Approval required for the purchase of
any Option Shares will not be issued or granted or (ii)
such Regulatory Approval has not been issued or granted
within six months of the date of the Exercise Notice,
Grantee shall have the right to exercise its Cash-Out
Right pursuant to Section 6(c) with respect to the Option
Shares for which such Regulatory Approval will not be
issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At
any Option Closing, Grantee will pay to Issuer in
immediately available funds by wire transfer to a bank
account designated in writing by Issuer an amount equal
to the Purchase Price multiplied by the number of Option
Shares to be purchased at such Option Closing.
(b) At any Option Closing, simultaneously with
the delivery of immediately available funds as provided
in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option
Shares to be purchased at such Option Closing, which
Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever.
If at the time of issuance of Option Shares pursuant to
an exercise of the Option hereunder, Issuer shall not
have issued any securities similar to rights under a
shareholder rights plan, then each Option Share issued
pursuant to such exercise will also represent such a
corresponding right with terms substantially the same as
and at least as favorable to Grantee as are provided
under any Issuer shareholder rights agreement or any
similar agreement then in effect.
(c) Certificates for the Option Shares
delivered at an Option Closing will have typed or printed
thereon a restrictive legend which will read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF ANY EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS
SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF
JULY 10, 1997, A COPY OF WHICH MAY BE OBTAINED FROM
THE SECRETARY OF FALCON DRILLING COMPANY, INC. AT
ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to
restrictions arising under the Securities Act in the
above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option
Shares have been registered pursuant to the Securities
Act, such Option Shares have been sold in reliance on and
in accordance with Rule 144 under the Securities Act or
Grantee has delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel in form
and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required
for purposes of the Securities Act and (ii) the reference
to restrictions pursuant to this Agreement in the above
legend will be removed by delivery of substitute
certificate(s) without such reference if the Option
Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance
with the provisions of this Agreement under circumstances
that do not require the retention of such reference.
4. Representations and Warranties of Issuer.
Issuer hereby represents and warrants to Grantee as
follows:
(a) Corporate Authorization. Issuer has the
corporate power and authority to enter into this
Agreement and to carry out its obligations
hereunder. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer, and
no other corporate proceedings on the part of Issuer
are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by
Issuer, and assuming this Agreement constitutes a
valid and binding agreement of Grantee, this
Agreement constitutes a valid and binding agreement
of Issuer, enforceable against Issuer in accordance
with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
creditors' rights generally, or by principles
governing the availability of equitable remedies).
(b) Authorized Stock. Issuer has taken all
necessary corporate and other action to authorize
and reserve and, subject to the expiration or
termination of any required waiting period under the
HSR Act, to permit it to issue, and, at all times
from the date hereof until the obligation to deliver
Option Shares upon the exercise of the Option
terminates, shall have reserved for issuance, upon
exercise of the Option, shares of Issuer Common
Stock necessary for Grantee to exercise the Option,
and Issuer will take all necessary corporate action
to authorize and reserve for issuance all additional
shares of Issuer Common Stock or other securities
which may be issued pursuant to Section 6 upon
exercise of the Option. The shares of Issuer Common
Stock to be issued upon due exercise of the Option,
including all additional shares of Issuer Common
Stock or other securities which may be issuable upon
exercise of the Option or any other securities which
may be issued pursuant to Section 6, upon issuance
pursuant hereto, will be duly and validly issued,
fully paid and nonassessable, and will be delivered
free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever,
including without limitation any preemptive rights
of any stockholder of Issuer.
5. Representations and Warranties of Grantee.
Grantee hereby represents and warrants to Issuer that:
(a) Corporate Authorization. Grantee has the
corporate power and authority to enter into this
Agreement and to carry out its obligations
hereunder. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly and validly
authorized by the Board of Directors of Grantee, and
no other corporate proceedings on the part of
Grantee are necessary to authorize this Agreement
and the transactions contemplated hereby. This
Agreement has been duly and validly executed and
delivered by Grantee, and assuming this Agreement
constitutes a valid and binding agreement of Issuer,
this Agreement constitutes a valid and binding
agreement of Grantee, enforceable against Grantee in
accordance with its terms (except insofar as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights
generally, or by principles governing the
availability of equitable remedies).
(b) Purchase Not for Distribution. Any Option
Shares or other securities acquired by Grantee upon
exercise of the Option will not be transferred or
otherwise disposed of except in a transaction
registered, or exempt from registration, under the
Securities Act.
6. Adjustment upon Changes in Capitalization, Etc.
(a) In the event of any changes in Issuer Common Stock
by reason of a stock dividend, reverse stock split,
merger, recapitalization, combination, exchange of
shares, or similar transaction, the type and number of
shares or securities subject to the Option, and the
Purchase Price therefor, will be adjusted appropriately,
and proper provision will be made in the agreements
governing such transaction, so that Grantee will receive
upon exercise of the Option the number and class of
shares or other securities or property that Grantee would
have received with respect to Issuer Common Stock if the
Option had been exercised immediately prior to such event
or the record date therefor, as applicable. Subject to
Section 1, and without limiting the parties' relative
rights and obligations under the Merger Agreement, if any
additional shares of Issuer Common Stock are issued after
the date of this Agreement (other than pursuant to an
event described in the first sentence of this Section
6(a)), the number of shares of Issuer Common Stock
subject to the Option will be adjusted so that, after
such issuance, it equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant
to the Option.
(b) Without limiting the parties' relative rights
and obligations under the Merger Agreement, in the event
that the Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not
be the continuing or surviving corporation in such
consolidation or merger, (ii) to permit any person, other
than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer will be the continuing or surviving
corporation, but in connection with such merger, the
shares of Issuer Common Stock outstanding immediately
prior to the consummation of such merger will be changed
into or exchanged for stock or other securities of Issuer
or any other person or cash or any other property, or the
shares of Issuer Common Stock outstanding immediately
prior to the consummation of such merger will, after such
merger represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets
to any person, other than Grantee or one of its
subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so
that the Option will, upon the consummation of any such
transaction and upon the terms and condition set forth
herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire
the number and class of shares or other securities or
property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or
transfer, or the record date therefor, as applicable and
make any other necessary adjustments.
(c) If, at any time during the period commencing
on the occurrence of an event as a result of which
Grantee is entitled to receive the Termination Fee
pursuant to Section 8.3 of the Merger Agreement (the
"Purchase Event") and ending on the termination of the
Option in accordance with Section 2, Grantee sends to
Issuer an Exercise Notice indicating Grantee's election
to exercise its right (the "Cash-Out-Right") pursuant to
this Section 6(c), then Issuer shall pay to Grantee, on
the Option Closing Date, in exchange for the cancellation
of the Option with respect to such number of Option
Shares as Grantee specifies in the Exercise Notice, an
amount in cash equal to such number of Option Shares
multiplied by the difference between (i) the average
closing price, for the 10 NYSE trading days commencing on
the 12th NYSE trading day immediately preceding the
Notice Date, per share of Issuer Common Stock as reported
on the NYSE Composite Transactions Tape (or, if not
listed on the NYSE, as reported on any other national
securities exchange or national securities quotation
system on which the Issuer Common Stock is listed or
quoted, as reported in The Wall Street Journal (Northeast
edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the
Purchase Price. Notwithstanding the termination of the
Option, Grantee will be entitled to exercise its rights
under this Section 6(c) if it has exercised such rights
in accordance with the terms hereof prior to the
termination of the Option.
7. Registration Rights. Issuer will, if requested
by Grantee at any time and from time to time within three
years of the exercise of the Option, as expeditiously as
possible prepare and file up to three registration
statements under the Securities Act if such registration
is necessary in order to permit the sale or other
disposition of any or all shares of securities that have
been acquired by or are issuable to Grantee upon exercise
of the Option in accordance with the intended method of
sale or other disposition stated by Grantee, including a
"shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer
will use its best efforts to qualify such shares or other
securities under any applicable state securities laws.
Grantee agrees to use reasonable efforts to cause, and to
cause any underwriters of any sale or other disposition
to cause, any sale or other disposition pursuant to such
registration statement to be effected on a widely
distributed basis so that upon consummation thereof no
purchaser or transferee will own beneficially more than
4.9% of the then outstanding voting power of Issuer.
Issuer will use reasonable efforts to cause each such
registration statement to become effective, to obtain all
consents or waivers of other parties which are required
therefor, and to keep such registration statement
effective for such period not in excess of 180 calendar
days from the day such registration statement first
becomes effective as may be reasonably necessary to
effect such sale or other disposition. The obligations
of Issuer hereunder to file a registration statement and
to maintain its effectiveness may be suspended for up to
60 calendar days in the aggregate if the Board of
Directors of Issuer shall have determined that the filing
of such registration statement or the maintenance of its
effectiveness would require premature disclosure of
material nonpublic information that would materially and
adversely affect Issuer or otherwise interfere with or
adversely affect any pending or proposed offering of
securities of Issuer or any other material transaction
involving Issuer. Any registration statement prepared
and filed under this Section 7, and any sale covered
thereby, will be at Issuer's expense except for
underwriting discounts or commissions, brokers' fees and
the fees and disbursements of Grantee's counsel related
thereto. Grantee will provide all information reasonably
requested by Issuer for inclusion in any registration
statement to be filed hereunder. If, during the time
periods referred to in the first sentence of this Section
7, Issuer effects a registration under the Securities Act
of Issuer Common Stock for its own account or for any
other stockholders of Issuer (other than on Form S-4 or
Form S-8, or any successor form), it will allow Grantee
the right to participate in such registration, and such
participation will not affect the obligation of Issuer to
effect demand registration statements for Grantee under
this Section 7; provided that, if the managing
underwriters of such offering advise Issuer in writing
that in their opinion the number of shares of Issuer
Common Stock requested to be included in such
registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be
included therein by Grantee pro rata with the shares
intended to be included therein by Issuer. In connection
with any registration pursuant to this Section 7, Issuer
and Grantee will provide each other and any underwriter
of the offering with customary representations,
warranties, covenants, indemnification, and contribution
in connection with such registration.
8. Transfers. The Option Shares may not be sold,
assigned, transferred, or otherwise disposed of except
(i) in an underwritten public offering as provided in
Section 7 or (ii) to any purchaser or transferee who
would not, to the knowledge of the Grantee after
reasonable inquiry, immediately following such sale,
assignment, transfer or disposal beneficially own more
than 4.9% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be
permitted to sell any Option Shares if such sale is made
pursuant to a tender or exchange offer that has been
approved or recommended by a majority of the members of
the Board of Directors of Issuer (which majority shall
include a majority of directors who were directors as of
the date hereof).
9. Listing. If Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are
then listed on the NYSE (or any other national securities
exchange or national securities quotation system),
Issuer, upon the request of Grantee, will promptly file
an application to list the shares of Issuer Common Stock
or other securities to be acquired upon exercise of the
Option on the NYSE (and any such other national
securities exchange or national securities quotation
system) and will use reasonable efforts to obtain
approval of such listing as promptly as practicable.
10. Miscellaneous. (a) Expenses. Except as
otherwise provided in the Merger Agreement, each of the
parties hereto will pay all costs and expenses incurred
by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Amendment. This Agreement may not be
amended, except by an instrument in writing signed on
behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part
of a party to waive any provision of this Agreement, or
to extend the time for performance, will be valid only if
set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or
otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party
Beneficiaries. This Agreement, the Merger Agreement
(including the documents and instruments attached thereto
as exhibits or schedules or delivered in connection
therewith) and the Confidentiality Agreement (i)
constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral,
between the parties with respect to the subject matter of
this Agreement, and (ii) except as provided in Section
9.9 of the Merger Agreement, are not intended to confer
upon any person other than the parties any rights or
remedies.
(e) Governing Law. This Agreement will be
governed by, and construed in accordance with, the laws
of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of
conflict of laws thereof.
(f) Notices. All notices, requests, claims,
demands, and other communications under this Agreement
must be in writing and will be deemed given if delivered
personally, telecopied (which is confirmed), or sent by
overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other
address for a party as shall be specified by like
notice):
If to Issuer to:
Falcon Drilling Company, Inc.
1900 West Loop South
Suite 1800
Houston, Texas 77027
Attention: Chairman and Chief Executive Officer
Fax: (713) 623-8103
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Fax: (212) 735-2000
If to Grantee to:
Reading & Bates Corporation
901 Threadneedle
Suite 200
Houston, Texas 77079
Attention: Chairman and Chief Executive Officer
Fax: (281) 496-0285
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Allen Finkelson
Fax: (212) 474-3700
(g) Assignment. Neither this Agreement, the
Option nor any of the rights, interests, or obligations
under this Agreement may be assigned, transferred or
delegated, in whole or in part, by operation of law or
otherwise, by Issuer or Grantee without the prior written
consent of the other. Any assignment, transfer or
delegation in violation of the preceding sentence will be
void. Subject to the first and second sentences of this
Section 10(g), this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
(h) Further Assurances. In the event of any
exercise of the Option by Grantee, Issuer and Grantee
will execute and deliver all other documents and
instruments and take all other action that may be
reasonably necessary in order to consummate the
transactions provided for by such exercise.
(i) Enforcement. The parties agree that
irreparable damage would occur and that the parties would
not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties will
be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in Delaware
state court, the foregoing being in addition to any other
remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (i) consents to
submit itself to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this
Agreement, (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, and (iii) agrees
that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this
Agreement in any court other than a Federal court sitting
in the State of Delaware or a Delaware state court.
IN WITNESS WHEREOF, Issuer and Grantee have caused
this Agreement to be signed by their respective officers
thereunto duly authorized as of the day and year first
written above.
FALCON DRILLING COMPANY, INC.
By: /s/ Steven A. Webster
Name: Steven A. Webster
Title: Chief Executive Officer
READING & BATES CORPORATION
By: /s/ Paul B. Loyd, Jr.
Name: Paul B. Loyd, Jr.
Title: Chief Executive Officer
