SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
FALCON DRILLING COMPANY, INC.
(Name of Issuer)
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
30591410
(CUSIP Number)
Wayne K. Hillin
Senior Vice President and General Counsel
Reading & Bates Corporation
901 Threadneedle,
Suite 200
Houston, TX 77079
(281) 496-5000
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
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 Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
(Continued on following pages)
(Page 1 of 9 Pages)
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CUSIP No. 30591410 13D Page 2 of 9 Pages
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1 NAME OF REPORTING PERSON
Reading & Bates Corporation
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
73-0642271
- -------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 15,753,823 [1]
BENEFICIALLY --------------------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH None
REPORTING --------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 15,753,823 [1]
--------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
15,753,823 [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*
HC; CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
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[1] The shares of common stock of Falcon Drilling Company, Inc.(the
"Issuer") covered by this report are purchasable by Reading & Bates
Corporation ("R&B") upon exercise of an option (the "Option") granted
to R&B pursuant to the Stock Option Agreement dated as of July 10,
1997 between Issuer and R&B (the "Stock Option Agreement"), and
described in Item 4 of this report. Prior to the exercise of the
Option, R&B is not entitled to any rights as a shareholder of the
Issuer as to the shares covered by the Option. The number of shares of
common stock of the Issuer purchasable by R&B under the Option, which
is initially set to equal 15,753,823 shares, will be adjusted if
necessary so that the number of shares purchasable by R&B upon
exercise of the Option at the time of its exercise 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, R&B expressly
disclaims beneficial ownership of the shares of common stock of the
Issuer which are purchasable by R&B 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 July 9,
1997 (after giving effect to the two-for-one stock split to holders of
record of common stock of the Issuer on July 9, 1997), excluding
shares issuable upon exercise of the Option.
[2] Adjusted to reflect the issuance by the Issuer of 15,753,823 shares of
common stock of the Issuer upon exercise of the Option as described
herein.
Page 3 of 9 Pages
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Item 1. Security and Issuer
This Schedule 13D relates to the common stock, par value $0.01 per
share (the "Common Stock," an individual share of which is a "Share"), of
Falcon Drilling Company, Inc., a Delaware corporation (the "Issuer"). The
principal executive offices of the Issuer are located at 1900 West Loop
South, Suite 1800, Houston, Texas 77027.
Item 2. Identity and Background
This Schedule 13D is filed by Reading & Bates Corporation ("R&B"), a
Delaware corporation that provides contract drilling and other related
services in major offshore and oil and gas producing areas worldwide. R&B's
principal offices are located at 901 Threadneedle, Suite 200, Houston, TX
77079.
During the last five years, to the best of R&B's knowledge, neither
R&B nor any of its executive officers or directors 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 any
violation with respect to such laws.
The name, business address, present principal occupation (including
the name and address of the corporation or organization in which such
employment is conducted) and citizenship of each executive officer and
director is set forth in Schedule A to this Schedule 13D and is
specifically incorporated herein by reference.
Item 3. Source and Amount of Funds or Other Consideration
This Statement relates to an option granted to R&B by the Issuer to
purchase shares of Common Stock from the Issuer as described in Item 4
below (the "Option"). The Option entitles R&B to purchase 15,753,823 Shares
(the "Option Shares") under the circumstances specified in the Stock Option
Agreement dated as of July 10, 1997, between R&B and the Issuer (the "Stock
Option Agreement") and as described in Item 4 below, for a purchase price
of $27.78 per Share (the "Purchase Price"). The number of Option Shares
will be adjusted if necessary so that the number of shares purchasable by
R&B upon exercise of the Option at the time of its exercise 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 hereby made to
the Stock Option Agreement, which is included as Exhibit 1 hereto, for the
full text of its terms, including the conditions upon which it may be
exercised. The Stock Option Agreement is incorporated herein by reference
in its entirety.
The Option was granted by the Issuer as an inducement to R&B to enter
into the Agreement and Plan of Merger dated as of July 10, 1997, among R&B
Falcon Corporation, a newly-formed parent holding company ("Parent"), FDC
Acquisition Corp., Reading & Bates Acquisition Corp., R&B and the Issuer
(the "Merger Agreement"). Pursuant to the Merger Agreement and subject to
the terms and conditions set forth therein (including approval by the
stockholders of R&B and the Issuer and various regulatory agencies), (i)
FDC Acquisition Corp. will merge with and into the Issuer (the "Issuer
Merger") with the Issuer continuing as the surviving corporation, and each
issued and outstanding Share will be converted into the right to receive
one share of common stock of Parent and (ii) Reading & Bates Acquisition
Corp. will merge with and into R&B (the "R&B Merger"; together with the
Issuer Merger, the "Mergers") with R&B continuing as the surviving
corporation, and each issued and outstanding share of common stock of R&B,
par value $.05 per share, will be converted into the right to receive one
share of common stock of Parent. If the Mergers are consummated, the Option
will not be exercised. No monetary consideration was paid by R&B to the
Issuer for the Option.
If R&B elects to exercise the Option, it currently anticipates that
the funds to pay the Purchase Price will be generated by a combination of
available working
Page 4 of 9 Pages
<PAGE>
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 R&B in connection with the
execution of the Merger Agreement. As an inducement to the Issuer to enter
into the Merger Agreement, R&B granted to the Issuer a reciprocal option to
purchase up to 14,340,154 shares of R&B common stock, par value $.05 per
share, under the circumstances specified in the Stock Option Agreement
dated as of July 10, 1997 between R&B, as issuer, and the Issuer, as
grantee, for a purchase price of $34.00 per share (the "R&B Stock Option
Agreement").
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.
If the Mergers are consummated in accordance with the terms of the
Merger Agreement, the Board of Directors of Parent shall consist of ten
members, five of whom shall be designated by each of R&B and the Issuer,
with the current Chairman and Chief Executive Officer of R&B being a
designee of R&B and the current Chairman and Chief Executive Officer of the
Issuer being a designee of the Issuer. The current Chairman and Chief
Executive Officer of R&B will be Chairman, and the current Chairman and
Chief Executive Officer of the Issuer will be Chief Executive Officer, of
the Parent.
R&B 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 R&B of any Option Shares purchased under the
Option.
In the event the Mergers are consummated, the Common Stock will be
delisted from the New York Stock Exchange and any other exchange, and will
become eligible for termination of registration under the Act, as amended.
The descriptions herein of the Stock Option Agreement, the R&B Stock
Option Agreement and the Merger Agreement are qualified in their entirety
by reference to such agreements, copies of which are filed as Exhibits 1, 2
and 3 respectively, hereto and which are incorporated herein by reference
in their entirety.
Other than as described above, R&B 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 (although R&B reserves the right to develop such plans).
Item 5. Interest in Securities of the Issuer
As a result of the issuance of the Option, R&B may be deemed to be the
beneficial owner of 15,753,823 Shares, which would represent approximately
16.6% of the Shares outstanding after exercise of the Option (based on the
number of Shares outstanding on July 9, 1997, as set forth in the Merger
Agreement). R&B will have sole voting and dispositive power with respect to
such Shares.
The Option Shares described herein are subject to the Option, which is
not currently exercisable. Nothing herein shall be deemed to be an
admission by R&B as to the beneficial ownership of any Shares, and, prior
to exercise of the Option, R&B disclaims beneficial ownership of all Option
Shares.
Except as described herein, neither R&B nor, to the best of R&B's
knowledge, any other person referred to in Schedule A attached hereto,
beneficially owns or has acquired or disposed of any Shares during the past
60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
Page 5 of 9 Pages
<PAGE>
Paul B. Loyd, Jr., the Chairman of the Board and Chief Executive
Officer of R&B, is the owner of 127,200 Shares. Mr. Loyd has pledged 20,000
of such Shares to secure his personal guarantee of the obligations of an
unaffiliated company, in which both Mr. Loyd and Steven A. Webster, the
Chairman of the Board and Chief Executive Officer of the Issuer, are
directors and stockholders, to an independent financial institution.
Except for the Merger Agreement and the Stock Option Agreement and as
set forth above, 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
Exhibit Description
1 Stock Option Agreement dated as of July 10, 1997,
between Falcon Drilling Company, Inc., as Issuer, and
Reading & Bates Corporation, as Grantee.
2 Agreement and Plan of Merger dated as of July 10, 1997,
among 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, among
Reading & Bates Corporation, as Issuer, and Falcon
Drilling Company, Inc., as Grantee.
Page 6 of 9 Pages
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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
READING & BATES CORPORATION
By: /s/ Timothy W. Nagle
-------------------------
Name: Timothy W. Nagle
Title: Executive Vice President,
Finance and Administration
Page 7 of 9 Pages
<PAGE>
SCHEDULE A
Residence or
Names of Directors and Principal Occupation Business Address
Officers or Employment of Organization Citizenship
Arnold L. Chavkin General Partner Chase Capital U.S.A.
Director of Chase Capital Partners
Partners 380 Madison
Avenue
12th Floor
New York, NY
10017
Paul B. Loyd, Jr. Chairman and Chief Reading & Bates U.S.A.
Director and Officer Executive Officer of Corporation
R&B 901 Threadneedle
Suite 200
Houston, TX
77079
Ted Kalborg Chairman and Managing Tufton Oceanic Sweden
Director Director of Tufton Inc.
Oceanic Ltd. Little Tufton
House
3 Dean Trench
Street
London, England
SW1P 3HB
Macko A. E. Laqueur Senior Partner, Venture Capital Netherlands
Director Venture Capital Investors
Investors Herengracht 468
1017 CA
Amsterdam
Netherlands
J. W. McClean Retired 5 Cypress Point U.S.A.
Director Court
Frisco, Texas
75034-1628
Charles A. Donabedian Chairman and Chief Winston U.S.A.
Director Executive Officer of Financial, Inc.
Winston Financial 200 Technecenter
Incorporated, Winston Dr. Suite 200
Advisors, Inc. and Milford, Ohio
Winston Brokerage, 45150
Inc.
Robert L. Sandmeyer Retired 1906 Iba Drive U.S.A.
Director Stillwater,
Oklahoma 74074
Page 8 of 9 Pages
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Residence or
Names of Directors and Principal Occupation Business Address
Officers or Employment of Organization Citizenship
1T. W. Nagle Executive Vice Reading & Bates U.S.A.
Officer President, Finance Corporation
and Administration 901 Threadneedle
Suite 200
Houston, TX
77079
W. K. Hillin Senior Vice Reading & Bates U.S.A.
Officer President, General Corporation
Counsel and Secretary 901
Threadneedle,
Suite 200
Houston, TX
77079
C. R. Ofner Vice President, Reading & Bates U.S.A.
Officer Business Development Corporation
901
Threadneedle,
Suite 200
Houston, TX
77079
D. L. McIntire Vice President, Human Reading & Bates U.S.A.
Officer Resources Corporation
901
Threadneedle,
Suite 200
Houston, TX
77079
Page 9 of 9 Pages
<PAGE>
EXHIBIT 1
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,
<PAGE>
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
<PAGE>
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
<PAGE>
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 EXECU TIVE 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
<PAGE>
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 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 neces-
<PAGE>
sary 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 proceed ings 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 regis tered, or exempt from registration, under the
Securi ties Act.
<PAGE>
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 proper ty, 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 outstand ing 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
<PAGE>
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 state ments 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
<PAGE>
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" regis tration 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 under writers of
any sale or other disposition to cause, any sale or other disposition
pursuant to such registration state ment 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 suspend ed 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 succes sor 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 registra-
<PAGE>
tion 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 applica tion 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
<PAGE>
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 under
standings, 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, de mands, 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
<PAGE>
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.
<PAGE>
(h) Further Assurances. In the event of any exer cise 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 irrepara ble 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 accor dance 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.
<PAGE>
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:
----------------------------------
Name:
Title:
READING & BATES CORPORATION
By:
----------------------------------
Name:
Title:
<PAGE>
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
==========================================================================
<PAGE>
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
i
<PAGE>
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
ii
<PAGE>
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
iii
<PAGE>
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
iv
<PAGE>
THIS AGREEMENT AND PLAN OF MERGER, dated as of
July 10, 1997 (the "Agreement"), among R&B FALCON CORPORA
TION, 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 subsid iaries
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 consti
tute 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
2
<PAGE>
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 repre
sentations, warranties, covenants and agreements contained
in this Agreement, the parties agree as follows:
ARTICLE I
The Mergers
Section 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
3
<PAGE>
Options (as defined in Section 6.6(a)) to be assumed by
Parent in accordance with Section 6.6 hereof.
Section 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 Surviv ing 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 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 4 Effective Time. Subject to the provi
sions 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
4
<PAGE>
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 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 immedi ately
prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws, respectively, of the R&B Surviving
Corporation.
Section 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 Effec tive
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 7 Parent Charter Documents. At the
Effective Time (i) the Certificate of Incorporation and
Bylaws of Parent shall be in form and substance satisfacto
ry 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
5
<PAGE>
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 1 Effect on FDC Stock. As of the Effec
tive Time, by virtue of the FDC Merger and without any
action on the part of SubF, FDC or the holders of any secu
rities 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 accor
dance 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.
6
<PAGE>
Section 2 Effect on R&B Stock. As of the Effec
tive Time, by virtue of the R&B Merger and without any
action on the part of SubR, R&B or the holders of any secu
rities 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 accor
dance 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 Incorpora
tion, 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
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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 divi
dends 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 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 "Ex change
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
8
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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 Consid
eration") (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 repre
senting 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 Certifi cate 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 repre sented 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 accor dance 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 Effec tive
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 distribu
tions 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 Certifi
cates 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 satisfac
tion 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
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<PAGE>
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 Cer
tificates 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
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<PAGE>
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 commis
sions, 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 determi
nation 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
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<PAGE>
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 thereto fore complied with
this Article II shall thereafter look only to Parent for
payment of their claim for Merger Con sideration, 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 Cer
tificate 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
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<PAGE>
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 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 discre tion 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 commit tee of the Board of Directors shall consist of
an equal number of designees of FDC and of R&B.
Section 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
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<PAGE>
and Chief Executive Officer of Reading & Bates Development
Co. ("Devco").
Section 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 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 Sec
tion 10.11), taken as a whole, or Parent and its Subsidiar
ies, 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
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<PAGE>
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 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:
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<PAGE>
(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 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 proceed ings 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 recom mend 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, reorganiza tion,
moratorium or similar laws affecting creditors' rights
generally, or by principles governing the avail ability 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 contemplat ed 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 competi tion,
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 authori zations,
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 Reports and Financial Statements. R&B
has previously furnished to FDC true and complete copies of:
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<PAGE>
(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 Re
ports") (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 con solidated 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
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<PAGE>
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 No Undisclosed Liabilities. Neither R&B
nor any of its Subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, con
tingent 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 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 repre
sentation 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 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,
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<PAGE>
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 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"), main tained 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 liabili ties or obligations
that would not, individually or in the aggregate, have a
Material Adverse Effect on R&B. No em ployee 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 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 Subsid
iaries 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 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.
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Section 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 sup plements
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 specifi cally 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 sched ules required to be filed with the SEC in
connection therewith are collectively referred to herein as
the "Joint Proxy Statement".
Section 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 transac tions
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 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).
<PAGE>
Section 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 complet ed 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.
<PAGE>
(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 consti tuting
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 contem
plated by this Agreement by any employee, officer or
director of R&B or any of its affiliates who is a "dis
qualified 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, includ ing,
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' compensa
tion, 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 estimat ed Tax.
Section 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 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
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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 re
quired 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 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 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
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<PAGE>
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 encumbranc
es, 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 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 arrange ments 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
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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 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 hereun
der 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 proceed
ings 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
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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 viola
tions 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. ss.ss. 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 Approv
als"), 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 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;
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<PAGE>
(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 consoli dated 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 No Undisclosed Liabilities. Neither FDC
nor any of its Subsidiaries has any liabilities or
obligations of any nature, whether or not accrued, contin
gent 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
27
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obligations which would not, individually or in the
aggregate, have a Material Adverse Effect on FDC.
Section 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 represen
tation 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 viola
tions which would not, individually or in the aggregate,
have a Material Adverse Effect on FDC.
Section 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, individu ally 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 opera
tion 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 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 aggre gate, have a
Material Adverse Effect on FDC. No employee
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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 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 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 respec tive 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 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 specifi cally 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.
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Section 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 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 transac tions
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 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
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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 consti tuting
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 contem
plated by this Agreement by any employee, officer or
director of FDC or any of its affiliates who is a "dis
qualified 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 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 finan
cial point of view.
Section 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 Stockhold
er 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
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for FDC to consummate the FDC Merger and the transactions
contemplated hereby and by the FDC Stock Option Agreement.
Section 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 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 "Termina tion
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 Subsid
iaries 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 relation
ships with those persons having business dealings with R&B
and its Subsidiaries;
(iii) shall confer at such times as FDC may rea
sonably request with one or more representatives of FDC to
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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 inten
tion 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 Subsid
iaries 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
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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 account
ing 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 ordi nary
course of business consistent with past practice (except
that R&B shall have the right to conclude defini tive
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
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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 Subsid
iaries 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
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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 rela
tionships 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 inten
tion 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 Subsid
iaries 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
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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 ordi nary
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
37
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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 satis
fied.
Section 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' respec
tive 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.
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Section 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 Regis
tration 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
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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 representa
tion 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 other
wise in connection with the consummation of the transac
tions 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 Registra tion
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 fol lowing
the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its stockholders (the
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<PAGE>
"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 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 reason ably
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 reason
able 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 docu ments
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 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 arrange
ments 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 arrange
ments 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,
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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 agree ments 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 agree ments upon
such terms and conditions as Parent or R&B deems
appropriate.
Section 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 arrange
ments 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 accor dance 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 arrange
ments 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
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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 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 con nection 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, authoriza tions 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 authori
ties 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 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.
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Section 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 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 Stockhold
ers Meeting (as defined in Section 6.3(c)(ii)) (the "R&B
Applicable Period"), the Board of Directors of R&B deter
mines 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
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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 subsid iaries (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 Sec tion
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 Direc
tors of R&B may (subject to this and the following sen
tences) 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
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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 stock
holders 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 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
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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 consulta tion with outside
counsel, that it is necessary to do so in order to comply
with its fiduciary duties to FDC's stock holders 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 follow ing 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 confidential ity 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 acquisi tion 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, recapitaliza tion,
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 Sec tion
6.11, neither the Board of Directors of FDC nor any
committee thereof shall (i) withdraw or modify, or propose
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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 Direc
tors of FDC may (subject to this and the following sen
tences) 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 stock holders 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
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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 stock holders
a position contemplated by Rule 14e-2(a) promul gated 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 inconsis tent 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 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 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 Par
ties") 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 indemnifica
tion pursuant to the preceding sentence.
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(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 Par
ties") 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 indemnifica
tion 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 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
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reasonably satisfactory to the recipient and customary in
scope for comfort letters delivered by independent accoun
tants in connection with registration statements on Form S-
4 under the Securities Act.
Section 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 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 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.
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ARTICLE VII
Conditions to the Mergers
Section 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 accor
dance 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 Securi
ties 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
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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 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 repre sentation 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 representa tions 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 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 represen tation 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
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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 representa
tions 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, certify ing to both
such effects.
ARTICLE VIII
Termination, Waiver, Amendment and Closing
Section 1 Termination or Abandonment. This
Agreement may be terminated at any time prior to the Effec
tive 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; pro
vided, 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, en
tered 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,
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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 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
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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 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 termi
nated 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 referenc
es 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 Take over 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
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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 transac tions
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 stock
holders 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 termi
nation 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 Pro
posal" 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 ex
penses (including attorneys' fees and expenses) in con
nection 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 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 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;
57
<PAGE>
(b) waive any inaccuracies in the representa tions
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 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 2 Expenses. Whether or not the Mergers are
consummated, all costs and expenses incurred in connec tion
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.
58
<PAGE>
Section 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 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 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
59
<PAGE>
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 6 Assignment; Binding Effect. Neither this
Agreement nor any of the rights, interests or obliga tions
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 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 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
60
<PAGE>
default and to any other equitable relief, including,
without limitation, specific performance, without bond or
other security being required.
Section 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 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 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 "Signifi cant
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 limita
tion, a governmental body or authority. Notwithstanding the
foregoing, Parent shall not be deemed to be an "affili ate"
or a "subsidiary" of either FDC or R&B.
61
<PAGE>
Section 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 re
spect 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.
62
<PAGE>
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:
----------------------
Name:
Title:
FDC ACQUISITION CORP.
By:
----------------------
Name:
Title:
READING & BATES ACQUISITION CORP.
By:
----------------------
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:
----------------------
Name:
Title:
READING & BATES CORPORATION
By:
----------------------
Name:
Title:
63
<PAGE>
EXHIBIT 3
R&B CORPORATION STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 10, 1997 (the "Agreement"),
between READING & BATES CORPORATION, a Dela ware 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
<PAGE>
$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
<PAGE>
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
<PAGE>
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
<PAGE>
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 neces sary corporate
action to authorize and reserve for issuance all additional shares of
Issuer Common Stock
<PAGE>
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 proceed ings 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 regis
tered, or exempt from registration, under the Securi ties Act.
<PAGE>
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 proper ty, 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 outstand ing 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
<PAGE>
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 state ments 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
<PAGE>
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" regis tration 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 under writers of
any sale or other disposition to cause, any sale or other disposition
pursuant to such registration state ment 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 suspend ed 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 succes sor 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 registra-
<PAGE>
tion 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 other wise 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.
<PAGE>
(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
<PAGE>
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 exer cise 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
<PAGE>
order to consummate the transactions provided for by such exercise.
(i) Enforcement. The parties agree that irrepara ble 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 accor dance 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.
<PAGE>
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:
-----------------------------
Name:
Title:
FALCON DRILLING COMPANY, INC.
By:
-----------------------------
Name:
Title:
