<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 20, 1998
CLIFFS DRILLING COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
001-12797 76-0248934
(Commission File Number) (I.R.S. Employer Identification No.)
1200 SMITH STREET
SUITE 300
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
(713) 651-9426
(Registrant's telephone number, including area code)
<PAGE> 2
Item 5. Other Events
On August 21, 1998, Cliffs Drilling Company (the "Company") entered
into an Agreement and Plan of Merger (the "Merger Agreement") with R&B Falcon
Corporation, a Delaware corporation ("RBF"), and RBF Cliffs Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary of RBF ("RBF Subsidiary"),
providing for the acquisition of the Company by RBF by means of a merger of RBF
Subsidiary with and into the Company. A copy of the Merger Agreement is
attached hereto as Exhibit 2.1 and is hereby incorporated by reference. On
August 21, 1998, the Company and RBF issued a press release concerning the
execution of the Merger Agreement, a copy of which has been attached hereto as
Exhibit 99.1 and is hereby incorporated by reference. The terms of the
transaction described in the press release are qualified in their entirety by
reference to the Merger Agreement.
In connection with the Merger Agreement, the Company executed
Amendment No. 1 to Rights Agreement (the "Rights Amendment") dated as of August
20, 1998 with Harris Trust and Savings Bank, as Rights Agent (the "Rights
Agent"), which Rights Amendment amended the Rights Agreement dated as of June
17, 1997 between the Company and the Rights Agent. A copy of the Rights
Amendment is attached hereto as Exhibit 4.3.1 and is hereby incorporated by
reference.
Also in connection with the Merger Agreement, the Company executed
Amendment No. 1 to Cliffs Drilling Company Compensation Deferral Plan (the
"Compensation Deferral Amendment") dated as of August 20, 1998, which
Compensation Deferral Amendment amended the Cliffs Drilling Company
Compensation Deferral Plan effective as of January 1, 1998. A copy of the
Compensation Deferral Amendment is attached hereto as Exhibit 10.23.1 and is
hereby incorporated by reference.
On August 26, 1998, the Company received notice that a class action
complaint against the Company and each member of the Board of Directors was
filed by a stockholder, on behalf of all of the stockholders of the Company,
on August 12, 1998 in the Court of Chancery of the State of Delaware. The
complaint alleges that the directors of the Company are not acting in
accordance with their fiduciary duties to protect the interests of the
stockholders in connection with the transaction involving the proposed merger
of the Company and RBF. The plaintiff seeks damages as well as injunctive
relief. The Company believes the allegations in the complaint are wholly
without merit and intends to vigorously defend the lawsuit.
Item 7. Financial Statements And Exhibits
(c) Exhibits.
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger dated as of August 21, 1998, among R&B
Falcon Corporation, RBF Cliffs Acquisition Corp. and Cliffs Drilling
Company.
4.3.1 Amendment No. 1 to Rights Agreement dated as of August 20, 1998,
between Cliffs Drilling Company and Harris Trust and Savings Bank.
10.23.1 Amendment No. 1 to Cliffs Drilling Company Compensation Deferral Plan
dated as of August 20, 1998.
99.1 Press Release dated August 21, 1998.
</TABLE>
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the securities exchange act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CLIFFS DRILLING COMPANY
Dated: August 27, 1998 By: /s/ Edward A. Guthrie
------------------------------------
Edward A. Guthrie
Vice President - Finance
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of August 21, 1998, among R&B Falcon
Corporation, RBF Cliffs Acquisition Corp. and Cliffs Drilling Company.
4.3.1 Amendment No. 1 to Rights Agreement dated as of August 20, 1998, between Cliffs
Drilling Company and Harris Trust and Savings Bank.
10.23.1 Amendment No. 1 to Cliffs Drilling Company Compensation Deferral Plan dated
as of August 20, 1998.
99.1 Press Release dated August 21, 1998.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
R&B FALCON CORPORATION,
RBF CLIFFS ACQUISITION CORP.
AND
CLIFFS DRILLING COMPANY
================================================================================
AUGUST 21, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Consummation of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Certificate of Incorporation; Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Conversion of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Exchange of Certificates; Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Taking of Necessary Action; Further Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Representations and Warranties of R&B Falcon and Sub. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Organization and Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Authorization and Validity of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) No Approvals or Notices Required; No Conflict with Instruments to which R&B Falcon or any of the
R&B Falcon Subsidiaries is a Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Commission Filings; Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Conduct of Business in the Ordinary Course; Absence of Certain Changes and Events. . . . . . . . . 8
(h) Tax Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(j) Interim Operations of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(k) Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Representations and Warranties of Cliffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Organization and Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Authorization and Validity of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) No Approvals or Notices Required; No Conflict with Instruments to which Cliffs or any of the Cliffs
Subsidiaries is a Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Commission Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Conduct of Business in the Ordinary Course; Absence of Certain Changes and Events . . . . . . . 13
(h) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(i) Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(j) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(k) Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(l) Severance Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
(m) Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(n) No Excess Parachute Payments; Section 162(m) of the Code . . . . . . . . . . . . . . . . . . . . 19
(o) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(p) Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(q) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(r) State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(s) Cliffs Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III - COVENANTS OF CLIFFS PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.1 Conduct of Business by Cliffs Pending the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.2 Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.3 Meeting of Stockholders of Cliffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.5 Affiliate Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.6 Waivers and Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.7 Obtain Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV - COVENANTS OF R&B FALCON PRIOR TO THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Conduct of Business by R&B Falcon Pending the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3 Adequate R&B Falcon Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.4 Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 Accountants Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2 Filings; Consents; Reasonable Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.3 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.4 Agreement to Defend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.5 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.6 R&B Falcon's Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.8 Cliffs Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.9 Cliffs Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10 New R&B Falcon Option Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11 Post-Effective Time Mailing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12. Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.13 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.14 Cliffs Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI - CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Conditions to Obligation of Each Party to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Additional Conditions to Obligations of R&B Falcon. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3 Additional Conditions to Obligations of Cliffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.3 Waiver and Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 Nonsurvival of Representations, Warranties and Agreements. . . . . . . . . . . . . . . . . . . . . . . . 38
7.5 Public Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.8 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.11 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.12 Entire Agreement; Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.13 Disclosure Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
Exhibits
Exhibit A - Form of Affiliate Letter
Schedules
Schedule 3.6 - Cliffs Executives - Waiver and Release Payments
Schedule 5.7 - Cliffs Executives - Employment Agreement Terms
Schedule 5.10 - Option Grants
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of the 21st day of August,
1998 (the "Agreement"), is among R&B Falcon Corporation, a Delaware corporation
("R&B Falcon"), RBF Cliffs Acquisition Corp., a newly formed Delaware
corporation and a wholly owned subsidiary of R&B Falcon ("Sub"), and Cliffs
Drilling Company, a Delaware corporation ("Cliffs").
WITNESSETH:
WHEREAS, subject to and in accordance with the terms and conditions of
this Agreement, the respective Boards of Directors of R&B Falcon, Sub and
Cliffs, and R&B Falcon as sole stockholder of Sub, after determining that it is
in the best interests of their respective stockholders, have approved the
merger of Sub with and into Cliffs (the "Merger"), whereby each issued and
outstanding share of common stock, $0.01 par value per share, of Cliffs
("Cliffs Common Stock") not owned directly or indirectly by Cliffs will be
converted into the right to receive 1.7 shares of common stock, $0.01 par value
per share, of R&B Falcon ("R&B Falcon Common Stock"), as provided herein;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Merger is intended to be treated as an acquisition for
accounting purposes; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), at the Effective Time (as defined in
Section 1.3) Sub shall be merged with and into Cliffs. As a result of the
Merger, the separate corporate existence of Sub shall cease and Cliffs shall
continue as the surviving corporation (sometimes referred to herein as the
"Surviving Corporation"), and all the properties, rights, privileges, powers
and franchises of Cliffs and Sub shall vest in the Surviving Corporation,
without any transfer or assignment having occurred, and all debts, liabilities
and duties of Cliffs and Sub shall attach to the Surviving Corporation, all in
accordance with the DGCL.
<PAGE> 6
1.2 Closing Date. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Gardere Wynne
Sewell & Riggs, L.L.P., 333 Clay, Suite 800, Houston, Texas 77002, as soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article VI or at such other time and place and on such other date as R&B Falcon
and Cliffs shall agree; provided, that the closing conditions set forth in
Article VI shall have been satisfied or waived at or prior to such time. The
date on which the Closing occurs is herein referred to as the "Closing Date."
1.3 Consummation of the Merger. As soon as practicable on the Closing
Date, the parties hereto will cause the Merger to be consummated by filing with
the Secretary of State of Delaware a certificate of merger in such form as
required by, and executed in accordance with, the relevant provisions of the
DGCL. The "Effective Time" of the Merger as that term is used in this Agreement
shall mean such time as the certificate of merger is duly filed with the
Secretary of State of Delaware or at such later time (not to exceed 90 days
from the date the certificate is filed) as is specified in the certificate of
merger pursuant to the mutual agreement of R&B Falcon and Cliffs.
1.4 Effects of the Merger. The Merger shall have the effects set forth
in the applicable provisions of the DGCL.
1.5 Certificate of Incorporation; Bylaws. At the Effective Time, the
Certificate of Incorporation and Bylaws of Cliffs, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
Bylaws, respectively, of Surviving Corporation.
1.6 Directors and Officers. At and after the Effective Time, Douglas
E. Swanson, Steven A. Webster, and Paul B. Loyd shall be the directors of the
Surviving Corporation, and shall serve as such until the next annual meeting of
the Surviving Corporation (or until their earlier resignation or removal) or
until their respective successors are duly elected and qualified. The officers
of Cliffs immediately prior to the Effective Time shall be the officers of the
Surviving Corporation at and after the Effective Time, to serve in such
capacities until their successors are duly elected or until their earlier
resignation or removal.
1.7 Conversion of Securities. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of R&B Falcon, Cliffs, Sub or their stockholders:
(a) Each share of Cliffs Common Stock issued and outstanding
immediately prior to the Effective Time, other than any shares of
Cliffs Common Stock to be canceled pursuant to Section 1.7(b), shall
be converted into the right to receive 1.7 shares of R&B Falcon Common
Stock; provided, however, that no fractional shares of R&B Falcon
Common Stock shall be issued, and, in lieu thereof, a cash payment
shall be made in accordance with Section 1.8(d) hereof.
(b) Each share of Cliffs Common Stock held in the treasury of
Cliffs and each share of Cliffs Common Stock owned by Sub, R&B Falcon
or any direct or indirect wholly owned
2
<PAGE> 7
subsidiary of R&B Falcon or of Cliffs immediately prior to the
Effective Time shall be canceled and extinguished without any
conversion thereof and no payment shall be made with respect thereto.
(c) Each share of common stock, par value $0.01 per share, of
Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock, $0.01 par value per
share, of the Surviving Corporation.
1.8 Exchange of Certificates; Fractional Shares.
(a) As soon as practicable after the Effective Time, each
holder of a certificate that prior thereto represented shares of
Cliffs Common Stock shall be entitled, upon surrender thereof to R&B
Falcon or its transfer agent, to receive in exchange therefor, a
certificate or certificates representing the number of whole shares of
R&B Falcon Common Stock into which the shares of Cliffs Common Stock
so surrendered shall have been converted as aforesaid, in such
denominations and registered in such names as such holder may request.
Each holder of shares of Cliffs Common Stock who would otherwise be
entitled to a fraction of a share of R&B Falcon Common Stock shall,
upon surrender of the certificates representing such shares held by
such holder to R&B Falcon or its transfer agent, be paid an amount in
cash in accordance with the provisions of Section 1.8(d). Until so
surrendered and exchanged, each certificate that prior to the
Effective Time represented shares of Cliffs Common Stock shall
represent solely the right to receive R&B Falcon Common Stock and cash
in lieu of fractional shares, if any. Unless and until any such
certificates shall be so surrendered and exchanged, no dividends or
other distributions payable to the holders of R&B Falcon Common Stock,
as of any time on or after the Effective Time, shall be paid to the
holders of such certificates that prior to the Effective Time
represented shares of Cliffs Common Stock; provided, however, that,
upon any such surrender and exchange of such certificates, there shall
be paid to the record holders of the certificates issued and exchanged
therefor the amount, without interest thereon, of dividends and other
distributions, if any, that theretofore were declared and became
payable after the Effective Time with respect to the number of whole
shares of R&B Falcon Common Stock issued to such holder.
(b) All shares of R&B Falcon Common Stock issued upon the
surrender for exchange of certificates that prior to the Effective
Time represented shares of Cliffs Common Stock in accordance with the
terms hereof (together with any cash paid pursuant to Section 1.8(d))
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Cliffs Common Stock. At and after the
Effective Time, there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of
Cliffs Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates which prior
to the Effective Time represented shares of Cliffs Common Stock are
presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Article I.
3
<PAGE> 8
(c) If any certificate for shares of R&B Falcon Common Stock
is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall have paid to R&B
Falcon or its transfer agent any transfer or other taxes required by
reason of the issuance of a certificate for shares of R&B Falcon
Common Stock in any name other than that of the registered holder of
the certificate surrendered, or established to the satisfaction of R&B
Falcon or its transfer agent that such tax has been paid or is not
payable.
(d) No fraction of a share of R&B Falcon Common Stock shall be
issued, but in lieu thereof each holder of Cliffs Common Stock who
would otherwise be entitled to a fraction of a share of R&B Falcon
Common Stock shall, upon surrender of the certificate formerly
representing Cliffs Common Stock held by such holder to R&B Falcon or
its transfer agent, be paid an amount in cash equal to the value of
such fraction of a share based upon the closing sales price of R&B
Falcon Common Stock, as reported on the New York Stock Exchange, on
the last day on which there is a reported trade in the R&B Falcon
Common Stock prior to the date on which the Effective Time occurs. No
interest shall be paid on such amount. All shares of Cliffs Common
Stock held by a record holder shall be aggregated for purposes of
computing the number of shares of R&B Falcon Common Stock to be issued
pursuant to this Article I and cash in lieu of fractional shares
payable hereunder.
(e) None of R&B Falcon, Sub, Cliffs, the Surviving Corporation
or their transfer agents shall be liable to a holder of shares of
Cliffs Common Stock for any amount properly paid to a public official
pursuant to applicable property, escheat or similar laws.
1.9 Lost Certificates. If any certificate representing shares of
Cliffs Common Stock shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such certificate to be
lost, stolen or destroyed and, if required by R&B Falcon, the posting by such
person of a bond in such reasonable amount as R&B Falcon may direct as
indemnity against any claim that may be made against it or the Surviving
Corporation with respect to such certificate, the shares of R&B Falcon Common
Stock issuable in exchange for the shares represented by such lost, stolen or
destroyed certificate shall be issued to such person and, if applicable, any
cash in lieu of fractional shares shall be paid to such person.
1.10 Taking of Necessary Action; Further Action. The parties hereto
shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Cliffs or Sub, such corporations
shall direct their respective officers and directors to take all such lawful
and necessary action.
4
<PAGE> 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of R&B Falcon and Sub. R&B Falcon
and Sub hereby jointly and severally represent and warrant to Cliffs that:
(a) Organization and Compliance with Law. Each of R&B Falcon
and its consolidated subsidiaries (the "R&B Falcon Subsidiaries") is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is chartered or
organized and has all requisite corporate power and authority and all
necessary governmental authorizations to own, lease and operate all of
its properties and assets and to carry on its business as now being
conducted, except where the failure to be so organized, existing or in
good standing or to have such governmental authority would not have a
material adverse effect on the financial condition, results of
operations or business of R&B Falcon and the R&B Falcon Subsidiaries,
taken as a whole (a "R&B Falcon MAE"). A R&B Falcon MAE shall not be
deemed to include material adverse effects caused by circumstances or
occurrences that similarly affect the contract drilling industry
generally or the United States economy generally. Except as set forth
in Section 2.1(a) of the disclosure letter delivered by R&B Falcon to
Cliffs on the date hereof (the "R&B Falcon Disclosure Letter"), each
of R&B Falcon and the R&B Falcon Subsidiaries is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be duly
qualified does not and would not, either individually or in the
aggregate, have a R&B Falcon MAE. Each of R&B Falcon and the R&B
Falcon Subsidiaries is in compliance with all applicable laws,
judgments, orders, rules and regulations, domestic and foreign, except
where failure to be in such compliance would not have a R&B Falcon
MAE.
(b) Capitalization.
(i) The authorized capital stock of R&B Falcon
consists of 550,000,000 shares of R&B Falcon Common Stock and
50,000,000 shares of preferred stock, par value $0.01 per
share ("R&B Falcon Preferred Stock"), of which 1,688,000
shares of R&B Falcon Preferred Stock has been designated
Series A Junior Participating Preferred Stock. As of August 1,
1998, there were issued and outstanding 166,226,374 shares of
R&B Falcon Common Stock, no shares of R&B Falcon Common Stock
were held as treasury shares, and no shares of R&B Falcon
Preferred Stock were issued and outstanding. All issued shares
of R&B Falcon Common Stock were duly authorized and validly
issued and are fully paid and nonassessable and no holder
thereof is entitled to preemptive rights. All shares of R&B
Falcon Common Stock to be issued pursuant to the Merger, when
issued in accordance with this Agreement, will be duly
authorized and validly issued, fully paid and nonassessable
and will not violate the preemptive rights of any person.
Except as set forth in
5
<PAGE> 10
Section 2.1(b) of the R&B Falcon Disclosure Letter, R&B Falcon
is not a party to, and is not aware of, any voting agreement,
voting trust or similar agreement or arrangement relating to
any class or series of its capital stock, or any agreement or
arrangement providing for registration rights with respect to
any capital stock or other securities of R&B Falcon as to
which the registration statement has not already become
effective.
(ii) As of August 1, 1998, there were outstanding
options to purchase 4,536,442 shares of R&B Falcon Common
Stock ("R&B Falcon Options"). Other than (A) as set forth in
this Section 2.1(b), (B) as described in Section 2.1(b) of the
R&B Falcon Disclosure Letter, (C) as contemplated by this
Agreement, (D) pursuant to the exercise of R&B Falcon Options,
and (E) pursuant to the Rights Agreement between R&B Falcon
and American Stock Transfer & Trust Company dated December 23,
1997, R&B Falcon will not, prior to the Effective Time, issue,
commit to issue or grant rights to acquire in excess of an
aggregate of 75,000,000 additional shares of R&B Falcon Common
Stock.
(iii) Except as set forth in Section 2.1(b) of the
R&B Falcon Disclosure Letter, all outstanding shares of
capital stock of the R&B Falcon Subsidiaries (A) are owned by
R&B Falcon or a wholly owned subsidiary of R&B Falcon, free
and clear of all liens, charges, encumbrances, adverse claims
and options of any nature, (B) were duly authorized and
validly issued and are fully paid and nonassessable, and (C)
have not been issued in violation of any preemptive rights.
There are not now, and at the Effective Time there will not
be, any outstanding options, warrants, scrip, rights to
subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of any class of capital stock
of the R&B Falcon Subsidiaries, or contracts, understandings
or arrangements to which R&B Falcon or a R&B Falcon Subsidiary
is a party, or by which any of them is or may be bound, to
issue additional shares of capital stock or options, warrants,
scrip or rights to subscribe for, or securities or rights
convertible into or exchangeable for, any additional shares of
capital stock of any R&B Falcon Subsidiary.
(iv) As of the date hereof, the authorized capital
stock of Sub consists of 1,000 shares of common stock, par
value $0.01 per share, all of which were duly authorized and
validly issued and are fully paid and nonassessable and are
owned by R&B Falcon.
(c) Authorization and Validity of Agreement. R&B Falcon and
Sub have all requisite corporate power and authority to enter into
this Agreement and to perform their obligations hereunder. The
execution and delivery by R&B Falcon and Sub of this Agreement and the
consummation by each of them of the transactions contemplated hereby
have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and
6
<PAGE> 11
delivered by R&B Falcon and Sub and is the valid and binding
obligation of R&B Falcon and Sub, enforceable against R&B Falcon and
Sub in accordance with its terms.
(d) No Approvals or Notices Required; No Conflict with
Instruments to which R&B Falcon or any of the R&B Falcon Subsidiaries
is a Party. Neither the execution and delivery of this Agreement nor
the performance by R&B Falcon or Sub of its obligations hereunder, nor
the consummation of the transactions contemplated hereby by R&B Falcon
and Sub, will (i) conflict with the certificate of incorporation or
the bylaws of R&B Falcon or the charter or bylaws of any of the R&B
Falcon Subsidiaries; (ii) assuming satisfaction of the requirements
set forth in clause (iii) below, violate any provision of law
applicable to R&B Falcon or any of the R&B Falcon Subsidiaries; (iii)
except for (A) requirements of Federal or state securities laws, (B)
requirements arising out of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), (C) requirements of notice
filings in such foreign jurisdictions as may be applicable, and (D)
the filing of a certificate of merger by Sub in accordance with the
DGCL, require any consent or approval of, or filing with or notice to,
any public body or authority, domestic or foreign, under any provision
of law applicable to R&B Falcon or any of the R&B Falcon Subsidiaries;
or (iv) require any consent, approval or notice under, or violate,
breach, be in conflict with or constitute a default (or an event that,
with notice or lapse of time or both, would constitute a default)
under, or permit the termination of any provision of, or result in the
creation or imposition of any lien upon any properties, assets or
business of R&B Falcon or any of the R&B Falcon Subsidiaries under,
any note, bond, indenture, mortgage, deed of trust, lease, franchise,
permit, authorization, license, contract, instrument or other
agreement or commitment or any order, judgment or decree to which R&B
Falcon or any of the R&B Falcon Subsidiaries is a party or by which
R&B Falcon or any of the R&B Falcon Subsidiaries or any of its or
their assets or properties is bound or encumbered, except (A) those
that have already been given, obtained or filed, (B) those that are
required pursuant to bank loan agreements, as set forth in Section
2.1(d) of the R&B Falcon Disclosure Letter, which R&B Falcon will use
its reasonable efforts to obtain prior to the Effective Time, and (C)
those that, in the aggregate, would not have a R&B Falcon MAE.
(e) Commission Filings; Financial Statements. R&B Falcon and
each of the R&B Falcon Subsidiaries have timely filed all reports,
registration statements and other filings, together with any
amendments required to be made with respect thereto, that they have
been required to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). All reports, registration statements and other
filings (including all notes, exhibits and schedules thereto and
documents incorporated by reference therein) filed by R&B Falcon with
the Commission since January 1, 1998, through the date of this
Agreement, together with any amendments thereto, are sometimes
collectively referred to as the "R&B Falcon Commission Filings." As of
the respective dates of their filing with the Commission, the R&B
Falcon Commission Filings complied in all material respects with the
Securities Act, the Exchange Act and the rules and regulations of the
Commission thereunder, and did not contain any untrue statement of a
material fact or
7
<PAGE> 12
omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
Each of the consolidated financial statements (including any
related notes or schedules) included in the R&B Falcon Commission
Filings was prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be noted
therein or in the notes or schedules thereto) and complied with all
applicable rules and regulations of the Commission. Such consolidated
financial statements fairly present the consolidated financial
position of R&B Falcon and the R&B Falcon Subsidiaries as of the dates
thereof and the results of operations, cash flows and changes in
stockholders' equity for the periods then ended (subject, in the case
of the unaudited interim financial statements, to normal year end
audit adjustments on a basis consistent with past periods).
(f) Absence of Undisclosed Liabilities. Except as disclosed
in Section 2.1(f) of the R&B Falcon Disclosure Letter, as of the date
of this Agreement, neither R&B Falcon nor any of the R&B Falcon
Subsidiaries has any liabilities that are reasonably likely to have,
individually or in the aggregate, a R&B Falcon MAE, except liabilities
which are accrued or reserved against in the consolidated balance
sheet of R&B Falcon as of December 31, 1997 or June 30, 1998, included
in the R&B Falcon Commission Filings or reflected in the notes
thereto. Neither R&B Falcon nor any R&B Falcon Subsidiary has
incurred or paid any liability since June 30, 1998, except for
liabilities incurred or paid (i) in the ordinary course of business
consistent with past practice, (ii) in connection with transactions
contemplated by this Agreement, or (iii) pursuant to transactions not
prohibited by this Agreement.
(g) Conduct of Business in the Ordinary Course; Absence of
Certain Changes and Events. Since January 1, 1998, except as
contemplated by this Agreement or as disclosed in the R&B Falcon
Commission Filings or as set forth in Section 2.1(g) of the R&B Falcon
Disclosure Letter, R&B Falcon and the R&B Falcon Subsidiaries have
conducted their business only in the ordinary and usual course, and
there has not been (i) any R&B Falcon MAE or any condition, event or
development that reasonably may be expected to result in a R&B Falcon
MAE; (ii) any material change by R&B Falcon in its accounting methods,
principles or practices; (iii) any revaluation by R&B Falcon or any of
the R&B Falcon Subsidiaries of any of its or their assets, including,
without limitation, writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of
business; (iv) any declaration, setting aside or payment of any
dividends or distributions in respect of the R&B Falcon Common Stock,
or any redemption, purchase or other acquisition of any of its
securities or any securities of any of the R&B Falcon Subsidiaries;
(v) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business
of R&B Falcon and the R&B Falcon Subsidiaries, taken as a whole; (vi)
any increase in indebtedness for borrowed money other than borrowings
under existing credit facilities or indebtedness incurred in the
ordinary course of business; (vii) any granting of a security interest
or lien on any material property or assets of R&B Falcon and the R&B
Falcon Subsidiaries, taken as a whole, other than (A) liens for taxes
not due and payable or which are being contested in good faith; (B)
maritime
8
<PAGE> 13
liens and mechanics', warehousemen's and other statutory liens
incurred in the ordinary course of business; (C) defects and
irregularities in title and encumbrances which are not substantial in
character or amount and do not materially impair the use of the
property or asset in question; and (D) liens securing indebtedness
incurred in the ordinary course of business (collectively, "Permitted
Liens"); or (viii) any entry by R&B Falcon or a R&B Falcon Subsidiary
into any transaction or commitment that could reasonably be expected
to have a R&B Falcon MAE.
(h) Tax Representation. R&B Falcon has no present plan or
intention to (i) liquidate the Surviving Corporation, (ii) merge the
Surviving Corporation with or into another corporation, (iii) sell or
otherwise dispose of the stock of the Surviving Corporation, except as
permitted under Section 368 of the Code, (iv) cause or permit the
Surviving Corporation to sell or otherwise dispose of any of the
assets of Cliffs or the assets of Sub vested in the Surviving
Corporation except for dispositions made in the ordinary course of
business or except as otherwise permitted under Section 368 of the
Code, (v) reacquire any of the R&B Falcon Common Stock issued to the
Cliffs stockholders pursuant to the Merger, or (vi) cause or permit
the Surviving Corporation to either discontinue the historic business
of Cliffs or fail to use a substantial amount of Cliffs' historic
business assets in a business.
(i) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by R&B
Falcon directly with Cliffs, without the intervention of any person on
behalf of R&B Falcon in such manner as to give rise to any valid claim
by any person against Cliffs, the Surviving Corporation, R&B Falcon or
any of their subsidiaries for a finders' fee, brokerage commission or
similar payment, other than the fee payable to Donaldson, Lufkin &
Jenrette Securities Corporation for acting as R&B Falcon's financial
advisor and rendering a fairness opinion in connection with the
Merger. R&B Falcon has provided Cliffs with a true, correct and
complete copy of the agreement between R&B Falcon and Donaldson,
Lufkin & Jenrette Securities Corporation, and R&B Falcon has no other
agreements or understandings (written or oral) with respect to such
services.
(j) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its
operations only as contemplated hereby.
(k) Stockholder Approval. The approval of the stockholders of
R&B Falcon is not required under applicable law or stock exchange
rules to authorize the consummation of the Merger.
2.2 Representations and Warranties of Cliffs. Cliffs hereby
represents and warrants to R&B Falcon that:
(a) Organization and Compliance with Law. Each of Cliffs and
its consolidated subsidiaries (the "Cliffs Subsidiaries") is a
corporation duly organized, validly existing and
9
<PAGE> 14
in good standing under the laws of the jurisdiction in which it is
chartered or organized and has all requisite corporate power and
authority and all necessary governmental authorizations to own, lease
and operate all of its properties and assets and to carry on its
business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such governmental
authority would not have a material adverse effect on the financial
condition, results of operations or business of Cliffs and the Cliffs
Subsidiaries, taken as a whole (a "Cliffs MAE"). A Cliffs MAE shall
not be deemed to include material adverse effects caused by
circumstances or occurrences that similarly affect the contract
drilling industry generally or the United States economy generally.
Except as set forth in Section 2.2(a) of the disclosure letter
delivered by Cliffs to R&B Falcon on the date hereof (the "Cliffs
Disclosure Letter"), each of Cliffs and the Cliffs Subsidiaries is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes
such qualification necessary, except in such jurisdictions where the
failure to be duly qualified does not and would not, either
individually or in the aggregate, have a Cliffs MAE. Each of Cliffs
and the Cliffs Subsidiaries is in compliance with all applicable laws,
judgments, orders, rules and regulations, domestic and foreign, except
where failure to be in such compliance would not have a Cliffs MAE.
(b) Capitalization.
(i) The authorized capital stock of Cliffs consists
of 30,000,000 shares of Cliffs Common Stock and 3,000,000
shares of preferred stock, without par value, of which 500,000
shares have been designated as Series A Junior Participating
Preferred Stock (the "Cliffs Preferred Stock"). As of August
20, 1998, there were issued and outstanding 15,943,326 shares
of Cliffs Common Stock, 395,399 shares of Cliffs Common Stock
were held as treasury shares, and no shares of Cliffs
Preferred Stock were issued and outstanding. All issued shares
of Cliffs Common Stock were duly authorized and validly issued
and are fully paid and nonassessable and no holder thereof is
entitled to preemptive rights. Except as set forth in Section
2.2(b) of the Cliffs Disclosure Letter, Cliffs is not a party
to, and is not aware of, any voting agreement, voting trust or
similar agreement or arrangement relating to any class or
series of its capital stock, or any agreement or arrangement
providing for registration rights with respect to any capital
stock or other securities of Cliffs as to which the
registration statement has not already become effective.
(ii) As of the date hereof, there are outstanding
options (the "Cliffs Options") to purchase an aggregate of
621,500 shares of Cliffs Common Stock under the Cliffs 1988
Incentive Equity Plan or the Cliffs 1998 Incentive Equity Plan
(collectively, the "Cliffs Stock Option Plans"). Other than as
set forth in this Section 2.2(b), there are not now, and at
the Effective Time there will not be, any (A) shares of
capital stock or other equity securities of Cliffs outstanding
other than Cliffs Common Stock issued pursuant to the exercise
of Cliffs Options or issued from treasury to satisfy matching
obligations pursuant to the Cliffs Drilling Company Savings
Plan (As
10
<PAGE> 15
Amended and Restated Effective June 21, 1988) (the "Cliffs
Savings Plan"), or (B) outstanding options, warrants, scrip,
rights to subscribe for, calls or commitments of any character
whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of any class of capital stock
of Cliffs, or contracts, understandings or arrangements to
which Cliffs is a party, or by which it is or may be bound, to
issue additional shares of its capital stock or options,
warrants, scrip or rights to subscribe for, or securities or
rights convertible into or exchangeable for, any additional
shares of its capital stock, other than (x) rights to acquire
shares of Cliffs Preferred Stock pursuant to that certain
Rights Agreement dated as of June 17, 1997 (the "Cliffs Rights
Plan") between Cliffs and Harris Trust and Savings Bank, as
rights agent and (y) an obligation of Cliffs to issue 3,800
shares of Cliffs Common Stock pursuant to the Cliffs Drilling
Company Compensation Deferral Plan, as amended (the "Cliffs
Compensation Deferral Plan").
(iii) Except as set forth in Section 2.2(b) of the
Cliffs Disclosure Letter, all outstanding shares of capital
stock of the Cliffs Subsidiaries (A) are owned by Cliffs or a
wholly owned subsidiary of Cliffs, free and clear of all
liens, charges, encumbrances, adverse claims and options of
any nature, (B) were duly authorized and validly issued and
are fully paid and nonassessable, and (C) have not been issued
in violation of any preemptive rights. There are not now, and
at the Effective Time there will not be, any outstanding
options, warrants, scrip, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for,
shares of any class of capital stock of the Cliffs
Subsidiaries, or contracts, understandings or arrangements to
which Cliffs or a Cliffs Subsidiary is a party, or by which
any of them is or may be bound, to issue additional shares of
capital stock or options, warrants, scrip or rights to
subscribe for, or securities or rights convertible into or
exchangeable for, any additional shares of capital stock of
any Cliffs Subsidiary. There are not now, and at the Effective
Time there will not be, any outstanding contractual
obligations of Cliffs or any of the Cliffs Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding shares
of capital stock or other ownership interests of any Cliffs
Subsidiary or to provide funds to or make any investment (in
the form of a loan, capital contribution or otherwise), in any
Cliffs Subsidiary or any other entity.
(c) Authorization and Validity of Agreement. Cliffs has all
requisite corporate power and authority to enter into this Agreement
and to perform its obligations hereunder. The execution and delivery
by Cliffs of this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action (subject only, with respect to the Merger,
to approval of this Agreement by its stockholders as provided for in
Section 3.3). On or prior to the date hereof the Board of Directors of
Cliffs has determined to recommend approval of the Merger to the
stockholders of Cliffs, and such determination is in effect as of the
date hereof. This Agreement has been duly executed and delivered by
Cliffs and is the valid and binding obligation of Cliffs, enforceable
against Cliffs in accordance with its terms.
11
<PAGE> 16
(d) No Approvals or Notices Required; No Conflict with
Instruments to which Cliffs or any of the Cliffs Subsidiaries is a
Party. Except as set forth in Section 2.2(d) of the Cliffs Disclosure
Letter, neither the execution and delivery of this Agreement nor the
performance by Cliffs of its obligations hereunder, nor the
consummation of the transactions contemplated hereby by Cliffs, will
(i) conflict with the certificate of incorporation or the bylaws of
Cliffs or the charter or bylaws of any of the Cliffs Subsidiaries;
(ii) assuming satisfaction of the requirements set forth in clause
(iii) below, violate any provision of law applicable to Cliffs or any
of the Cliffs Subsidiaries; (iii) except for (A) requirements of
Federal or state securities laws, (B) requirements arising out of the
HSR Act, (C) requirements of notice filings in such foreign
jurisdictions as may be applicable, and (D) the filing of a
certificate of merger in accordance with the DGCL, require any consent
or approval of, or filing with or notice to, any public body or
authority, domestic or foreign, under any provision of law applicable
to Cliffs or any of the Cliffs Subsidiaries; or (iv) require any
consent, approval or notice under, or violate, breach, be in conflict
with or constitute a default (or an event that, with notice or lapse
of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the creation or
imposition of any lien upon any properties, assets or business of
Cliffs or any of the Cliffs Subsidiaries under, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which Cliffs or any of
the Cliffs Subsidiaries is a party or by which Cliffs or any of the
Cliffs Subsidiaries or any of its or their assets or properties is
bound or encumbered, except (A) those that have already been given,
obtained or filed, (B) those that are required pursuant to bank loan
agreements or leasing arrangements, as set forth in Section 2.2(d) of
the Cliffs Disclosure Letter, which Cliffs will use its reasonable
efforts to obtain prior to the Effective Time, and (C) those that, in
the aggregate, would not have a Cliffs MAE.
(e) Commission Filings; Financial Statements. Cliffs and each
of the Cliffs Subsidiaries have timely filed all reports, registration
statements and other filings, together with any amendments required to
be made with respect thereto, that they have been required to file
with the Commission under the Securities Act and the Exchange Act. All
reports, registration statements and other filings (including all
notes, exhibits and schedules thereto and documents incorporated by
reference therein) filed by Cliffs with the Commission since January
1, 1996 through the date of this Agreement, together with any
amendments thereto, are sometimes collectively referred to as the
"Cliffs Commission Filings." As of the respective dates of their
filing with the Commission, the Cliffs Commission Filings complied in
all material respects with the Securities Act, the Exchange Act and
the rules and regulations of the Commission thereunder, and did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which
they were made, not misleading.
Each of the consolidated financial statements (including any
related notes or schedules) included in the Cliffs Commission Filings
was prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be
12
<PAGE> 17
noted therein or in the notes or schedules thereto) and complied with
the rules and regulations of the Commission. Such consolidated
financial statements fairly present the consolidated financial
position of Cliffs and the Cliffs Subsidiaries as of the dates thereof
and the results of operations, cash flows and changes in stockholders'
equity for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year end audit
adjustments on a basis consistent with past periods).
(f) Absence of Undisclosed Liabilities. Except as disclosed
in Section 2.2(f) of the Cliffs Disclosure Letter, as of the date of
this Agreement, neither Cliffs nor any of the Cliffs Subsidiaries has
any liabilities that are reasonably likely to have, individually or in
the aggregate, a Cliffs MAE, except liabilities which are accrued or
reserved against in the consolidated balance sheet of Cliffs as of
December 31, 1997 or June 30, 1998, included in the Cliffs Commission
Filings or reflected in the notes thereto. Neither Cliffs nor any
Cliffs Subsidiary has incurred or paid any liability since June 30,
1998, except for liabilities incurred or paid (i) in the ordinary
course of business consistent with past practice, (ii) in connection
with transactions contemplated by this Agreement, or (iii) pursuant to
transactions not prohibited by this Agreement.
(g) Conduct of Business in the Ordinary Course; Absence of
Certain Changes and Events. Since January 1, 1998, except as
contemplated by this Agreement or as disclosed in the Cliffs
Commission Filings or as set forth in Section 2.2(g) of the Cliffs
Disclosure Letter, Cliffs and the Cliffs Subsidiaries have conducted
their business only in the ordinary and usual course, and there has
not been (i) any Cliffs MAE, or any condition, event or development
that reasonably may be expected to result in a Cliffs MAE; (ii) any
material change by Cliffs in its accounting methods, principles or
practices; (iii) any revaluation by Cliffs or any of the Cliffs
Subsidiaries of any of its or their assets, including, without
limitation, writing down the value of inventory or writing off notes
or accounts receivable other than in the ordinary course of business;
(iv) any entry by Cliffs or any of the Cliffs Subsidiaries into any
commitment or transaction material to Cliffs and the Cliffs
Subsidiaries, taken as a whole; (v) any declaration, setting aside or
payment of any dividends or distributions in respect of the Cliffs
Common Stock or any redemption, purchase or other acquisition of any
of its securities or any securities of any of the Cliffs Subsidiaries;
(vi) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business
of Cliffs and the Cliffs Subsidiaries, taken as a whole; (vii) any
increase in indebtedness for borrowed money other than (A) borrowings
under existing credit facilities or (B) indebtedness incurred in the
ordinary course of business that does not exceed $5,000,000 in the
aggregate; (viii) any granting of a security interest or lien on any
material property or assets of Cliffs and the Cliffs Subsidiaries,
taken as a whole, other than Permitted Liens; or (ix) any increase in
or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards),
stock purchase or other employee benefit plan or any other increase in
the compensation payable or to become payable to any executive
officers of Cliffs or any of the Cliffs Subsidiaries.
13
<PAGE> 18
(h) Litigation. Except as disclosed in the Cliffs Commission
Filings or as set forth in Section 2.2(h) of the Cliffs Disclosure
Letter, there are no claims, actions, suits, investigations, inquiries
or proceedings pending or, to the knowledge of Cliffs, overtly
threatened against or affecting Cliffs or any of the Cliffs
Subsidiaries or any of their respective properties at law or in
equity, or any of their respective employee benefit plans or
fiduciaries of such plans, or before or by any federal, state,
municipal or other governmental agency or authority, or before any
arbitration board or panel, wherever located, that individually or in
the aggregate if adversely determined could have a Cliffs MAE, or that
involve the risk of criminal liability.
(i) Employee Benefit Plans.
(i) Section 2.2(i) of the Cliffs Disclosure Letter
provides a list of each of the following which is sponsored,
maintained or contributed to by Cliffs, a Cliffs Subsidiary or
any corporation, trade, business or entity under common
control with Cliffs or a Cliffs Subsidiary within the meaning
of Section 414(b), (c), (m) or (o) of the Code or Section 4001
of ERISA (a "Cliffs ERISA Affiliate") for the benefit of its
employees, or has been so sponsored, maintained or contributed
to within six years prior to the Closing Date:
(A) each "employee benefit plan," as such
term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), ("Plan"); and
(B) each personnel policy, stock option plan,
collective bargaining agreement, bonus plan or
arrangement, incentive award plan or arrangement,
vacation policy, severance pay plan, policy or
agreement, deferred compensation agreement or
arrangement, executive compensation or supplemental
income arrangement, consulting agreement, employment
agreement and each other employee benefit plan,
agreement, arrangement, program, practice or
understanding that is not described in Section
2.1(i)(i)(A) ("Benefit Program or Agreement").
True, correct and complete copies of each of the Plans,
Benefit Programs or Agreements, related trusts, if applicable,
and all amendments thereto, have been or upon request will be
furnished to R&B Falcon.
(ii) Except as otherwise set forth in Section 2.2(i)
of the Cliffs Disclosure Letter:
(A) None of Cliffs, any Cliffs Subsidiary or
any Cliffs ERISA Affiliate contributes to or has an
obligation to contribute to, or has at any time
contributed to or had an obligation to contribute to,
a plan subject to
14
<PAGE> 19
Title IV of ERISA, including, without limitation, a
multiemployer plan within the meaning of Section
3(37) of ERISA;
(B) Each Plan and each Benefit Program or
Agreement has been administered, maintained and
operated in all material respects in accordance with
the terms thereof and in compliance with its
governing documents and applicable law (including,
where applicable, ERISA and the Code);
(C) There is no matter pending with respect
to any of the Plans before any governmental agency,
and there are no actions, suits or claims pending
(other than routine claims for benefits) or, to the
knowledge of Cliffs, threatened against, or with
respect to, any of the Plans or Benefit Programs or
Agreements or their assets;
(D) No act, omission or transaction has
occurred which would result in imposition on Cliffs,
any Cliffs Subsidiary or any Cliffs ERISA Affiliate
of breach of fiduciary duty liability damages under
Section 409 of ERISA, a civil penalty assessed
pursuant to Subsections (c), (i) or (l) of Section
502 of ERISA or a tax imposed pursuant to Chapter 43
of Subtitle D of the Code; and
(E) Except as provided in Sections 3.6, 5.7,
5.8, 5.9 or 5.10, the execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby will not require Cliffs, any
Cliffs Subsidiary or any Cliffs ERISA Affiliate to
make a larger contribution to, or pay greater
benefits under, any Plan, Benefit Program or
Agreement than it otherwise would or create or give
rise to any additional vested rights or service
credits under any Plan or Benefit Program or
Agreement.
(iii) Termination of employment of any employee of
Cliffs, any Cliffs Subsidiary or any Cliffs ERISA Affiliate
immediately after consummation of the transactions
contemplated by this Agreement would not result in payments
under the Plans, Benefit Programs or Agreements which, in the
aggregate, would result in imposition of the sanctions imposed
under Sections 280G and 4999 of the Code.
(iv) Each Plan which is an "employee welfare benefit
plan," as such term is defined in Section 3(1) of ERISA,
provides that it may be unilaterally amended or terminated in
its entirety, and no such plan provides for the accrual of
additional liability after such amendment or termination.
(v) None of the employees of Cliffs, any of the
Cliffs Subsidiaries or any Cliffs ERISA Affiliate are subject
to union or collective bargaining agreements.
15
<PAGE> 20
(j) Taxes. Except as set forth in Section 2.2(j) of the Cliffs
Disclosure Letter, all federal and all material state, local, foreign
returns, declarations, reports, including claims for refunds,
estimates, information returns and statements (including any
amendments thereof) ("Tax Returns") of or relating to any Tax that are
required to be filed on or before the Closing Date by or with respect
to Cliffs or any of the Cliffs Subsidiaries, or any other corporation
that is or was a member of an affiliated group (within the meaning of
Section 1504 (a) of the Code) of corporations of which Cliffs was a
member for any period ending on or prior to the Closing Date, have
been or will be duly and timely filed with appropriate governmental
authorities, and all Taxes, including interest and penalties, due and
payable pursuant to such Tax Returns or otherwise required to be duly
paid or deposited by or with respect to Cliffs or any of the Cliffs
Subsidiaries have been paid or adequately provided for in reserves
established by Cliffs, except where the failure to file, pay or
provide for would not have a Cliffs MAE. Except as set forth in
Section 2.2(j) of the Cliffs Disclosure Letter, all U.S. Federal
income Tax Returns of or with respect to Cliffs or any of the Cliffs
Subsidiaries have been audited by the applicable governmental
authority, or the applicable statute of limitations has expired, for
all periods up to and including the tax year ended December 31, 1994.
There is no material claim against Cliffs or any of the Cliffs
Subsidiaries with respect to any Taxes, and no material assessment,
deficiency or adjustment has been asserted or proposed with respect to
any Tax Return of or with respect to Cliffs or any of the Cliffs
Subsidiaries that has not been adequately provided for in reserves
established by Cliffs in the consolidated financial statements
included in the Cliffs Commission Filings. The total amounts set up as
liabilities for current and deferred Taxes in the consolidated
financial statements included in the Cliffs Commission Filings have
been prepared in accordance with generally accepted accounting
principles and are sufficient to cover the payment of all material
Taxes, including any penalties or interest thereon and whether or not
assessed or disputed, that are, or are hereafter found to be, or to
have been, due with respect to the operations of Cliffs and the Cliffs
Subsidiaries through the periods covered thereby. Cliffs and each of
the Cliffs Subsidiaries have (and as of the Closing Date will have)
made all deposits (including estimated tax payments for taxable years
for which the consolidated federal income tax return is not yet due)
required with respect to Taxes. Except as set forth in Section 2.2(j)
of the Cliffs Disclosure Letter, no waiver or extension of any statute
of limitations as to any federal, state, local or foreign Tax matter
has been given by or requested from Cliffs or any of the Cliffs
Subsidiaries. Except for statutory liens for current Taxes not yet
due, no liens for Taxes exist upon the assets of either Cliffs or the
Cliffs Subsidiaries. Except as set forth in Section 2.2(j) of the
Cliffs Disclosure Letter, neither Cliffs nor any of the Cliffs
Subsidiaries (i) has filed consolidated income Tax Returns with any
corporation, other than consolidated federal and state income Tax
Returns with Cliffs, for any taxable period which is not now closed by
the applicable statute of limitations, (ii) is a party to any tax
sharing or indemnity agreement, or (iii) has any liability for Taxes
of any other person (other than current members of the Cliffs
affiliated group of corporations) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as
a transferee or successor, by contract or otherwise. Neither Cliffs
nor the Cliffs Subsidiaries has any deferred intercompany gain as
defined in Treasury Regulation Section 1.1502-13.
16
<PAGE> 21
Cliffs and the Cliffs Subsidiaries have made or upon request
will make available to R&B Falcon true and correct copies of all
federal, state and local income and franchise Tax Returns, examination
reports and statements of deficiencies asserted or assessed against or
agreed to by Cliffs or any Cliff Subsidiary for all open Tax periods.
None of the assets of Cliffs or the Cliffs Subsidiaries (i) is
property that is required to be treated as being owned by any other
person pursuant to the "safe harbor lease" provisions of former
Section 168(f)(8) of the Code, (ii) is "tax-exempt use property"
within the meaning of Section 168(h) of the Code, or (iii) secures any
debt the interest on which is tax-exempt under Section 103(a) of the
Code.
In the Merger, at least 90% of the fair market value of
Cliffs's net assets and at least 70% of the fair market value of
Cliffs's gross assets held immediately prior to the Merger will be
held by the Surviving Corporation. For purposes of this
representation, amounts paid by Cliffs to its stockholders who receive
cash or other property, amounts used by Cliffs to pay reorganization
expenses, and all redemptions and distributions (except for regular,
normal dividends) made by Cliffs will be included as assets of Cliffs
immediately prior to the Merger. As of the Closing Date, Cliffs has
not redeemed, or made any distributions (except for regular, normal
dividends) with respect to, shares of Cliffs Common Stock in
connection with the Merger.
For purposes of this Agreement, "Tax" or "Taxes" means any and
all taxes, fees, levies, duties, tariffs, imposts and other charges of
any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by
any government or taxing authority, including, without limitation:
taxes or other charges on or with respect to income, franchises,
windfall profits, severance, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers'
compensation, unemployment compensation, disability or net worth;
taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added or gains taxes; license,
registration and documentation fees; and custom duties, tariffs and
similar charges whether or not disputed.
(k) Environmental Matters. Except for matters disclosed in
Section 2.2(k) of the Cliffs Disclosure Letter and except for matters
that in the aggregate would not have a Cliffs MAE, (i) the properties,
operations and activities of Cliffs and the Cliffs Subsidiaries comply
with all applicable Environmental Laws (as hereinafter defined); (ii)
Cliffs and the Cliffs Subsidiaries and the properties and operations
of Cliffs and the Cliffs Subsidiaries are not subject to any existing,
pending or, to the knowledge of Cliffs, threatened action, suit,
investigation, inquiry or proceeding by or before any governmental
authority under any Environmental Law; (iii) all notices, permits,
licenses or similar authorizations, if any, required to be obtained or
filed by Cliffs or the Cliffs Subsidiaries under any Environmental Law
in connection with any aspect of the business of Cliffs or the Cliffs
Subsidiaries, including without limitation those relating to the
treatment, storage, disposal or release of a hazardous substance or
solid waste, have been duly obtained or filed and will remain valid
and in effect after the Merger, and Cliffs and the Cliffs Subsidiaries
are in compliance with
17
<PAGE> 22
the terms and conditions of all such notices, permits, licenses and
similar authorizations; (iv) Cliffs and the Cliffs Subsidiaries have
satisfied and are currently in compliance with all financial
responsibility requirements applicable to their operations and imposed
by the U.S. Coast Guard and Minerals Management Service pursuant to
OPA (as hereinafter defined) or by any other governmental authority
under any other Environmental Law, and Cliffs and the Cliffs
Subsidiaries have not received any notice of noncompliance with any
such financial responsibility requirements; (v) to the knowledge of
Cliffs, there are no physical or environmental conditions existing on
any property of Cliffs and the Cliffs Subsidiaries or resulting from
Cliffs' or the Cliffs Subsidiaries' operations or activities, past or
present, at any location, that would give rise to any on-site or
off-site remedial obligations under any Environmental Laws; (vi) to
the knowledge of Cliffs, since the effective date of the relevant
requirements of all applicable Environmental Laws, all hazardous
substances or solid wastes generated by Cliffs or any of the Cliffs
Subsidiaries or used in connection with any of their properties or
operations have been transported only by carriers authorized under
Environmental Laws to transport such substances and wastes, and
disposed of only at treatment, storage and disposal facilities
authorized under Environmental Laws to treat, store or dispose of such
substances and wastes, and, to the knowledge of Cliffs, such carriers
and facilities have been and are operating in compliance with such
authorizations and are not the subject of any existing, pending or
overtly threatened action, investigation, or inquiry by any
governmental authority in connection with any Environmental Laws;
(vii) there has been no exposure of any person or property to
hazardous substances, solid waste, or any pollutant or contaminant,
nor has there been any release of hazardous substances, solid waste,
or any pollutant or contaminant into the environment by Cliffs or the
Cliffs Subsidiaries or in connection with any of their properties or
operations that could reasonably be expected to give rise to any claim
for damages or compensation; and (viii) Cliffs and the Cliffs
Subsidiaries have made or upon request will make available to R&B
Falcon true and correct copies of all internal and external
environmental audits and studies and all correspondence on substantial
environmental matters in the possession of Cliffs and the Cliffs
Subsidiaries relating to any of the current or former properties or
operations of Cliffs and the Cliffs Subsidiaries.
For purposes of this Agreement, the term "Environmental Laws"
shall mean any and all laws, statutes, ordinances, rules, regulations,
orders or determinations of any Governmental Authority (as hereinafter
defined) pertaining to health or the environment currently in effect
in any jurisdiction in which the party in question and its
subsidiaries own property or conduct business, or has owned property
or conducted business, including without limitation, the Clean Air
Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation
and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water
Act, as amended, the Toxic Substances Control Act, as amended, the
Hazardous & Solid Waste Amendments Act of 1984, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, the Oil Pollution
Act of 1990 ("OPA"), any state laws
18
<PAGE> 23
pertaining to the handling of oil and gas exploration and production
wastes or the use, maintenance and closure of pits and impoundments,
and all other environmental conservation or protection laws. For
purposes of this Agreement, the terms "hazardous substance" and
"release" have the meanings specified in CERCLA, and the terms "solid
waste" and "disposal" have the meanings specified in RCRA; provided,
however, that to the extent the laws of the state in which the
property is located establish a meaning for "hazardous substance,"
"release," "solid waste" or "disposal" that is broader than that
specified in either CERCLA or RCRA, such broader meaning shall apply.
For purposes of this Agreement, the term "Governmental Authority"
includes the United States, the state, county, city and political
subdivisions in which the party in question owns property or conducts
business, or has owned property or conducted business, and any agency,
department, commission, board, bureau or instrumentality of any of
them that exercises jurisdiction over the party in question.
(l) Severance Payments. Except as set forth in Section 2.2(l)
of the Cliffs Disclosure Letter or as contemplated by Section 3.6
hereof, none of Cliffs or the Cliffs Subsidiaries will owe a severance
payment or similar obligation to any of their respective employees,
officers or directors as a result of the Merger or the transactions
contemplated by this Agreement, nor will any of such persons be
entitled to severance payments or other benefits as a result of the
Merger or the transactions contemplated by this Agreement in the event
of the subsequent termination of their employment.
(m) Voting Requirements. The affirmative vote of the holders
of a majority of the outstanding shares of Cliffs Common Stock is the
only vote of the holders of any class or series of the capital stock
of Cliffs necessary to approve this Agreement and the Merger.
(n) No Excess Parachute Payments; Section 162(m) of the Code.
(i) Except as disclosed in Section 2.2(n) of the Cliffs Disclosure
Letter, any amount that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer or director of
Cliffs or any of its affiliates who is a "Disqualified Individual" (as
such term is defined in proposed Treasury Regulation 1.280G-1) under
any employment, severance or termination agreement, other compensation
arrangement or benefit plan currently in effect would not be
characterized as an "Excess Parachute Payment" (as such term is
defined in Section 280G(b)(1) of the Code).
(ii) Except as disclosed in Section 2.2(n) of the Cliffs
Disclosure Letter, the disallowance of a deduction under Section
162(m) of the Code for employee remuneration will not apply to any
amount paid or payable by Cliffs or the Surviving Corporation or any
of their subsidiaries under any contract, benefit plan, program,
arrangement or understanding currently in effect.
(o) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Cliffs
directly with R&B Falcon, without the intervention of any person on
behalf of Cliffs in such manner as to give rise to any valid claim by
any person against Cliffs, the Surviving Corporation, R&B Falcon or
any of their
19
<PAGE> 24
subsidiaries for a finders' fee, brokerage commission or similar
payment, other than the fee payable to Jefferies & Company, Inc. for
acting as Cliffs' financial advisor and rendering a fairness opinion
in connection with the Merger. Cliffs has provided R&B Falcon with a
true, correct and complete copy of the agreement between Cliffs and
Jefferies & Company, Inc., and Cliffs has no other agreements or
understandings (written or oral) with respect to such services.
(p) Labor Relations. Except as set forth in Section 2.2(p) of
the Cliffs Disclosure Letter, neither Cliffs nor any of the Cliffs
Subsidiaries is a party to, or bound by, any collective bargaining
agreement, contract or other agreement or understanding with respect
to a labor union or labor organization, and to the knowledge of
Cliffs, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or
threatened involving employees of Cliffs or any of the Cliffs
Subsidiaries. There are no unfair labor practice complaints against
Cliffs or any of the Cliffs Subsidiaries pending before the National
Labor Relations Board and there is no labor strike, dispute, slow down
or stoppage, or any union organizing campaign, actually pending or, to
the knowledge of Cliffs, threatened against Cliffs or any of the
Cliffs Subsidiaries, except for any such proceedings which would not
reasonably be expected to have a Cliffs MAE.
(q) Insurance. Section 2.2(q) of the Cliffs Disclosure Letter
sets forth a list and brief description of the insurance policies of
Cliffs and the Cliffs Subsidiaries relating to their properties and
the conduct of their business. All premiums due and arising thereon
have been paid and such policies are in full force and effect. True,
correct and complete copies of all such insurance policies have been
or upon request will be made available to R&B Falcon.
(r) State Takeover Laws. Cliffs and the Cliffs Subsidiaries
have taken all necessary action to approve the transactions
contemplated by this Agreement pursuant to Section 203 of the DGCL.
(s) Cliffs Rights Plan. The Board of Directors of Cliffs has
approved and Cliffs has executed, and contemporaneously with the
execution of this Agreement Cliffs has caused the rights agent under
the Cliffs Rights Plan to execute and deliver, an amendment to the
Cliffs Rights Plan that provides and specifically confirms that: (i)
neither this Agreement, the Merger nor any of the other transactions
contemplated hereby (A) will cause R&B Falcon or Sub to become an
"Acquiring Person," or result in the occurrence of a "Shares
Acquisition Date," a "Flip-In Event," a "Flip-Over Event" or a
"Distribution Date" (as defined in the Cliffs Rights Plan), or (B)
will permit any Person to have the right under the Cliffs Rights Plan
to acquire, or to make the rights under the Cliffs Rights Plan ever
exercisable for, any securities of R&B Falcon; and (ii) this
Agreement, the Merger, the other transactions and all actions of R&B
Falcon, Sub, the R&B Falcon Subsidiaries and any of their affiliates
contemplated hereby will not cause the rights under the Cliffs Rights
Plan to become separated from the Cliffs Common Stock or to become
exercisable.
20
<PAGE> 25
ARTICLE III
COVENANTS OF CLIFFS PRIOR TO THE EFFECTIVE TIME
Cliffs covenants and agrees as follows:
3.1 Conduct of Business by Cliffs Pending the Merger. From the date
of this Agreement until the Effective Time, unless R&B Falcon shall otherwise
agree in writing or as otherwise expressly contemplated by this Agreement or
set forth in Section 3.1 of the Cliffs Disclosure Letter:
(a) the business of Cliffs and the Cliffs Subsidiaries shall
be conducted only in, and Cliffs and the Cliffs Subsidiaries shall not
take any action except in, the ordinary course of business and
consistent with past practice;
(b) Cliffs shall not directly or indirectly: (i) issue, sell,
pledge, dispose of or encumber, or permit any Cliffs Subsidiary to
issue, sell, pledge, dispose of or encumber, any capital stock of
Cliffs or any Cliffs Subsidiary except upon the exercise of Cliffs
Options; (ii) amend or propose to amend the respective charters or
bylaws of Cliffs or any Cliffs Subsidiary; (iii) split, combine or
reclassify any outstanding capital stock, or declare, set aside or pay
any dividend or other distribution payable in cash, stock, property or
otherwise with respect to its capital stock whether now or hereafter
outstanding; (iv) redeem, purchase or acquire or offer to acquire, or
permit any of the Cliffs Subsidiaries to redeem, purchase or acquire
or offer to acquire, any of its or their capital stock; (v) enter into
any contract, agreement, commitment or arrangement with respect to any
of the matters set forth in this Section 3.1(b); (vi) except as
provided in Sections 3.6, 5.7, 5.8, 5.9 and 5.10, enter into, adopt or
(except as may be required by law and except for an amendment to the
Cliffs Stock Option Plans (or any option agreements existing
thereunder) to provide the Board of Directors of Cliffs with the power
to take the actions required pursuant to Section 5.9) amend or
terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase, pension,
retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for
the benefit or welfare of any director, officer or employee; (vii)
except as provided in Sections 3.6, 5.7, 5.8, 5.9 and 5.10, or in the
ordinary course of business consistent with past practice only with
respect to non-executive officer employees, increase in any manner the
compensation or fringe benefits of any director, officer or employee;
(viii) except as provided in Sections 3.6, 5.7, 5.8, 5.9 and 5.10,
pay to any director, officer or employee any benefit not required by
any employee benefit agreement, trust, plan, fund or other arrangement
as in effect on the date hereof; (ix) commence any legal proceedings
other than in accordance with past practice or settle any legal
proceedings or claims against Cliffs or any Cliffs Subsidiary not
covered by insurance for an amount or amounts in excess of $5,000,000
in the aggregate; or (x) lend or advance any funds or otherwise extend
credit to any person other than Cliffs or a Cliffs Subsidiary except
for advances to employees for business related expenses consistent
with past practice and trade credit extended in the ordinary course of
business;
21
<PAGE> 26
(c) Cliffs shall use its reasonable efforts (i) to preserve
intact the business organization of Cliffs and each of the Cliffs
Subsidiaries, (ii) to maintain in effect any authorizations or similar
rights of Cliffs and each of the Cliffs Subsidiaries, (iii) to keep
available the services of the current officers and key employees of
Cliffs and the Cliffs Subsidiaries, (iv) to preserve the goodwill of
those having business relationships with it and the Cliffs
Subsidiaries, (v) to maintain and keep its properties and the
properties of the Cliffs Subsidiaries in as good a repair and
condition as presently exists, except for deterioration due to
ordinary wear and tear and damage due to casualty; and (vi) to
maintain in full force and effect insurance comparable in amount and
scope of coverage to that currently maintained by it and the Cliffs
Subsidiaries;
(d) Without the prior written consent of R&B Falcon, which
consent will not be unreasonably withheld, Cliffs shall not make or
agree to make, or permit any of the Cliffs Subsidiaries to make or
agree to make, capital expenditures that in the aggregate exceed
$40,000,000 (excluding any capital expenditures (i) funded with
insurance proceeds or (ii) accrued or incurred prior to June 30, 1998
and reflected in the Cliffs SEC Filings);
(e) Without the prior written consent of R&B Falcon, which
consent will not be unreasonably withheld, Cliffs shall not, and shall
not permit any of the Cliffs Subsidiaries to (i) sell, pledge, dispose
of or encumber any material portion of its assets, (ii) incur, assume
or guarantee indebtedness for money borrowed, other than pursuant to
existing credit facilities (within the limits of such facilities as in
effect on the date hereof) or for indebtedness incurred in the
ordinary course of business that does not exceed $5,000,000 in the
aggregate, or (iii) prepay any indebtedness or other material
liability, except prepayments pursuant to revolving lines of credit
and prepayments made to obtain prepayment discounts consistent with
past practice;
(f) Cliffs shall not, and shall not permit any of the Cliffs
Subsidiaries to, authorize, propose or announce an intention to
authorize or propose, or enter into an agreement with respect to, any
merger, consolidation or business combination (other than the Merger)
or any acquisition of a material amount of assets or securities, or
otherwise acquire direct or indirect control over any other person,
except for (i) purchases of U.S. Treasury securities or U.S.
government agency securities, which in either case have maturities of
three years or less, (ii) other investments in connection with cash
management activities consistent with past practice, or (iii)
purchases of inventory, spares and replacements consistent with past
practice;
(g) Cliffs shall, and shall cause the Cliffs Subsidiaries to,
perform their respective obligations under any contracts and
agreements to which any of them is a party or to which any of their
assets is subject; and
(h) Cliffs shall not, and shall not permit any of the Cliffs
Subsidiaries to, take any action that would, or that reasonably could
be expected to, result in any of the representations and warranties
set forth in this Agreement becoming untrue or any of the conditions
to the
22
<PAGE> 27
Merger set forth in Article VI not being satisfied. Cliffs promptly
shall advise R&B Falcon orally and in writing of any change or event
having, or which, insofar as reasonably can be foreseen, would have, a
Cliffs MAE; and
(i) Cliffs shall, and shall cause the Cliffs Subsidiaries to,
make available to R&B Falcon and its representatives such information
with respect to the business and affairs of Cliffs and the Cliffs
Subsidiaries as R&B Falcon shall reasonably request, and shall confer
at all times as R&B Falcon may reasonably request with one or more
representatives of R&B Falcon with respect to Cliffs' material
operational matters and the general status of its operations.
3.2 Proxy Statement. Promptly after the date of this Agreement, Cliffs
shall prepare and file with the Commission under the Exchange Act, and shall
use its reasonable efforts to have cleared by the Commission, a proxy statement
(the "Proxy Statement") with respect to the meeting of stockholders of Cliffs
referred to in Section 3.3 and Cliffs shall cooperate with R&B Falcon in
preparing the Registration Statement (as defined in Section 4.2). Cliffs shall
cause (i) the Proxy Statement (except with respect to information concerning
R&B Falcon and the R&B Falcon Subsidiaries furnished in writing by or on behalf
of R&B Falcon specifically for use therein, for which information R&B Falcon
shall be responsible) to comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations adopted
thereunder, and (ii) the Registration Statement (with respect to information
concerning Cliffs and the Cliffs Subsidiaries furnished in writing by or on
behalf of Cliffs specifically for use therein) and the Proxy Statement (except
with respect to information concerning R&B Falcon and the R&B Falcon
Subsidiaries furnished in writing by or on behalf of R&B Falcon specifically
for use therein, for which information R&B Falcon shall be responsible) to not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading. Subject to the terms and conditions of Section 3.4, the Proxy
Statement shall contain the recommendation of the Board of Directors of Cliffs
that the stockholders of Cliffs vote to approve and adopt this Agreement and
the Merger. Cliffs will advise R&B Falcon promptly in writing if prior to the
Effective Time it shall obtain knowledge of any facts that would make it
necessary to amend or supplement the Proxy Statement or the Registration
Statement in order to make the statements therein not misleading or to comply
with applicable law.
3.3 Meeting of Stockholders of Cliffs. Subject to the terms and
conditions set forth in Section 3.4, Cliffs shall promptly take all action
reasonably necessary in accordance with the DGCL and the certificate of
incorporation and bylaws of Cliffs to convene a meeting of its stockholders to
consider and vote upon the adoption and approval of this Agreement and the
Merger. Subject to the terms and conditions set forth in Section 3.4, the Board
of Directors of Cliffs (i) shall recommend at such meeting that the
stockholders of Cliffs vote to adopt and approve this Agreement and the Merger;
(ii) shall use its reasonable efforts to solicit from stockholders of Cliffs
proxies in favor of such adoption and approval; and (iii) shall take all other
action reasonably necessary to secure a vote of its stockholders in favor of
the adoption and approval of this Agreement and the Merger.
23
<PAGE> 28
3.4 No Solicitation. From and after the date of this Agreement,
neither Cliffs nor any Cliffs Subsidiary shall, directly or indirectly, through
any officer, director, employee, representative or agent of Cliffs or any of
the Cliffs Subsidiaries, (i) solicit or knowingly encourage, including by way
of furnishing information, the initiation of any inquiries or proposals
regarding (A) any merger, tender offer, sale of shares of capital stock or
similar business combination transactions involving Cliffs or the Cliffs
Subsidiaries (other than (1) a merger of one or more wholly owned Cliffs
Subsidiaries with or into another wholly owned Cliffs Subsidiary or Cliffs, (2)
an issuance of Cliffs Common Stock in exchange for assets of another entity, or
(3) a merger of a wholly owned Cliffs Subsidiary with or into another entity in
which the surviving entity is a wholly owned Cliffs Subsidiary and the
securities of such entity outstanding prior to such merger are converted into
shares of Cliffs Common Stock; provided that the aggregate number of shares of
Cliffs Common Stock issued in connection with any and all transactions effected
in reliance upon clause (2) or (3) do not exceed 15% of the outstanding shares
of Cliffs Common Stock as of the date hereof), or (B) any sale of 15% or more
of the assets of Cliffs and the Cliffs Subsidiaries, taken as a whole (any of
the foregoing transactions being referred to herein as a "Cliffs Acquisition
Transaction"), (ii) negotiate, explore or otherwise engage in discussions with
any person (other than R&B Falcon, Sub or their respective directors, officers,
employees, agents and representatives) with respect to any Cliffs Acquisition
Transaction, or (iii) enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the Merger or any
other transactions contemplated by this Agreement; provided, however, that
nothing in this Section 3.4 or elsewhere in this Agreement shall prevent the
members of the Board of Directors of Cliffs from (i) furnishing information to
(but only pursuant to a confidentiality agreement substantially similar to the
Confidentiality Agreement between Cliffs and R&B Falcon dated August 7, 1998
(the "Confidentiality Agreement")) or entering into discussions or negotiations
with any person or group that makes an unsolicited bona fide written proposal
for a Cliffs Acquisition Transaction (an "Alternative Proposal"), if, and only
to the extent that, (A) the Board of Directors of Cliffs, based on the written
opinion of outside counsel, determines in good faith that such action is
required for the Board of Directors of Cliffs to comply with its fiduciary
duties to stockholders imposed by law, and (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, Cliffs provides written notice to R&B Falcon to the effect that it
is furnishing information to, or entering into negotiations with, such person
or group; (ii) failing to make or withdrawing or modifying its recommendation
referred to in Section 3.3 if (A) there exists an Alternative Proposal and the
Board of Directors of Cliffs, based on the written opinion of outside counsel,
determines in good faith that such action is required for the Board of
Directors of Cliffs to comply with its fiduciary duties to stockholders imposed
by law, (B) either such Alternative Proposal is not conditioned on the receipt
of financing or the Board of Directors of Cliffs has reasonably concluded in
good faith that the person or group making such Alternative Proposal will have
adequate sources of financing to consummate such Alternative Proposal, (C) the
Board of Directors of Cliffs has reasonably determined in good faith that such
Alternative Proposal is more favorable to the stockholders of Cliffs than the
Merger, and (D) the Board of Directors of Cliffs has received a written opinion
from a nationally-recognized investment banking firm to the effect that the
consideration to be received by stockholders of Cliffs in connection with such
Alternative Proposal is superior, from a financial point of view, to the
consideration to be received by them in
24
<PAGE> 29
the Merger; or (iii) to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Alternative Proposal.
3.5 Affiliate Letters. At least 30 days prior to the Closing Date,
Cliffs shall deliver to R&B Falcon a list, which shall be reasonably acceptable
to R&B Falcon, identifying all persons whom it believes are, at the time this
Agreement is submitted for approval to the stockholders of Cliffs, "affiliates"
of Cliffs for purposes of Rule 145 under the Securities Act. Cliffs shall
deliver or cause to be delivered to R&B Falcon on or prior to the Closing Date
a duly executed affiliate letter in the form of Exhibit A for each such
"affiliate" of Cliffs. R&B Falcon shall be entitled to place legends as
specified in such affiliate letters on the certificates evidencing any R&B
Falcon Common Stock to be received by such "affiliates" pursuant to the terms
of this Agreement and to issue appropriate stop transfer instructions to the
transfer agent for R&B Falcon Common Stock consistent with the terms of such
affiliate letters.
3.6 Waivers and Releases. Immediately prior to the Effective Time,
Cliffs shall pay to each executive officer identified on Schedule 3.6 hereto a
cash payment equal to the amount listed beside such executive officer's name on
Schedule 3.6 hereto as consideration for such executive officer's execution of
a waiver and release in a form to be mutually agreed by Cliffs and R&B Falcon
(the "Waiver and Release"). In the event it is determined that such payment to
any executive officer would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by the executive
officer with respect to such excise tax (such excise tax, together with any
interest and penalties, being referred to as the "Excise Tax"), then Cliffs
shall pay to such executive officer an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the executive officer of all
taxes, including without limitation, any income taxes and Excise Tax imposed
upon the Gross-Up Payment, the executive officer retains an amount of the
Gross-Up Payment equal to the Excise Tax on such payment. Cliffs shall deliver
or cause to be delivered on or prior to the Closing Date a duly executed Waiver
and Release for each such executive officer identified on Schedule 3.6.
3.7 Obtain Tax Opinion. Cliffs shall use its best efforts to obtain
the tax opinion referred to in Section 6.3(e) hereof.
ARTICLE IV
COVENANTS OF R&B FALCON PRIOR TO THE EFFECTIVE TIME
R&B Falcon covenants and agrees as follows:
4.1 Conduct of Business by R&B Falcon Pending the Merger. From the
date of this Agreement until the Effective Time, unless Cliffs shall otherwise
agree in writing or as otherwise expressly contemplated by this Agreement, the
business of R&B Falcon and the R&B Falcon Subsidiaries shall be conducted only
in the ordinary course of business consistent with past practice, and R&B
Falcon shall not, and shall not permit any of the R&B Falcon Subsidiaries to,
take any action (i) other than in the ordinary course of business consistent
with past practice or (ii) that would,
25
<PAGE> 30
or that reasonably could be expected to, result in any of the representations
and warranties set forth in this Agreement becoming untrue or any of the
conditions to the Merger set forth in Article VI not being satisfied. For
purposes hereof, acquisitions by R&B Falcon or any R&B Falcon Subsidiary of
entities or assets relating to or involved in the energy service business shall
be considered to be in the ordinary course of R&B Falcon's business consistent
with past practice. R&B Falcon promptly shall advise Cliffs orally and in
writing of any change or event having, or which, insofar as reasonably can be
foreseen, would have, a R&B Falcon MAE. R&B Falcon shall, and shall cause the
R&B Falcon Subsidiaries to, make available to Cliffs and its representatives
such information with respect to the business and affairs of R&B Falcon and the
R&B Falcon Subsidiaries as Cliffs shall reasonably request, and shall confer at
all times as Cliffs may reasonably request with one or more representatives of
Cliffs with respect to R&B Falcon's material operational matters and the
general status of its operations.
4.2 Registration Statement. Promptly after the date of this Agreement,
R&B Falcon will file a registration statement (the "Registration Statement") on
Form S-4 with the Commission under the Securities Act with respect to the
offering, sale and delivery of the shares of R&B Falcon Common Stock to be
issued pursuant to the Merger, and R&B Falcon shall cooperate with Cliffs in
preparing the Proxy Statement. R&B Falcon will use its reasonable efforts to
cause such Registration Statement to become effective as soon as practicable
after filing. R&B Falcon shall cause (i) the Registration Statement to comply
as to form in all material respects with the requirements of the Securities Act
and the Exchange Act and the respective rules and regulations adopted
thereunder, and (ii) the Registration Statement (except with respect to
information concerning Cliffs and the Cliffs Subsidiaries furnished in writing
by or on behalf of Cliffs specifically for use therein, for which information
Cliffs shall be responsible) and the Proxy Statement (but only with respect to
information concerning R&B Falcon and the R&B Falcon Subsidiaries furnished in
writing by or on behalf of R&B Falcon specifically for use therein, for which
information R&B Falcon shall be responsible) to not contain any untrue
statement of any material fact or omit to state any material fact required to
be stated therein or necessary to make the statements made therein not
misleading. R&B Falcon will advise Cliffs in writing if prior to the Effective
Time it shall obtain knowledge of any fact that would, in its opinion, make it
necessary to amend or supplement the Registration Statement in order to make
the statements therein not misleading or to comply with applicable law.
4.3 Adequate R&B Falcon Common Stock. R&B Falcon shall ensure that it
has adequate authorized and unissued shares of R&B Falcon Common Stock as of
the Effective Time to issue the required number of shares of R&B Falcon Common
Stock issuable pursuant to the Merger.
4.4 Stock Exchange Listing. R&B Falcon shall use all reasonable
efforts to cause the shares of R&B Falcon Common Stock to be issued in the
Merger and the shares of R&B Falcon Common Stock to be reserved for issuance
upon the exercise of Cliffs Options to be assumed by R&B Falcon in the Merger,
if any, to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance, prior to the Closing Date.
26
<PAGE> 31
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Accountants Letters.
(a) Cliffs shall use its reasonable efforts to cause Ernst &
Young LLP to deliver a letter dated as of the date of the Proxy
Statement, and addressed to Cliffs and R&B Falcon, in form and
substance reasonably satisfactory to R&B Falcon and customary in scope
and substance for agreed upon procedures letters delivered by
independent public accountants in connection with registration
statements and proxy statements similar to the Registration Statement
and Proxy Statement.
(b) R&B Falcon shall use its reasonable efforts to cause
Arthur Andersen LLP to deliver a letter dated as of the date of the
Registration Statement, and addressed to R&B Falcon and Cliffs, in
form and substance reasonably satisfactory to Cliffs and customary in
scope and substance for agreed upon procedures letters delivered by
independent public accountants in connection with registration
statements and proxy statements similar to the Registration Statement
and Proxy Statement.
5.2 Filings; Consents; Reasonable Efforts. Subject to the terms and
conditions of this Agreement, Cliffs and R&B Falcon shall (i) make all
necessary filings with respect to the Merger and this Agreement under the HSR
Act, the Securities Act, the Exchange Act and applicable blue sky or similar
securities laws and shall use all reasonable efforts to obtain required
approvals and clearances with respect thereto; (ii) obtain all consents,
waivers, approvals, authorizations and orders required in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the Merger; and (iii) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
5.3 Notification of Certain Matters. Cliffs shall give prompt notice
to R&B Falcon, and R&B Falcon shall give prompt notice to Cliffs, orally and in
writing, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any of its representations or
warranties contained in this Agreement to be untrue or inaccurate at any time
from the date hereof to the Effective Time, and (ii) any material failure by it
or any of its officers, directors, employees or agents to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder.
5.4 Agreement to Defend. If any claim, action, suit, investigation or
other proceeding by any governmental body or other person or other legal or
administrative proceeding is commenced that questions the validity or legality
of the transactions contemplated hereby or seeks damages in connection
therewith, the parties hereto agree to cooperate and use their reasonable
efforts to defend against and respond thereto.
27
<PAGE> 32
5.5 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, except
that expenses incurred in connection with printing and mailing the Registration
Statement and the Proxy Statement shall be shared equally by R&B Falcon and
Cliffs.
5.6 R&B Falcon's Board of Directors. R&B Falcon's Board of Directors
will take action to increase the number of directors comprising the full Board
of Directors of R&B Falcon at the Effective Time to eleven persons, and the
directors of R&B Falcon shall elect Douglas E. Swanson as a Class I director to
fill the vacancy created by the increase in the number of directors at or prior
to the Effective Time. If, prior to the Effective Time, Douglas E. Swanson
shall decline or be unable to serve, Cliffs shall designate another person to
serve in his stead, which designee shall be reasonably acceptable to R&B
Falcon.
5.7 Employment Agreements. As of the Effective Time, the Surviving
Corporation will enter into employment agreements with the executive officers
of Cliffs listed on Schedule 5.7 hereto in a form to be mutually agreed by
Cliffs and R&B Falcon providing for a salary and term equal to the salary and
term listed beside such employee's name under the columns headed "Salary" and
"Term" on Schedule 5.7 hereto. Cliffs shall use its reasonable efforts to cause
each such executive officer to deliver to R&B Falcon on or prior to the Closing
Date such an employment agreement.
5.8 Cliffs Employee Benefits.
(a) The amounts of target bonuses to employees of Cliffs and
the Cliffs Subsidiaries under the Cliffs Incentive Bonus Plan have
previously been determined by the Board of Directors of Cliffs. Final
bonuses shall be awarded based upon Cliffs' achievement of certain
financial and other targets for Cliffs for the fiscal year ending
December 31, 1998, in a manner consistent with the Cliffs Incentive
Bonus Plan and with the administration of the Cliffs Incentive Bonus
Plan in prior years. The final amount of bonuses shall be determined
by the Board of Directors of the Surviving Corporation and the Chief
Executive Officer of the Surviving Corporation as provided in the
Cliffs Incentive Bonus Plan. Bonuses under the Cliffs Incentive Bonus
Plan will be paid not later than February 28, 1999. Any employee of
Cliffs or a Cliffs Subsidiary who is terminated after the Closing Date
shall receive the full amount of any bonus to which such employee
would have been entitled under the Cliffs Incentive Bonus Plan but for
the termination of employment.
(b) As soon as practicable after the Effective Time, those
employees of Cliffs and the Cliffs Subsidiaries who become employees
of the Surviving Corporation or a subsidiary of the Surviving
Corporation or R&B Falcon or an R&B Falcon Subsidiary (the "Cliffs
Employees") shall be entitled to participate in the R&B Falcon 401(k)
savings and defined benefit pension plans in respect of their service
after the Effective Time to the same extent that employees of R&B
Falcon who are employed in comparable positions are entitled to
participate. R&B Falcon and Cliffs further agree that any such
employees shall be credited with their Cliffs service for purposes of
eligibility and vesting in such plans provided by
28
<PAGE> 33
R&B Falcon (but not for purposes of benefit accruals under the defined
benefit pension plan). Notwithstanding the preceding provisions of
this Section 5.8(b), the Cliffs Employees shall be permitted to
continue their active participation in the Cliffs Savings Plan until
such time as such employees are entitled to participate in the R&B
Falcon 401(k) and defined benefit pension plans.
(c) Cliffs shall, and shall cause the Cliffs Subsidiaries to,
if and to the extent requested by R&B Falcon prior to the Effective
Time, take all actions necessary (i) to amend or terminate the Cliffs
Executive Split Dollar Life Insurance Plan as so requested by R&B
Falcon, and (ii) to amend the Cliffs Compensation Deferral Plan to
provide that no further amounts may be deferred thereunder after the
Effective Time and that such plan shall terminate five years after the
Effective Time.
(d) As soon as practicable after the Effective Time, the
Cliffs Employees shall be entitled to participate in all other R&B
Falcon welfare plans (health, disability and life insurance, etc.) in
respect of their service after the Effective Time to the same extent
that employees of R&B Falcon who are employed in comparable positions
are entitled to participate; provided that life insurance benefits
will not be so provided to any person who continues to receive company
funded life insurance under the Cliffs Executive Split Dollar Life
Insurance Plan. R&B Falcon and Cliffs further agree that the Cliffs
Employees shall be credited for their service with Cliffs for purposes
of eligibility in such plans provided by R&B Falcon. The Cliffs
Employees' benefits under R&B Falcon's medical benefit plan shall not
be subject to any exclusions for any pre-existing conditions, and
credit shall be received for any deductibles or out-of-pocket amounts
previously paid by the Cliffs Employees.
(e) At the Effective Time, the obligation of Cliffs to issue
shares of Cliffs Common Stock pursuant to the Cliffs Compensation
Deferral Plan shall be assumed by R&B Falcon and shall thereafter
constitute an obligation of R&B Falcon to issue, on the same terms and
conditions as were applicable under the Cliffs Compensation Deferral
Plan, 1.7 shares of R&B Falcon Common Stock (rounded downward to the
nearest whole number) for each share of Cliffs Common Stock to be
issued thereunder. R&B Falcon shall ensure at all times that it has
sufficient authorized and unissued shares of R&B Falcon Common Stock
to issue in satisfaction of such obligation.
5.9 Cliffs Stock Options.
(a) At the Effective Time, each outstanding Cliffs Option
under either of the Cliffs Stock Option Plans, whether vested or
unvested, shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under the applicable
Cliffs Stock Option Plan and such Cliffs Option, 1.7 shares of R&B
Falcon Common Stock (rounded downward to the nearest whole number), at
a price per share (rounded upward to the nearest whole cent) equal to
(y) the exercise price per share for the shares of Cliffs Common Stock
purchasable pursuant to such Cliffs Option immediately prior to the
Effective Time divided by (z) 1.7.
29
<PAGE> 34
(b) Upon proper exercise after the Effective Time of any
Cliffs Option that has become, pursuant to this Section 5.9, an option
to acquire R&B Falcon Common Stock, R&B Falcon shall issue such shares
of R&B Falcon Common Stock to the holder exercising such option. R&B
Falcon shall ensure at all times that it has sufficient authorized and
unissued shares of R&B Falcon Common Stock to issue such shares upon
proper exercise of such options.
(c) As soon as practicable after the Effective Time, R&B
Falcon shall deliver to the participants in Cliffs Stock Option Plans
appropriate notice setting forth such participants' rights pursuant
thereto, and the grants pursuant to the Cliffs Stock Option Plans
shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 5.9 after giving effect to
the Merger).
(d) As soon as practicable after the Effective Time, R&B
Falcon shall file a registration statement on Form S-8 (or any
successor or other appropriate forms), or another appropriate form
with respect to the shares of R&B Falcon Common Stock subject to such
options and shall use its reasonable efforts to maintain the
effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain
outstanding.
(e) The Board of Directors of Cliffs shall, prior to or as of
the Effective Time, take all necessary actions, pursuant to and in
accordance with the terms of the Cliffs Stock Option Plans and the
instruments evidencing the Cliffs Options, to provide for the
conversion of the Cliffs Options into options to acquire R&B Falcon
Common Stock in accordance with this Section 5.9, and to ensure that
no consent of the holders of the Cliffs Options is required in
connection with such conversion.
5.10 New R&B Falcon Option Grants. As of the Effective Time, R&B
Falcon shall grant options to purchase R&B Falcon Common Stock under the R&B
Falcon 1998 Employee Long-Term Incentive Plan to each of the Cliffs employees
listed on Schedule 5.10 hereto in an amount equal to the number of options
listed beside each such employee's name under the column headed "New Option
Award" on Schedule 5.10 hereto. The exercise price of such options shall be
equal to the closing sales price of R&B Falcon Common Stock, as reported on the
New York Stock Exchange, on the date on which the Effective Time occurs. Such
options shall have a term of ten years and shall vest as to 50% of such options
on the first anniversary of the grant date, as to an additional 25% on the
second anniversary of the grant date, and as to the remaining 25% on the third
anniversary of the grant date. Such options shall otherwise be on terms and
conditions consistent with employee stock options granted by R&B Falcon prior
to the Effective Time.
5.11 Post-Effective Time Mailing. As soon as practicable following the
Effective Time, R&B Falcon shall cause to be mailed to each holder of
certificates that represented shares of Cliffs Common Stock immediately prior
to the Effective Time, at such holder's address as it appears on Cliffs's stock
transfer records, a letter of transmittal and other information advising such
holder of
30
<PAGE> 35
the consummation of the Merger along with information and instructions to
enable such holder to effect the exchange of stock certificates as contemplated
by Article I of this Agreement.
5.12. Tax-Free Reorganization.
(a) R&B Falcon and Cliffs shall each use its reasonable
efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368(a) of the Code.
(b) To the extent permitted under applicable tax laws, the
Merger shall be reported as a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code in all
federal, state and local Tax Returns after the Effective Time.
(c) R&B Falcon will cause the Surviving Corporation to hold
following the Merger at least 90% of the fair market value of its net
assets and at least 70% of the fair market value of its gross assets,
and at least 90% of the fair market value of Sub's net assets and 70%
of the fair market value of Sub's gross assets, held immediately prior
to the Merger. For purposes of the preceding sentence, amounts paid
by Cliffs to its stockholders who receive cash or other property, to
pay reorganization expenses, and in connection with redemptions and
distributions (except for regular, normal distributions), will be
treated as assets of Cliffs immediately prior to the Merger.
5.13 Indemnification.
(a) From and after the Effective Time, R&B Falcon and the
Surviving Corporation shall, subject to the proviso at the end of this
Section 5.13(a), indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer, director or employee
of Cliffs or any of the Cliffs Subsidiaries (the "Indemnified
Parties") against losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be
unreasonably withheld) of or in connection with a claim, action, suit,
proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a
director, officer or employee of Cliffs or any of the Cliffs
Subsidiaries, whether pertaining to any matter existing or occurring
at or prior to the Effective Time and whether reasserted or claimed
prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including without limitation, all Indemnified
Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement, the Merger or the
transactions contemplated hereby, AND SPECIFICALLY INCLUDING ANY
INDEMNIFIED LIABILITY THAT MAY BE BASED ON THE SOLE OR CONTRIBUTORY
NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR GROSS) OF ANY INDEMNIFIED
PARTY, and R&B Falcon and the Surviving Corporation shall, subject to
the proviso at the end of this Section 5.13(a), pay expenses in
advance of the final disposition of any such action or proceeding to
each Indemnified Party; provided, however, that in no event shall R&B
Falcon or the Surviving Corporation be required to indemnify any
Indemnified Party or advance any expenses on
31
<PAGE> 36
behalf of any Indemnified Party pursuant to this Section 5.13 to any
greater extent than Cliffs would have been required to so indemnify or
advance expenses pursuant to the certificate of incorporation or
bylaws of Cliffs or contractual indemnification agreements binding on
Cliffs, each as in existence on August 11, 1998.
(b) The defense of any such claim, action, suit, proceeding or
investigation shall be conducted by R&B Falcon and the Surviving
Corporation. If R&B Falcon or the Surviving Corporation has failed to
conduct such defense or counsel for the Indemnified Parties has
advised the Indemnified Parties that there are substantive issues that
raise conflicts of interest between R&B Falcon or the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them and, subject to Section 5.13(a),
R&B Falcon and the Surviving Corporation shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received. The party not conducting the defense
will use reasonable efforts to assist in the vigorous defense of any
such matter, provided that such party shall not be liable for any
settlement of any claim effected without its written consent, which
consent, however, shall not be unreasonably withheld. Any Indemnified
Party wishing to claim indemnification under this Section 5.13, upon
learning of any such claim, action, suit, proceeding or investigation,
shall notify R&B Falcon and the Surviving Corporation (but the failure
so to notify shall not relieve them from any liability which they may
have under this Section 5.13 except to the extent such failure
materially prejudices them). If R&B Falcon and the Surviving
Corporation are responsible for the attorneys' fees of the Indemnified
Parties, then the Indemnified Parties as a group may retain only one
law firm to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or
more Indemnified Parties.
(c) The Surviving Corporation shall purchase and maintain for
a period of six years after the Effective Time continuation coverage
for runoff liability with respect to Cliffs' (i) directors' and
officers' liability insurance policy as in effect on August 11, 1998
(or obtain a directors' and officers' liability insurance policy for
the benefit of those persons covered by Cliffs' current directors' and
officers' liability insurance policy with comparable coverage) and
(ii)fiduciary liability policy, commercial crime policy and special
crime policy as in effect on August 11, 1998 (or obtain similar
policies for those persons currently covered thereby with comparable
coverage). R&B Falcon will cause its fiduciary liability policy to be
endorsed to cover the individuals acting as fiduciaries for Cliffs
subsequent to the Effective Date.
5.14 Cliffs Rights Plan. Cliffs shall take or cause to be taken all
further action reasonably necessary pursuant to the Cliffs Rights Plan in order
to prevent the rights issuable thereunder from becoming exercisable as a result
of the execution of this Agreement, the Merger or the consummation of any of
the transactions contemplated hereby.
32
<PAGE> 37
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement shall have been approved and adopted by the
requisite vote of the stockholders of Cliffs, as may be required by
law, and by the rules of the New York Stock Exchange, respectively,
and by any applicable provisions of Cliffs' certificate of
incorporation or bylaws;
(b) The waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired
or been terminated;
(c) No order shall have been entered and remain in effect in
any action or proceeding before any foreign, federal or state court or
governmental agency or other foreign, federal or state regulatory or
administrative agency or commission that would prevent or make illegal
the consummation of the Merger;
(d) The Registration Statement shall be effective (and remain
effective on the Closing Date), and all post-effective amendments
filed shall have been declared effective or shall have been withdrawn;
and no stop- order suspending the effectiveness thereof shall have
been issued and no proceedings for that purpose shall have been
initiated or, to the knowledge of the parties, threatened by the
Commission;
(e) There shall have been obtained any and all material
permits, approvals and consents of securities or blue sky commissions
of any jurisdiction, and of any other governmental body or agency,
that reasonably may be deemed necessary so that the consummation of
the Merger and the transactions contemplated thereby will be in
compliance with applicable laws, the failure to comply with which
would have a material adverse effect on the business, financial
condition or results of operations of the Surviving Corporation and
its subsidiaries, taken as a whole, after consummation of the Merger;
(f) The shares of R&B Falcon Common Stock issuable upon
consummation of the Merger and the shares of R&B Falcon Common Stock
issuable upon exercise of any Cliffs Options that are to become
options to purchase R&B Falcon Common Stock pursuant to Section 5.9
shall have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance; and
(g) All approvals of private persons or corporations, (i) the
granting of which is necessary for the consummation of the Merger or
the transactions contemplated in connection therewith and (ii) the
non-receipt of which would have a material adverse effect
33
<PAGE> 38
on the business, financial condition or results of operations of the
Surviving Corporation and its subsidiaries, taken as a whole after the
consummation of the Merger, shall have been obtained.
6.2 Additional Conditions to Obligations of R&B Falcon. The obligation
of R&B Falcon to effect the Merger is, at the option of R&B Falcon, also
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) The representations and warranties of Cliffs contained in
Section 2.2 shall be accurate as of the date of this Agreement and
(except to the extent such representations and warranties speak
specifically as of an earlier date) as of the Closing Date as though
such representations and warranties had been made at and as of that
time; all of the terms, covenants and conditions of this Agreement to
be complied with and performed by Cliffs on or before the Closing Date
shall have been duly complied with and performed in all material
respects; and a certificate to the foregoing effect dated the Closing
Date and signed by the chief executive officer of Cliffs shall have
been delivered to R&B Falcon;
(b) Since the date of this Agreement, no material adverse
change in the financial condition, results of operations or business
of Cliffs and the Cliffs Subsidiaries, taken as a whole, shall have
occurred (other than as a result of material adverse changes affecting
the contract drilling industry generally or the U.S. economy
generally), and no Cliffs MAE shall have occurred, and R&B Falcon
shall have received a certificate signed by the chief executive
officer of Cliffs dated the Closing Date to such effect;
(c) The Board of Directors of R&B Falcon shall have received
from Donaldson, Lufkin & Jenrette Securities Corporation, financial
advisor to R&B Falcon, a written opinion, dated as of the date of this
Agreement, satisfactory in form and substance to the Board of
Directors of R&B Falcon, to the effect that the conversion ratio of
1.7 shares of R&B Falcon Common Stock to be issued for each share of
Cliffs Common Stock pursuant to the Merger is fair to the stockholders
of R&B Falcon from a financial point of view, which opinion shall have
been confirmed in writing to such Board as of the date the Proxy
Statement is first mailed to the stockholders of Cliffs and shall not
have been subsequently withdrawn;
(d) Cliffs shall have received, and furnished written copies
to R&B Falcon of, each of the Cliffs affiliate letters required
pursuant to Section 3.5;
(e) Cliffs shall have received, and furnished written copies
to R&B Falcon of, each Waiver and Release required pursuant to Section
3.6; and
(f) R&B Falcon shall have received from Griggs & Harrison,
P.C., counsel to Cliffs, an opinion dated the Closing Date in form and
substance reasonably acceptable to R&B Falcon covering such matters as
are customary in similar transactions.
34
<PAGE> 39
6.3 Additional Conditions to Obligations of Cliffs. The obligation of
Cliffs to effect the Merger is, at the option of Cliffs, also subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) The representations and warranties of R&B Falcon and Sub
contained in Section 2.1 shall be accurate as of the date of this
Agreement and (except to the extent such representations and
warranties speak specifically as of an earlier date) as of the Closing
Date as though such representations and warranties had been made at
and as of that time; all the terms, covenants and conditions of this
Agreement to be complied with and performed by R&B Falcon or Sub on or
before the Closing Date shall have been duly complied with and
performed in all material respects; and a certificate to the foregoing
effect dated the Closing Date and signed by the chief executive
officer of R&B Falcon shall have been delivered to Cliffs;
(b) Since the date of this Agreement, no material adverse
change in the financial condition, results of operations or business
of R&B Falcon and the R&B Falcon Subsidiaries, taken as a whole, shall
have occurred (other than as a result of material adverse changes
affecting the contract drilling industry generally or the U.S. economy
generally), and no R&B Falcon MAE shall have occurred, and Cliffs
shall have received a certificate signed by the chief executive
officer of R&B Falcon dated the Closing Date to such effect;
(c) The Board of Directors of Cliffs shall have received from
Jefferies & Company, Inc., financial advisor to Cliffs, a written
opinion, dated as of the date of this Agreement, satisfactory in form
and substance to the Board of Directors of Cliffs, to the effect that
the conversion ratio of 1.7 shares of R&B Falcon Common Stock to be
issued for each share of Cliffs Common Stock pursuant to the Merger is
fair to the stockholders of Cliffs from a financial point of view,
which opinion shall have been confirmed in writing to such Board as of
the date the Proxy Statement is first mailed to the stockholders of
Cliffs and shall not have been subsequently withdrawn;
(d) Cliffs shall have received from Gardere Wynne Sewell &
Riggs, L.L.P., counsel to R&B Falcon, an opinion dated the Closing
Date in form and substance reasonably acceptable to Cliffs covering
such matters as are customary in similar transactions; and
(e) Cliffs shall have received a written opinion dated as of
the Closing Date to the effect that for U.S. federal income tax
purposes (i) the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, (ii) R&B Falcon, Sub and Cliffs
will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, and (iii) Cliffs and the stockholders of
Cliffs will not recognize any gain or loss as a result of the Merger,
other than to the extent such stockholders receive cash in lieu of
fractional shares. In rendering such opinion, counsel may require and
rely upon (and may incorporate by reference) representations and
covenants to the extent reasonable, including those contained in
certificates of officers and/or directors of R&B Falcon, Cliffs and
Sub and others. Cliffs shall have received executed copies of the
certificates of officers and directors
35
<PAGE> 40
of Cliffs, R&B Falcon, Sub and others that may reasonably be required
by counsel in connection with the tax opinions referred to in this
Section 6.3(e).
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated and the Merger and
the other transactions contemplated herein may be abandoned at any time prior
to the Effective Time, whether prior to or after approval by the stockholders
of Cliffs:
(a) by mutual consent of R&B Falcon and Cliffs;
(b) by either R&B Falcon or Cliffs if the Merger has not been
effected on or before February 28, 1999; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not
be available to a party whose failure to fulfill any obligation under
this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date;
(c) by R&B Falcon if the condition set forth in Section 6.2(c)
is not satisfied;
(d) by Cliffs if the condition set forth in Section 6.3(c) is
not satisfied;
(e) by either R&B Falcon or Cliffs if a final, unappealable
order of a judicial or administrative authority of competent
jurisdiction to restrain, enjoin or otherwise prevent a consummation
of this Agreement or the transactions contemplated in connection
herewith shall have been entered;
(f) by either R&B Falcon or Cliffs if the required approval of
the stockholders of Cliffs provided for in Section 3.3 is not received
in a vote duly taken at the Cliffs stockholders' meeting;
(g) by R&B Falcon if (i) since the date of this Agreement
there has been a material adverse change in the results of operations,
financial condition or business of Cliffs and the Cliffs Subsidiaries,
taken as a whole (other than as a result of material adverse changes
affecting the contract drilling industry generally or the U.S. economy
generally), or (ii) there has been a breach of any representation or
warranty or covenant set forth in this Agreement by Cliffs which
breach has not been cured within 30 days following receipt by Cliffs
of notice of such breach;
(h) by Cliffs if (i) since the date of this Agreement there
has been a material adverse change in the results of operations,
financial condition or business of R&B Falcon and the R&B Falcon
Subsidiaries, taken as a whole (other than as a result of material
adverse changes affecting the contract drilling industry generally or
the U.S. economy generally), or
36
<PAGE> 41
(ii) there has been a breach of any representation or warranty or
covenant set forth in this Agreement by R&B Falcon which breach has
not been cured within 30 days following receipt by R&B Falcon of
notice of such breach; or
(i) by R&B Falcon if the Board of Directors of Cliffs
exercises its right pursuant to Section 3.4 not to convene a meeting
of the Cliffs stockholders to approve the Merger or to withdraw or
otherwise change its recommendation that the Cliffs stockholders
approve the Merger.
7.2 Effect of Termination.
(a) In the event of any termination of this Agreement pursuant
to Section 7.1, (i) the provisions of the Confidentiality Agreement
and the provisions of Section 5.5 shall survive any such termination,
and (ii) such termination shall not relieve any party from liability
for any breach of this Agreement, provided that a party's liability
for any such breach shall be limited to that set forth in the
provisions of this Section 7.2.
(b) If this Agreement is terminated (i) pursuant to Section
7.1(d) and Cliffs is not entitled to terminate this Agreement pursuant
to Section 7.1(h)(i), or (ii) pursuant to Section 7.1(f), 7.1(g)(ii)
or 7.1(i), then Cliffs shall promptly, but in no event later than five
business days after written request by R&B Falcon, pay to R&B Falcon
an amount equal to $15,000,000 as liquidated damages.
(c) If this Agreement is terminated (i) pursuant to Section
7.1(c) and R&B Falcon is not entitled to terminate this Agreement
pursuant to Section 7.1(g)(i), or (ii) pursuant to Section 7.1(h)(ii),
then R&B Falcon shall promptly, but in no event later than five
business days after written request by Cliffs, pay to Cliffs an amount
equal to $15,000,000 as liquidated damages.
(d) If this Agreement is terminated (i) pursuant to Section
7.1(d) and Cliffs is not entitled to terminate this Agreement pursuant
to Section 7.1(h)(i), or (ii) pursuant to Section 7.1(f), 7.1(g)(ii)
or 7.1(i), or if Cliffs terminates this Agreement pursuant to Section
7.1(b), and (A) after the date of this Agreement but at or before the
time this Agreement is terminated a Cliffs Acquisition Transaction
shall have been made known to Cliffs or shall have been made directly
to Cliffs stockholders or any person shall have publicly announced an
intention to effect a Cliffs Acquisition Transaction, and (B) any
Cliffs Acquisition Transaction (whether the same or different from the
one referenced in clause (A)) is consummated at any time within one
year after the date of termination of this Agreement, then Cliffs
shall promptly pay to R&B Falcon the sum of $30,000,000, less any
amounts previously paid by Cliffs to R&B Falcon pursuant to Section
7.2(b).
7.3 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is, or whose stockholders are, entitled to
the benefits thereof. This Agreement may not be amended or supplemented at any
time, except by an instrument in writing signed on behalf
37
<PAGE> 42
of each party hereto, provided that after this Agreement has been approved and
adopted by the stockholders of Cliffs, this Agreement may be amended only as
may be permitted by applicable provisions of the DGCL. The waiver by any party
hereto of any condition or of a breach of another provision of this Agreement
shall not operate or be construed as a waiver of any other condition or
subsequent breach. The waiver by any party hereto of any of the conditions
precedent to its obligations under this Agreement shall not preclude it from
seeking redress for breach of this Agreement other than with respect to the
condition so waived.
7.4 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants or agreements in this Agreement
shall survive the Effective Time, except for the terms of Article I, Section
2.1(h), Sections 5.8, 5.9, 5.11, 5.12 and 5.13, and Article VII.
7.5 Public Statements. Cliffs and R&B Falcon agree to consult with
each other prior to issuing any press release or otherwise making any public
statement with respect to the transactions contemplated hereby, and shall not
issue any such press release or make any such public statement without the
consent of the other, except as may be required by law or applicable stock
exchange rules.
7.6 Assignment. This Agreement shall inure to the benefit of and will
be binding upon the parties hereto and their respective legal representatives,
successors and permitted assigns. Except as set forth in this Agreement, this
Agreement shall not be assignable by the parties hereto.
7.7 Notices. All notices, requests, demands, claims and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given if (i)
delivered in person or by courier, (ii) sent by confirmed telecopy or facsimile
transmission, or (iii) mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following addresses:
if to Cliffs: Cliffs Drilling Company
300 Citicorp Center
1200 Smith Street
Houston, Texas 77002
Attention: Douglas E. Swanson
with a copy to: Griggs & Harrison, P.C.
1301 McKinney, Suite 3200
Houston, Texas 77010
Attention: W. Garney Griggs
if to R&B Falcon
or Sub: R&B Falcon Drilling Corporation
901 Threadneedle
Houston, Texas 77079
Attention: Steven A. Webster
38
<PAGE> 43
with a copy to: Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay, Suite 800
Houston, Texas 77002
Attention: Frank M. Putman
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section 7.7. Such notices shall be
effective, (i) if delivered in person or by courier, upon actual receipt by the
intended recipient, (ii) if sent by telecopy or facsimile transmission, on the
date indicated by the confirmation, or (iii) if mailed, upon the earlier of
five days after deposit in the mail and the date of delivery as shown by the
return receipt therefor.
7.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the substantive law of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
7.9 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provision, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated.
7.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
7.11 Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
7.12 Entire Agreement; Third Party Beneficiaries. This Agreement and
the Confidentiality Agreement constitute the entire agreement and supersede all
other prior agreements and understandings, both oral and written, among the
parties or any of them, with respect to the subject matter hereof and neither
this nor any document delivered in connection with this Agreement confers upon
any person not a party hereto any rights or remedies hereunder except as
provided in Sections 5.7, 5.8, 5.9, 5.10 and 5.13, which are intended for the
benefit of, and shall be enforceable by, the Indemnified Parties and their
heirs or representatives or the employees described therein, as applicable.
7.13 Disclosure Letters.
(a) The Cliffs Disclosure Letter, executed by Cliffs as of the
date hereof, and delivered to R&B Falcon on the date hereof, contains
all disclosure required to be made by Cliffs under the various terms
and provisions of this Agreement. Each item of disclosure set forth in
the Cliffs Disclosure Letter specifically refers to the Article and
Section of the
39
<PAGE> 44
Agreement to which such disclosure responds, and shall not be deemed
to be disclosed with respect to any other Article or Section of the
Agreement.
(b) The R&B Falcon Disclosure Letter, executed by R&B Falcon
as of the date hereof, and delivered to Cliffs on the date hereof,
contains all disclosure required to be made by R&B Falcon under the
various terms and provisions of this Agreement. Each item of
disclosure set forth in the R&B Falcon Disclosure Letter specifically
refers to the Article and Section of the Agreement to which such
disclosure responds, and shall not be deemed to be disclosed with
respect to any other Article or Section of the Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
THE NEXT PAGE IS THE SIGNATURE PAGE.]
40
<PAGE> 45
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
CLIFFS DRILLING COMPANY
BY: /s/ DOUGLAS E. SWANSON
-----------------------------------
Douglas E. Swanson, President
R&B FALCON CORPORATION
BY: /s/ STEVEN A. WEBSTER
-----------------------------------
Steven A. Webster, President
RBF CLIFFS ACQUISITION CORP.
BY: /s/ STEVEN A. WEBSTER
-----------------------------------
Steven A. Webster, President
41
<PAGE> 1
EXHIBIT 4.3.1
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO RIGHTS AGREEMENT (this "Amendment") is entered
into as of August 20, 1998 by and between CLIFFS DRILLING COMPANY, a Delaware
corporation (the "Company"), and HARRIS TRUST AND SAVINGS BANK, as Rights Agent
(the "Rights Agent"), amending the Rights Agreement dated June 17, 1997 between
the Company and the Rights Agent (the "Rights Agreement").
WHEREAS, the Board of Directors of the Company has approved an
Agreement and Plan of Merger (the "Merger Agreement") by and among the Company,
R&B Falcon Corporation, a Delaware corporation ("RBF"), and RBF Cliffs
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of RBF
("RBF Subsidiary"), providing for the acquisition of the Company by RBF by means
of a merger of RBF Subsidiary with and into the Company;
WHEREAS, the willingness of RBF and RBF Subsidiary to enter into the
Merger Agreement is conditioned on, among other things, the amendment of the
Rights Agreement on the terms set forth herein;
WHEREAS, Section 27 of the Rights Agreement provides that, among other
things, prior to the Distribution Date (as defined therein) and subject to the
restrictions set forth in such Section, the Company may, and the Rights Agent
shall if the Company so directs, supplement or amend any provision of the Rights
Agreement without the approval of any holders of Rights (as defined therein);
WHEREAS, the Board of Directors has determined that it is in the best
interests of the Company and its stockholders to amend the Rights Agreement to
exempt the Merger Agreement and the transactions contemplated thereby from the
application of the Rights Agreement.
NOW, THEREFORE, in consideration of the premises and agreements set
forth in the Rights Agreement and this Amendment, the Company directs changes to
the Rights Agreement as follows:
1. Section 1 of the Rights Agreement is hereby amended by adding the
following definitions thereto:
"Merger Agreement" shall mean the Agreement and Plan of Merger dated
August 21, 1998 by and among the Company, RBF and RBF Subsidiary, as
the same may be amended in accordance with the terms thereof.
"RBF" shall mean R&B Falcon Corporation, a Delaware corporation.
"RBF Subsidiary" shall mean RBF Cliffs Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of RBF.
<PAGE> 2
2. The definition of "Acquiring Person" in Section 1 of the Rights
Agreement is hereby amended by adding to the end thereof the following:
"Notwithstanding anything to the contrary contained herein, so long as
the Merger Agreement has not been terminated pursuant to the terms
thereof, neither RBF nor RBF Subsidiary nor any Affiliate or Associate
of RBF or RBF Subsidiary shall be or become an "Acquiring Person" (and
no Shares Acquisition Date shall occur) by reason of the approval,
execution, delivery or performance of the Merger Agreement or the
announcement or consummation of the transactions contemplated thereby."
3. Section 3(b) of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"Notwithstanding anything to the contrary contained herein, so long as
the Merger Agreement has not been terminated pursuant to the terms
thereof, a Distribution Date shall not be deemed to have occurred as a
result of the approval, execution, delivery or performance of the
Merger Agreement or the announcement or consummation of the
transactions contemplated thereby."
4. Section 11(a)(ii) of the Rights Agreement is hereby amended by
adding to the end thereof the following:
"Notwithstanding anything to the contrary contained herein, so long as
the Merger Agreement has not been terminated pursuant to the terms
thereof, the provisions of this Section 11(a)(ii) will not apply to or
be triggered by, and a Flip-In Event shall not be deemed to have
occurred as a result of, the approval, execution, delivery or
performance of the Merger Agreement or the announcement or consummation
of the transactions contemplated thereby."
5. Section 13 of the Rights Agreement is hereby amended by adding to
the end thereof the following:
"(c) Notwithstanding anything to the contrary contained herein, so long
as the Merger Agreement has not been terminated pursuant to the terms
thereof, the provisions of this Section 13 will not apply to or be
triggered by, and a Flip-Over Event shall not be deemed to have
occurred as a result of, the approval, execution, delivery or
performance of the Merger Agreement or the announcement or consummation
of the transactions contemplated thereby."
6. The Rights Agreement is hereby amended by adding the following
section after Section 33:
"Section 34. Merger Agreement. Notwithstanding any provision herein to
the contrary, so long as the Merger Agreement has not been terminated
pursuant to the terms thereof,
<PAGE> 3
neither RBF nor RBF Subsidiary shall be considered an Acquiring Person
under this Agreement and no Shares Acquisition Date, Flip-In Event,
Flip-Over Event or Distribution Date shall occur in any such case as
the result of the approval, execution, delivery or performance of the
Merger Agreement or the announcement or consummation of the
transactions contemplated thereby. Additionally, notwithstanding any
provision herein to the contrary, any Rights evidenced by and attached
to any certificates representing shares of the Common Stock shall cease
to exist upon conversion of such shares of Common Stock into shares of
common stock of RBF pursuant to the Merger Agreement, and no Rights
shall attach to any shares of the common stock of RBF issued pursuant
to the Merger Agreement."
7. The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Amendment.
8. The term "Agreement" as used in the Rights Agreement shall be deemed
to refer to the Rights Agreement as amended by this Amendment.
9. Except as expressly set forth herein, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the Rights
Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
10. This Amendment may be executed in two counterparts, each of which
shall be deemed an original, and both of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as the of date first above written.
CLIFFS DRILLING COMPANY
Attest:
/s/ CINDY B. TAYLOR By: /s/ EDWARD A. GUTHRIE
---------------------------- -------------------------------
Cindy B. Taylor Edward A. Guthrie
Secretary Vice President-Finance
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
Attest:
/s/ RAY G. ROSENBAUM By: /s/ LORRAINE RODEWALD
------------------------------ --------------------------------
Name: Ray G. Rosenbaum Name: Lorraine Rodewald
Title: Vice President Title: Assistant Vice President
<PAGE> 1
EXHIBIT 10.23.1
AMENDMENT NO. 1 TO
CLIFFS DRILLING COMPANY
COMPENSATION DEFERRAL PLAN
THIS AMENDMENT NO. 1 TO CLIFFS DRILLING COMPANY COMPENSATION DEFERRAL
PLAN (this "Amendment") is entered into effective as of August 20, 1998 (the
"Effective Date") by CLIFFS DRILLING COMPANY, a Delaware corporation (the
"Company").
WHEREAS, the Company adopted a compensation deferral plan (the "Plan")
effective as of January 1, 1998 pursuant to that certain Cliffs Drilling Company
Compensation Deferral Plan (the "Plan Document");
WHEREAS, the Company is the Sponsor of the Plan;
WHEREAS, Section 9.1 of the Plan Document provides that the Sponsor may
at any time modify or amend the Plan subject to certain restrictions set forth
in Section 9.2; and
WHEREAS, the Company desires to amend certain terms of the Plan.
NOW, THEREFORE, the Plan Document shall be amended as follows:
1. Section 9.2 of the Plan Document is hereby deleted and replaced in
its entirety by the following:
"9.2 LIMITATIONS ON RIGHT TO AMEND. If the Plan is amended in
any manner, the nonforfeitable percentage of the balance of each
Account (determined as of the later of the date of the adoption of the
amendment or of the effective date of the amendment) of each
Participant shall not be less than such nonforfeitable percentage
computed under the Plan without regard to such amendment. No amendment
shall decrease the Account balance of a Participant. If any Employer is
subject to the Securities Act of 1934 (the "34 Act"), the Plan shall
not be amended more than once every six months, other than to comport
with changes in the Code, ERISA, or the rules thereunder, in any manner
that would create liability to a Participant under Section 16 of the 34
Act with respect to such Participant's Account. The elimination of one
or more forms of benefit payment, whether with respect to benefits
attributable to service before the amendment or service after the
amendment, shall not be prohibited under this Section."
2. This Amendment shall be effective as of the Effective Date.
3. The term "Plan Document" as used in the Plan Document shall be
deemed to refer to the Plan Document as amended by this Amendment.
<PAGE> 2
4. Except as expressly set forth herein, this Amendment shall not by
implication or otherwise alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the Plan
Document, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to be duly
executed as the of date first above written.
CLIFFS DRILLING COMPANY
Attest:
/s/ CINDY B. TAYLOR By: /s/ EDWARD A. GUTHRIE
-------------------------------- -----------------------------
Cindy B. Taylor Edward A. Guthrie
Secretary Vice President-Finance
2
<PAGE> 1
EXHIBIT 99.1
[R & B FALCON LOGO] [CLIFFS DRILLING COMPANY LOGO]
For additional information contact: Charles R. Ofner
R&B Falcon Corporation
(281) 496-5000
Edward A. Guthrie
Cliffs Drilling Company
(713) 651-9426
R&B FALCON CORPORATION AND CLIFFS DRILLING COMPANY ANNOUNCE
EXECUTION OF DEFINITIVE MERGER AGREEMENT
Houston, Texas, August 21, 1998.... R&B Falcon Corporation ("R&B
Falcon") (NYSE:FLC) and Cliffs Drilling Company ("Cliffs Drilling") (NYSE:CDG)
announced today the signing of a definitive merger agreement for the merger of
the two companies.
Under the terms of the definitive agreement, which has been approved by the
Boards of Directors of both companies, each share of common stock of Cliffs
Drilling will be exchanged for 1.7 shares of newly issued common stock of R&B
Falcon. The exchange of shares for both companies is expected to be tax-free,
and transaction will be accounted for as a purchase.
The merger will result in an expanded shallow water presence for R&B Falcon
with the addition of sixteen Cliffs Drilling jackups, ten of which operate in
the U.S. Gulf of Mexico. Cliffs Drilling's international jackup rigs are
working in Trinidad, Venezuela, Mexico and Qatar. R&B Falcon already operates
the industry's largest fleet of transition zone rigs, and this merger will make
R&B Falcon the world's largest operator of jackup drilling rigs with forty-two
units in service. Additionally, the merger will add three self-contained
platform rigs working in Trinidad and Brazil, eleven land rigs in Venezuela,
and four mobile offshore production units (MOPU's) working in the U.S. Gulf of
Mexico, Qatar and Nigeria.
In addition to its continuing expansion in shallow water, R&B Falcon remains
focused on developing the industry's leading market position in ultra deep
water. Including units under construction, R&B Falcon has a fleet of 15
semisubmersibles and drillships capable of operating in excess of 3000' water
depths.
Douglas E. Swanson, Chairman of the Board and CEO of Cliffs Drilling, will
become the head of a third business unit of the Company, focusing on expanding
business opportunities in Venezuela and the international shallow water markets
for both current Cliffs Drilling and R&B Falcon jackups and inland barges. In
this regard, the Cliffs Drilling well engineering and management services group
is expected to play a major role by expanding market opportunities via turnkey
and integrated services drilling contracts. Mr. Swanson will also become a
member of the Board of Directors of R&B Falcon Corporation, bringing the number
of directors to eleven.
Steven A. Webster, R&B Falcon's President & CEO, commented, "Cliffs Drilling's
position in attractive markets and its quality rig fleet provide an excellent
business fit with R&B Falcon. In particular, consolidation of our shallow
water jackup fleets and Venezuelan operations provides
<PAGE> 2
opportunities for operational efficiency and business expansion. With its
international experience and ability to provide turnkey and integrated
services, Cliffs Drilling will further R&B Falcon's strategy of exploiting
growth potential through our large equipment base in emerging international
shallow water and transition zone markets. This transaction will better
position us to compete in a changing worldwide market environment."
Mr. Swanson stated, "The R&B Falcon merger provides an excellent opportunity
for Cliffs Drilling to expand and diversify its operations by optimizing
utilization of R&B Falcon and Cliffs Drilling equipment. We believe the
combination will provide for further growth opportunities in the international
offshore area, turnkey drilling and engineering services."
R&B Falcon Corporation operates the world's largest fleet of 115 marine-based
drilling rigs for the international oil and gas industry consisting of twelve
drillships (including seven under construction), eleven semisubmersible rigs
(including two under construction), 26 jackups, three submersible rigs, two
tender rigs, 60 barge drilling and workover rigs and a floating production
vessel. R&B Falcon actively markets 101 of these units in the offshore and
inland waters worldwide. R&B Falcon also operates a leading offshore and
inland marine towing and service business.
Cliffs Drilling Company is an international offshore contract drilling company
which provides daywork and turnkey drilling services, mobile offshore
production units and well engineering and management services.
-end-
