<PAGE>
EXHIBIT 10
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
TRANSOCEAN SEDCO FOREX INC.,
TRANSOCEAN HOLDINGS INC.,
TSF DELAWARE INC.
and
R&B FALCON CORPORATION
Dated as of August 19, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 THE MERGER.............................................................. 1
Section 1.1 The Merger......................................................... 1
Section 1.2 The Closing........................................................ 2
Section 1.3 Effective Time..................................................... 2
ARTICLE 2 ARTICLES OF ASSOCIATION OF PARENT AND CERTIFICATE OF INCORPORATION
AND BYLAWS OF THE SURVIVING ENTITY...................................... 2
Section 2.1 Articles of Association of Parent.................................. 2
Section 2.2 Certificate of Incorporation of the Surviving Entity............... 2
Section 2.3 Bylaws of the Surviving Entity..................................... 3
ARTICLE 3 DIRECTORS AND OFFICERS OF THE SURVIVING ENTITY AND
DIRECTORS OF PARENT..................................................... 3
Section 3.1 Directors of Surviving Entity...................................... 3
Section 3.2 Officers of Surviving Entity....................................... 3
Section 3.3 Board of Directors of Parent....................................... 3
ARTICLE 4 CONVERSION OF COMPANY COMMON STOCK...................................... 4
Section 4.1 Merger Ratio....................................................... 4
Section 4.2 Conversion of Capital Stock of the Company and Merger Sub.......... 4
Section 4.3 Exchange of Certificates Representing Company Common Stock......... 6
Section 4.4 Adjustment of Merger Ratios........................................ 8
Section 4.5 Rule 16b-3 Approval................................................ 9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF COMPANY................................ 9
Section 5.1 Existence; Good Standing; Corporate Authority...................... 9
Section 5.2 Authorization, Validity and Effect of Agreements................... 9
Section 5.3 Capitalization..................................................... 10
Section 5.4 Significant Subsidiaries........................................... 10
Section 5.5 Compliance with Laws; Permits...................................... 11
Section 5.6 No Conflict........................................................ 12
Section 5.7 SEC Documents...................................................... 12
Section 5.8 Litigation......................................................... 13
Section 5.9 Absence of Certain Changes......................................... 13
Section 5.10 Taxes.............................................................. 14
Section 5.11 Employee Benefit Plans............................................. 15
Section 5.12 Labor Matters...................................................... 17
Section 5.13 Environmental Matters.............................................. 17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.14 Intellectual Property.............................................. 18
Section 5.15 Decrees, Etc....................................................... 18
Section 5.16 Insurance.......................................................... 19
Section 5.17 No Brokers......................................................... 19
Section 5.18 Opinion of Financial Advisor....................................... 19
Section 5.19 Parent Share Ownership............................................. 19
Section 5.20 Vote Required...................................................... 20
Section 5.21 Ownership of Drilling Rigs and Drillships.......................... 20
Section 5.22 Undisclosed Liabilities............................................ 20
Section 5.23 Certain Contracts.................................................. 20
Section 5.24 Capital Expenditure Program........................................ 21
Section 5.25 Improper Payments.................................................. 21
Section 5.26 Amendment to the Company Rights Agreement.......................... 22
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PARENT, SUB AND
MERGER SUB............................................................... 22
Section 6.1 Existence; Good Standing; Corporate Authority...................... 22
Section 6.2 Authorization, Validity and Effect of Agreements................... 23
Section 6.3 Capitalization..................................................... 23
Section 6.4 Significant Subsidiaries........................................... 23
Section 6.5 Compliance with Laws; Permits...................................... 24
Section 6.6 No Conflict........................................................ 25
Section 6.7 SEC Documents...................................................... 25
Section 6.8 Litigation......................................................... 26
Section 6.9 Absence of Certain Changes......................................... 26
Section 6.10 Taxes.............................................................. 27
Section 6.11 Employee Benefit Plans............................................. 28
Section 6.12 Labor Matters...................................................... 29
Section 6.13 Environmental Matters.............................................. 30
Section 6.14 Intellectual Property.............................................. 30
Section 6.15 Decrees, Etc....................................................... 31
Section 6.16 Insurance.......................................................... 31
Section 6.17 No Brokers......................................................... 31
Section 6.18 Opinion of Financial Advisor....................................... 32
Section 6.19 Company Stock Ownership............................................ 32
Section 6.20 Vote Required...................................................... 32
Section 6.21 Ownership of Drilling Rigs and Drillships.......................... 32
Section 6.22 Undisclosed Liabilities............................................ 33
Section 6.23 Certain Contracts.................................................. 33
Section 6.24 Capital Expenditure Program........................................ 34
Section 6.25 Improper Payments.................................................. 34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 7 COVENANTS.................................................................. 34
Section 7.1 Conduct of Company Business.......................................... 34
Section 7.1A Conduct of Parent Business........................................... 38
Section 7.2 No Solicitation by the Company....................................... 39
Section 7.3 No Solicitation by Parent............................................ 41
Section 7.4 Meetings of Stockholders............................................. 42
Section 7.5 Filings; Commercially Reasonable Best Efforts, Etc................... 43
Section 7.6 Inspection........................................................... 46
Section 7.7 Publicity............................................................ 46
Section 7.8 Registration Statement on Form S-4................................... 46
Section 7.9 Listing Applications................................................. 47
Section 7.10 Letters of Accountants............................................... 48
Section 7.11 Agreements of Rule 145 Affiliates.................................... 48
Section 7.12 Expenses............................................................. 48
Section 7.13 Indemnification and Insurance........................................ 48
Section 7.14 Employee Matters..................................................... 50
Section 7.15 Rights Agreement..................................................... 54
Section 7.16 Delivery of Parent Ordinary Shares................................... 54
Section 7.17 Consulting Agreements................................................ 54
Section 7.18 Assets in the Coastwise Trade........................................ 54
Section 7.19 Obtaining Investment Grade Rating.................................... 54
Section 7.20 Agreement Regarding Company Redeemable Preferred Stock............... 55
ARTICLE 8 CONDITIONS................................................................. 57
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger........... 57
Section 8.2 Conditions to Obligation of the Company to Effect the Merger......... 58
Section 8.3 Conditions to Obligation of Parent, Sub and Merger Sub to Effect the
Merger............................................................... 59
ARTICLE 9 TERMINATION................................................................ 60
Section 9.1 Termination by Mutual Consent........................................ 60
Section 9.2 Termination by Parent or the Company................................. 60
Section 9.3 Termination by the Company........................................... 61
Section 9.4 Termination by Parent................................................ 62
Section 9.5 Effect of Termination................................................ 63
Section 9.6 Extension; Waiver.................................................... 64
ARTICLE 10 GENERAL PROVISIONS......................................................... 64
Section 10.1 Nonsurvival of Representations, Warranties and Agreements............ 64
Section 10.2 Notices.............................................................. 65
Section 10.3 Assignment; Binding Effect; Benefit.................................. 65
Section 10.4 Entire Agreement..................................................... 66
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 10.5 Amendments........................................................ 66
Section 10.6 Governing Law..................................................... 66
Section 10.7 Counterparts...................................................... 66
Section 10.8 Headings.......................................................... 66
Section 10.9 Interpretation.................................................... 66
Section 10.10 Waivers........................................................... 67
Section 10.11 Incorporation of Exhibits......................................... 67
Section 10.12 Severability...................................................... 67
Section 10.13 Enforcement of Agreement.......................................... 67
</TABLE>
iv
<PAGE>
GLOSSARY OF DEFINED TERMS
Defined Terms Where Defined
------------- ---------------
Action..................................... Section 7.13(a)
Affected Employee.......................... Section 7.14(b)
Agreement.................................. Preamble
Antitrust Laws............................. Section 7.5(c)
Applicable Laws............................ Section 5.5(a)
Cause...................................... Section 7.14(c)
Certificate of Merger...................... Section 1.3
Certificates............................... Section 4.3(b)
CIC Agreements............................. Section 7.14(f)
Closing.................................... Section 1.2
Closing Date............................... Section 1.2
Code....................................... Recitals
Common Stock Merger Ratio.................. Section 4.1(a)
Company.................................... Preamble
Company Acquisition Proposal............... Section 7.2(a)
Company Benefit Plans...................... Section 5.11(a)
Company Charter Amendment.................. Section 5.20
Company Common Stock....................... Section 4.2(b)
Company Disclosure Letter.................. Article 5 Preface
Company High Yield Debt.................... Section 7.19(a)
Company Material Adverse Effect............ Section 10.9(c)
Company Material Contract.................. Section 5.23(a)
Company Option............................. Section 4.2(e)(i)
Company Permits............................ Section 5.5(b)
Company Permitted Liens.................... Section 5.21
Company Real Property...................... Section 5.5(d)
Company Redeemable Preferred Stock......... Section 4.2(c)
Company Reports............................ Section 5.7
Company Right.............................. Section 5.3
Company Rights Agreement................... Section 5.3
Company Stock Plans........................ Section 4.1(e)(i)
Company Superior Proposal.................. Section 7.2(a)
Confidentiality and Standstill Agreement... Section 7.2(a)
Cutoff Date................................ Section 7.2(d), 7.3(d)
DGCL....................................... Section 1.1
Effective Time............................. Section 1.3
Eligible Company Shareholders.............. Recitals
Employees.................................. Section 7.14(d)
v
<PAGE>
Environmental Laws......................... Section 5.13(a)
ERISA...................................... Section 5.11(a)
ERISA Affiliate............................ Section 5.11(b)
Exchange Act............................... Section 4.5
Exchange Agent............................. Section 4.3(a)
Exchange Fund.............................. Section 4.3(a)
Form S-4................................... Section 7.8(a)
Hazardous Materials........................ Section 5.13(b)
HSR Act.................................... Section 5.6(b)
Indemnified Parties........................ Section 7.13(a)
Irrevocable Deposit........................ Section 7.20(c)
Letter of Transmittal...................... Section 4.3(b)
Liens...................................... Section 5.4
Material Adverse Effect.................... Section 10.9(c)
Merger..................................... Recitals
Merger Sub................................. Preamble
Moody's.................................... Section 7.19(a)
Nasdaq National Market System.............. Section 5.6(b)
Non-U.S. Antitrust Laws.................... Section 7.5(a)(i)
NYSE....................................... Section 4.1(c)
Parent..................................... Preamble
Parent Acquisition Proposal................ Section 7.3(a)
Parent Benefit Plans....................... Section 6.11
Parent Disclosure Letter................... Article 6 Preface
Parent Guarantee........................... Section 7.19(b)
Parent Material Adverse Effect............. Section 10.9(c)
Parent Material Contract................... Section 6.23(a)
Parent Ordinary Shares..................... Section 2.1
Parent Ordinary Share Price................ Section 4.1(e)
Parent Permits............................. Section 6.5(b)
Parent Permitted Liens..................... Section 6.21
Parent Preference Shares................... Section 6.3
Parent Real Property....................... Section 6.5(d)
Parent Reports............................. Section 6.7
Parent Superior Proposal................... Section 7.3(a)
Proxy Statement/Prospectus................. Section 7.8(a)
Public Offering............................ Section 7.20(b)
RBF Finance Co............................. Section 7.19(a)
Regulatory Filings......................... Section 5.6(b)
Returns.................................... Section 5.10(a)
Rule 145 Affiliates........................ Section 7.11
Rule 16b-3................................. Section 4.5
vi
<PAGE>
S&P........................................ Section 7.19(a)
SEC........................................ Section 4.2(e)(ii)
Securities Act............................. Section 4.3(d)
Series A Junior Preferred Stock............ Section 5.3
Severance Plan............................. Section 7.14(c)
Shelf Registration Statement............... Section 7.20(a)
Significant Subsidiary..................... Section 5.4
Sub........................................ Preamble
Subsidiary................................. Section 10.9(d)
Surviving Entity........................... Section 1.1
Taxes...................................... Section 5.10(e)
Third-Party Provisions..................... Section 10.3
Warrant Agreement.......................... Section 4.2(f)
Warrants................................... Section 4.2(f)
Year 2000 Bonuses.......................... Section 7.14(e)
Year 2001 Bonuses.......................... Section 7.14(e)
vii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
August 19, 2000, is by and among Transocean Sedco Forex Inc., a company
incorporated under the laws of the Cayman Islands ("Parent"), Transocean
Holdings Inc., a company organized under the laws of Delaware and a direct
wholly owned subsidiary of Parent ("Sub"), TSF Delaware Inc., a company
organized under the laws of Delaware and a direct wholly owned subsidiary of Sub
("Merger Sub"), and R&B Falcon Corporation, a company organized under the laws
of Delaware (the "Company").
RECITALS
A. The Merger. At the Effective Time (as defined herein), the
parties intend to effect a merger of Merger Sub with and into the Company, with
the Company being the surviving entity (the "Merger"), thus enabling Sub to
acquire all of the stock of the Company solely in exchange for voting shares of
Parent.
B. Intended U.S. Tax Consequences. The parties to this Agreement
intend that, for U.S. federal income tax purposes, the Merger qualify as a
reorganization under Section 368(a)(1)(B) of the U.S. Internal Revenue Code of
1986, as amended (the "Code"), and that the holders of stock of the Company who
will not be "five percent transferee shareholders" as defined in Treasury
Regulation Section 1.367(a)-3(c)(5)(ii) or who enter into five-year gain
recognition agreements in the form provided in Treasury Regulation Section
1.367(a)-8(b) ("Eligible Company Shareholders") and who exchange Company Common
Stock (as defined herein) solely for Parent Ordinary Shares (as defined herein)
pursuant to the Merger not recognize taxable gain with respect to the Merger
pursuant to Section 367(a) of the Code (except with respect to cash received in
lieu of fractional shares).
C. Intended U.S. Accounting Treatment. The parties to this
Agreement intend that the Merger be treated as the purchase of the Company by
Parent for U.S. generally accepted accounting principles.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section Section 1.1 The Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time, Merger Sub shall be merged
with and into the Company in accordance with this Agreement, and the separate
corporate existence of Merger Sub shall thereupon cease. The Company shall be
the surviving entity in the Merger (sometimes
<PAGE>
hereinafter referred to as the "Surviving Entity"). The Merger shall have the
effects specified herein and in the General Corporation Law of the State of
Delaware (the "DGCL").
Section Section 1.2 The Closing. Subject to the terms and
conditions of this Agreement, the closing of the Merger (the "Closing") shall
take place (a) at the offices of Baker Botts L.L.P., One Shell Plaza, 910
Louisiana, Houston, Texas, at 9:00 a.m., local time, on the first business day
immediately following the day on which the last to be fulfilled or waived of the
conditions set forth in Section 8.1, or, if on such day any condition set forth
in Section 8.2 or 8.3 has not been fulfilled or waived, as soon as practicable
after all the conditions set forth in Article 8 have been fulfilled or waived in
accordance herewith or (b) at such other time, date or place as Parent and the
Company may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
Section Section 1.3 Effective Time. Prior to the Closing,
Parent, the Company and Merger Sub shall prepare, and on the Closing Date shall
cause a certificate of merger (the "Certificate of Merger") meeting the
requirements of Section 251 of the DGCL to be properly executed and filed in
accordance with such section. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later time that Parent and the
Company hereto shall have agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time").
ARTICLE 2
ARTICLES OF ASSOCIATION OF PARENT AND CERTIFICATE OF
INCORPORATION AND BYLAWS OF THE SURVIVING ENTITY
Section Section 2.1 Articles of Association of Parent.
Subject to the approval by the holders of the issued ordinary shares, par value
$.01 per share, of Parent ("Parent Ordinary Shares") as and to the extent
required by Cayman Islands law and Parent's memorandum of association and
articles of association, as of the Effective Time:
(a) The authorized ordinary share capital of Parent shall be
increased to 800,000,000 Parent Ordinary Shares.
(b) The maximum number of directors constituting the Board of
Directors of Parent shall be increased to 13.
Section Section 2.2 Certificate of Incorporation of the
Surviving Entity. As of the Effective Time, the certificate of incorporation of
the Company in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Entity; provided, however, that at
the Effective Time, the certificate of incorporation of the Company shall be
amended to delete Articles Eighth, Ninth and Tenth thereof in their entirety.
2
<PAGE>
Section Section 2.3 Bylaws of the Surviving Entity. The
bylaws of the Company in effect immediately prior to the Effective Time shall be
the bylaws of the Surviving Entity, until duly amended in accordance with
applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING ENTITY
AND DIRECTORS OF PARENT
Section Section 3.1 Directors of Surviving Entity. The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Entity as of the Effective Time, until their
successors shall be elected and qualified or their earlier death, resignation or
removal in accordance with the certificate of incorporation and bylaws of the
Surviving Entity.
Section Section 3.2 Officers of Surviving Entity. The
officers of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Entity as of the Effective Time, until their
successors shall be appointed or their earlier death, resignation or removal in
accordance with the certificate of incorporation and bylaws of the Surviving
Entity.
Section Section 3.3 Board of Directors of Parent. The
number of directors constituting the Board of Directors of Parent as of the
Effective Time shall (a) in the event that the maximum number of directors
constituting the Board of Directors of Parent is not increased pursuant to
Section 2.1(b), be increased from 10 to 12 or (b) in the event that the maximum
number of directors constituting the Board of Directors of Parent is increased
pursuant to Section 2.1(b), be increased from 10 to 13, and the Board of
Directors of the Company in consultation with Parent shall designate the persons
to fill the two or three, as applicable, vacancies created by such increase,
with such persons being allocated by Parent as nearly as practicable on a
proportionate basis to each of the three classes into which the Board of
Directors is divided in accordance with Parent's articles of association. Such
designations shall be made no later than promptly after the meeting of Parent's
shareholders held in accordance with Section 7.4. Prior to the Effective Time,
the Board of Directors of Parent shall take such action as may be necessary to
cause the Company designees to be elected to the Board of Directors of Parent
immediately following the Effective Time.
3
<PAGE>
ARTICLE 4
CONVERSION OF COMPANY COMMON STOCK
Section Section 4.1 Merger Ratio. For purposes of
this Agreement,
(a) the "Common Stock Merger Ratio" shall equal 0.5; and
(b) the "Parent Ordinary Share Price" shall mean the average of
the per share closing prices of the Parent Ordinary Shares as
reported on the consolidated transaction reporting system for
securities traded on the New York Stock Exchange, Inc. ("NYSE")
(as reported in the New York City edition of The Wall Street
Journal or, if not reported thereby, another authoritative
source) for the 20 consecutive trading days ending on the fifth
trading day prior to the Closing Date, appropriately adjusted for
any stock splits, reverse stock splits, stock dividends,
recapitalizations or other similar transactions.
Section Section 4.2 Conversion of Capital Stock of
the Company and Merger Sub.
(a) At the Effective Time, each share of common stock, par value
$.01 per share, of Merger Sub outstanding immediately prior to
the Effective Time shall be converted into and become one fully
paid and non-assessable share of common stock, par value $.01 per
share, of the Surviving Entity.
(b) At the Effective Time, each share of common stock, par value
$.01 per share, of the Company ("Company Common Stock") issued
and outstanding immediately prior to the Effective Time (other
than shares of Company Common Stock to be canceled without
payment of any consideration therefor pursuant to Section
4.2(d)), shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to
receive a number of Parent Ordinary Shares equal to the Common
Stock Merger Ratio to be transferred by Sub pursuant to the
Merger, and each such share of Company Common Stock shall cease
to be outstanding and shall be canceled and retired and shall
cease to exist, and each holder of such shares of Company Common
Stock shall thereafter cease to have any rights with respect to
such shares of Company Common Stock, except the right to receive,
without interest, a certificate for Parent Ordinary Shares and
cash for fractional shares in accordance with Sections 4.3(b) and
4.3(e) upon the surrender of such Certificate.
4
<PAGE>
(c) At the Effective Time, each share of 13.875% Cumulative
Redeemable Preferred Stock of the Company (the "Company
Redeemable Preferred Stock") issued and outstanding immediately
prior to the Effective Time shall remain outstanding and
unaffected by the Merger.
(d) Each share of Company Common Stock issued and held in the
Company's treasury and each share of Company Common Stock owned
by any wholly owned Subsidiary of the Company or by Parent, Sub
or Merger Sub, shall, at the Effective Time and by virtue of the
Merger, cease to be outstanding and shall be canceled and retired
without payment of any consideration therefor, and no capital
shares of Parent or other consideration shall be delivered in
exchange therefor.
(e) (i) At the Effective Time, all options to acquire shares of
Company Common Stock (individually, a "Company Option" and
collectively, the "Company Options") outstanding at the Effective
Time under the Company's stock plans (collectively, the "Company
Stock Plans") identified in Section 4.2(e) of the Company
Disclosure Letter (as hereinafter defined) shall remain
outstanding following the Effective Time, subject to the
modifications described in this Section 4.2(e) and in Section
7.14(h). Prior to the Effective Time, the Company and Parent
shall take all actions (if any) as may be required to permit the
assumption of such Company Options by Parent pursuant to this
Section 4.2(e)(i). At the Effective Time, the Company Options
shall be assumed by Parent in such manner that Parent (i) is a
corporation "assuming a stock option in a transaction to which
Section 424(a) applies" within the meaning of Section 424 of the
Code, or (ii) to the extent that the Company Option is not or
ceases to qualify as an "incentive stock option" within the
meaning of Section 422 of the Code, would be such a corporation
were Section 424 of the Code applicable to such option. Each
Company Option assumed by Parent shall, to the extent provided by
the Company Stock Plans, the option agreements entered into
pursuant thereto, and Section 7.14(h), be fully vested and
exercisable as of the Effective Time and shall otherwise be
subject to the same terms and conditions as under the applicable
Company Stock Option Plan and the applicable option agreement
entered into pursuant thereto, except that (i) immediately
following the Effective Time (A) each Company Option shall be
exercisable for that whole number of Parent Ordinary Shares equal
to the product (rounded to the nearest whole share) of the number
of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the Common
Stock Merger Ratio, and (B) the exercise price per Parent
Ordinary Share shall be an amount equal to the exercise price per
5
<PAGE>
share of Company Common Stock subject to such Company Option in
effect immediately prior to the Effective Time divided by the
Common Stock Merger Ratio (the price per share, as so determined,
being rounded down to the nearest whole cent), and (ii) as of the
Effective Time, each Company Option identified in Section 4.2(e)
of the Company Disclosure Letter shall be deemed modified to
remain exercisable for the full scheduled term of such Company
Option in the event the holder of such Company Option is
involuntarily terminated, for any reason other than Cause (as
defined in Section 7.14(c)), within twelve months after the
Effective Time.
(ii) At or prior to the Effective Time, Parent shall take all
corporate action necessary to reserve for issuance a number of Parent Ordinary
Shares equal to the number of Parent Ordinary Shares issuable upon the exercise
of Company Options assumed by Parent pursuant to this Section 4.2(e). From and
after the date of this Agreement, no action shall be taken by the Company or its
Subsidiaries to provide for the acceleration of the exercisability of any
Company Options in connection with the Merger (except to the extent such
acceleration is required under the terms of such Company Options or as set forth
in Section 7.14(h)). On the Closing Date, Parent shall file with the U.S.
Securities and Exchange Commission (the "SEC") a Registration Statement on Form
S-8 (or a post-effective amendment on Form S-8 with respect to the Form S-4 (as
defined in Section 7.8) or such other appropriate form) covering all such Parent
Ordinary Shares and shall cause such registration statement to remain effective
(and shall cause the prospectus or prospectuses relating thereto to remain
compliant with applicable securities laws) for as long as there are outstanding
any such Company Options.
(iii) Except as otherwise specifically provided by this Section
4.2(e) and Section 7.14(h), the terms of the Company Options and the relevant
Company Stock Plans, as in effect on the Effective Time, shall remain in full
force and effect with respect to the Company Options after giving effect to the
Merger and the assumptions by Parent as set forth above. As soon as practicable
following the Effective Time, Parent shall deliver to the holders of Company
Options appropriate notices setting forth such holders' rights pursuant to the
respective Company Stock Plans and the agreements evidencing the grants of such
Company Options, and that such Company Options and such agreements shall be
assumed by Parent and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 4.2(e) and Section
7.14(h)).
(f) At the Effective Time, all warrants (the "Warrants") to
purchase shares of Company Common Stock issued pursuant to the
Warrant Agreement dated April 22, 1999 between the Company and
American Stock Transfer and Trust Company (the "Warrant
Agreement") shall be assumed by Parent in accordance with the
terms of the Warrant Agreement and the Warrant shall be adjusted
as provided therein. At the Effective Time, Parent and the
Surviving Entity shall enter into a supplemental Warrant
Agreement
6
<PAGE>
and a supplement to the Warrant Registration Rights Agreement as
contemplated by Section 17(l) of the Warrant Agreement.
Section Section 4.3 Exchange of Certificates
Representing Company Common Stock.
(a) As of the Effective Time, Sub shall deposit, or shall cause
to be deposited, with an exchange agent selected by Sub, which
shall be Parent's transfer agent for Parent Ordinary Shares or
such other party reasonably satisfactory to the Company (the
"Exchange Agent"), for the benefit of the holders of shares of
Company Common Stock for exchange in accordance with this Article
4, certificates representing the Parent Ordinary Shares to be
issued pursuant to Section 4.2 and delivered pursuant to this
Section 4.3 in exchange for outstanding shares of Company Common
Stock. The Surviving Entity shall provide the Exchange Agent
immediately following the Effective Time cash sufficient to pay
cash in lieu of fractional shares in accordance with Sections
4.3(b) and 4.3(e) (such cash and certificates for Parent Ordinary
Shares together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund").
(b) Promptly after the Effective Time, Sub shall cause the
Exchange Agent to mail to each holder of record of one or more
certificates ("Certificates") that immediately prior to the
Effective Time represented shares of Company Common Stock (other
than to holders of shares of Company Common Stock that, pursuant
to Section 4.2(d), are canceled without payment of any
consideration therefor): (A) a letter of transmittal (the "Letter
of Transmittal") which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as
Parent may reasonably specify and (B) instructions for use in
effecting the surrender of the Certificates in exchange for
certificates representing Parent Ordinary Shares and cash in lieu
of fractional shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such Letter of
Transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Certificate shall be
entitled to receive in exchange therefor (x) a certificate
representing that number of whole Parent Ordinary Shares and (y)
a check representing the amount of cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any,
which such holder has the right to receive pursuant to the
provisions of this Article 4, after giving effect to any required
withholding tax, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the
cash in lieu of fractional shares and
7
<PAGE>
unpaid dividends and distributions, if any, payable to holders of
Certificates. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of
the Company, a certificate representing the proper number of
Parent Ordinary Shares together with a check for the cash to be
paid in lieu of fractional shares, may be issued to such a
transferee if the Certificate representing such Company Common
Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to
evidence that any applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared or made after the
Effective Time with respect to Parent Ordinary Shares with a
record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the Parent
Ordinary Shares represented by such Certificate as a result of
the conversion provided in Section 4.2(b) or 4.2(c) until such
Certificate is surrendered as provided herein. Subject to the
effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the
Certificates so surrendered, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore payable
and not paid with respect to the number of whole Parent Ordinary
Shares issued pursuant to Section 4.2, less the amount of any
withholding taxes, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole
Parent Ordinary Shares, less the amount of any withholding taxes.
(d) At or after the Effective Time, the Surviving Entity shall
pay from funds on hand at the Effective Time any dividends or
make other distributions with a record date prior to the
Effective Time that may have been declared or made by the Company
on shares of Company Common Stock which remain unpaid at the
Effective Time, and after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Entity of
the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Entity, the
presented Certificates shall be canceled and exchanged for
certificates representing Parent Ordinary Shares and cash in lieu
of fractional shares, if any, deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures set
forth in this Article 4. Certificates surrendered for exchange by
any person constituting an "affiliate" of the Company for
purposes of Rule 145(c) under
8
<PAGE>
the Securities Act of 1933, as amended (the "Securities Act"),
shall not be exchanged until the Company has received a written
agreement from such person as provided in Section 7.11.
(e) No fractional Parent Ordinary Shares shall be issued pursuant
hereto. In lieu of the issuance of any fractional Parent Ordinary
Shares pursuant to Section 4.2(b), cash adjustments provided by
Sub will be paid to holders in respect of any fractional Parent
Ordinary Shares that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to such fractional
proportion of the Parent Ordinary Share Price.
(f) Any portion of the Exchange Fund (including the proceeds of
any investments thereof and any certificates for Parent Ordinary
Shares) that remains undistributed to the former stockholders of
the Company one year after the Effective Time shall be delivered
to Sub. Any former stockholders of the Company who have not
theretofore complied with this Article 4 shall thereafter look
only to Sub for delivery of certificates representing their
Parent Ordinary Shares and cash in lieu of fractional shares and
to Parent for any unpaid dividends and distributions on the
Parent Ordinary Shares deliverable to such former stockholder
pursuant to this Agreement.
(g) None of Parent, Sub, the Company, the Surviving Entity, the
Exchange Agent or any other person shall be liable to any person
for any portion of the Exchange Fund properly delivered to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Entity, the posting by such
person of a bond in such reasonable amount as the Surviving
Entity may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed
Certificate certificates representing the Parent Ordinary Shares,
cash in lieu of fractional shares and unpaid dividends and
distributions on Parent Ordinary Shares, as provided in Section
4.3(c), deliverable in respect thereof pursuant to this
Agreement.
Section Section 4.4 Adjustment of Merger Ratios. In the
event that, subsequent to the date of this Agreement but prior to the Effective
Time, Parent changes the number of Parent Ordinary Shares, or the Company
changes the number of shares of Company Common Stock issued and outstanding as a
result of a stock split, reverse stock split, stock dividend,
9
<PAGE>
recapitalization or other similar transaction, the Common Stock Merger Ratio and
other items dependent thereon shall be appropriately adjusted.
Section Section 4.5 Rule 16b-3 Approval. Parent agrees that
the Parent Board of Directors or the Executive Compensation Committee of the
Parent Board of Directors shall, at or prior to the Effective Time, adopt
resolutions specifically approving, for purposes of Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
receipt, pursuant to Section 4.2, of Parent Ordinary Shares, and of options to
acquire Parent Ordinary Shares, by executive officers or directors of the
Company who become executive officers or directors of Parent subject to
Rule 16b-3.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the disclosure letter delivered to Parent by
the Company at or prior to the execution hereof (the "Company Disclosure
Letter"), the Company represents and warrants to Parent and Merger Sub that:
Section Section 5.1 Existence; Good Standing; Corporate
Authority. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation. The
Company is duly qualified to do business and, to the extent such concept or
similar concept exists in the relevant jurisdiction, is in good standing under
the laws of any jurisdiction in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified does not
and is not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect (as defined in Section 10.9). The Company has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted. The copies of the
Company's certificate of incorporation and bylaws previously made available to
Parent are true and correct and contain all amendments as of the date hereof.
Section Section 5.2 Authorization, Validity and Effect of
Agreements. The Company has the requisite corporate power and authority to
execute and deliver this Agreement and all other agreements and documents
contemplated hereby to which it is a party. The consummation by the Company of
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on behalf of the Company, other than the approvals referred to
in Section 5.20. This Agreement constitutes the valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. The Company has taken all action necessary to render the
10
<PAGE>
restrictions set forth in Section 203 of the DGCL inapplicable to this Agreement
and the transactions contemplated hereby.
Section Section 5.3 Capitalization. As of the date of this
Agreement, the authorized capital stock of the Company consists of 550,000,000
shares of Common Stock and 50,000,000 shares of preferred stock, par value $.01
per share, of which 1,200,000 shares have been designated Company Redeemable
Preferred Stock and 1,688,000 shares have been designated Series A Junior
Participating Preferred Stock ("Series A Junior Preferred Stock"). As of the
date of this Agreement, there were outstanding 293,000 Warrants, each
representing the right to purchase 35 shares of Company Common Stock at an
exercise price of $9.50 per share. As of August 17, 2000, there were
193,990,737 outstanding shares of Company Common Stock, 16,411,563 shares of
Company Common Stock reserved for issuance upon exercise of outstanding Company
Options, 10,255,000 shares of Company Common Stock reserved for issuance upon
exercise of the outstanding Warrants, 356,961.01 outstanding shares of Company
Redeemable Preferred Stock and no outstanding shares of Series A Junior
Preferred Stock. All such issued and outstanding shares of Company Common Stock
and Company Redeemable Preferred Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. One right to purchase
Series A Junior Preferred Stock (each, a "Company Right") issued pursuant to the
Rights Agreement, dated as of December 23, 1997 (the "Company Rights
Agreement"), as amended, between the Company and American Stock Transfer and
Trust Company is associated with and attached to each outstanding share of
Company Common Stock. As of the date of this Agreement, except as set forth in
this Section 5.3, there are no outstanding shares of capital stock and there are
no options, warrants, calls, subscriptions, convertible securities or other
rights, agreements or commitments which obligate the Company or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock or other
voting securities of the Company or any of its Subsidiaries. The Company has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter.
Section Section 5.4 Significant Subsidiaries. For purposes
of this Agreement, "Significant Subsidiary" shall mean significant subsidiary as
defined in Rule 1-02 of Regulation S-X of the Exchange Act. Each of the
Company's Significant Subsidiaries is a corporation or other legal entity duly
organized, validly existing and, to the extent such concept or similar concept
exists in the relevant jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or other entity
power and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing (where applicable) in each jurisdiction in which the
ownership, operation or lease of its property or the conduct of its business
requires such qualification, except for jurisdictions in which such failure to
be so qualified or to be in good standing does not and is not reasonably likely
to have a Company Material Adverse Effect. As of the date of this Agreement,
all of the outstanding shares of capital stock of, or other ownership interests
in, each of the Company's Significant Subsidiaries are duly authorized, validly
issued, fully
11
<PAGE>
paid and nonassessable and are owned, directly or indirectly, by the Company
free and clear of all mortgages, deeds of trust, liens, security interests,
pledges, leases, conditional sale contracts, charges, privileges, easements,
rights of way, reservations, options, rights of first refusal and other
encumbrances ("Liens").
Section Section 5.5 Compliance with Laws; Permits. Except
for such matters as, individually or in the aggregate, do not or are not
reasonably likely to have a Company Material Adverse Effect and except for
matters arising under Environmental Laws (as defined herein) which are treated
exclusively in Section 5.13:
(a) Neither the Company nor any Subsidiary of the Company is in
violation of any applicable law, rule, regulation, code,
governmental determination, order, treaty, convention,
governmental certification requirement or other public
limitation, U.S. or non-U.S. (collectively, "Applicable Laws"),
relating to the ownership or operation of any of their respective
assets, and no claim is pending or, to the knowledge of the
Company, threatened with respect to any such matters. No
condition exists that is not disclosed in the Company Disclosure
Letter and which does or is reasonably likely to constitute a
violation of or deficiency under any Applicable Law relating to
the ownership or operation of the assets of the Company or any
Subsidiary of the Company.
(b) The Company and each Subsidiary of the Company hold all
permits, licenses, certifications, variations, exemptions,
orders, franchises and approvals of all governmental or
regulatory authorities necessary for the conduct of their
respective businesses (the "Company Permits"). All Company
Permits are in full force and effect and there exists no default
thereunder or breach thereof, and the Company has no notice or
actual knowledge that such Company Permits will not be renewed in
the ordinary course after the Effective Time. No governmental
authority has given, or to the knowledge of the Company
threatened to give, any action to terminate, cancel or reform any
Company Permit.
(c) Each drilling rig, drillship or other drilling unit owned by
the Company or a subsidiary of the Company which is subject to
classification is in class according to the rules and regulations
of the applicable classifying body and is duly and lawfully
documented under the laws of its flag jurisdiction.
(d) The Company and each Subsidiary of the Company possess all
permits, licenses, operating authorities, orders, exemptions,
franchises, variances, consents, approvals or other
authorizations required for the present
12
<PAGE>
ownership and operation of all its real property or leaseholds
("Company Real Property") except where the failure to possess any
of the same does not and is not reasonably likely to have a
Company Material Adverse Effect. There exists no material default
or breach with respect to, and no party or governmental authority
has taken or, to the knowledge of the Company, threatened to
take, any action to terminate, cancel or reform any such permit,
license, operating authority, order, exemption, franchise,
variance, consent, approval or other authorization pertaining to
the Company Real Property.
Section Section 5.6 No Conflict. Neither the execution
and delivery by the Company of this Agreement nor the consummation by the
Company of the transactions contemplated hereby in accordance with the terms
hereof will (i) subject to the approvals referred to in Section 5.20, conflict
with or result in a breach of any provisions of the certificate of incorporation
or bylaws of the Company, (ii) violate, or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or give rise to a
right of purchase under, or accelerate the performance required by, or result in
the creation of any Lien upon any of the properties of the Company or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, or otherwise result in a detriment to the Company or any
of its Subsidiaries under, any of the terms, conditions or provisions of, any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
lease, contract, agreement, joint venture or other instrument or obligation to
which the Company or any of its Subsidiaries is a party, or by which the Company
or any of its Subsidiaries or any of their properties is bound or affected or
(iii) subject to the filings and other matters referred to in Section 5.6(b),
contravene or conflict with or constitute a violation of any provision of any
law, rule, regulation, judgment, order or decree binding upon or applicable to
the Company or any of its Subsidiaries, except, for such matters described in
clause (ii) or (iii) as do not and are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(a) Neither the execution and delivery by the Company of this
Agreement nor the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof will
require any consent, approval or authorization of, or filing or
registration with, any governmental or regulatory authority,
other than (i) the filing of the Certificate of Merger provided
for in Section 1.3, (ii) the filing of the Company Charter
Amendment, (iii) the filing of a listing application with the
NYSE, another national securities exchange or the national market
system of the interdealer quotation system of the National
Association of Securities Dealers, Inc. ("Nasdaq National Market
System") pursuant to Section 7.9(b) and (iv) filings required
under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Exchange Act, the
Securities Act or applicable state securities and "Blue Sky"
laws,
13
<PAGE>
applicable non-U.S. competition, antitrust or premerger
notification laws ((i), (ii), (iii) and (iv) collectively, the
"Regulatory Filings"), except for any consent, approval or
authorization the failure of which to obtain and for any filing
or registration the failure of which to make does not and is not
reasonably likely to have a Company Material Adverse Effect.
Section Section 5.7 SEC Documents. The Company has filed
with the SEC all documents required to be so filed by it since January 1, 2000
pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange Act, and has made
available to Parent each registration statement, report, proxy statement or
information statement (other than preliminary materials) it has so filed, each
in the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). As of its respective date, each Company
Report (i) complied in all material respects in accordance with the applicable
requirements of the Exchange Act and the rules and regulations thereunder and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading except for such statements, if any, as have been modified by
subsequent filings with the SEC prior to the date hereof. Each of the
consolidated balance sheets included in or incorporated by reference into the
Company Reports (including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of the Company and its
Subsidiaries as of its date, and each of the consolidated statements of
operations, cash flows and changes in stockholders' equity included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presents in all material respects the results of
operations, cash flows or changes in stockholders' equity, as the case may be,
of the Company and its Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to (x) such exceptions as may be permitted
by Form 10-Q of the SEC and (y) normal year-end audit adjustments), in each case
in accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. Except as and to
the extent set forth on the consolidated balance sheet of the Company and its
Subsidiaries included in the Company Reports, including all notes thereto, as of
the date of such balance sheet, neither the Company nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of the Company or in the notes thereto prepared in
accordance with generally accepted accounting principles consistently applied,
other than liabilities or obligations which do not and are not reasonably likely
to have, individually or in the aggregate, a Company Material Adverse Effect.
Section Section 5.8 Litigation. Except as described in the
Company Reports filed on or prior to the date of this Agreement, there are no
actions, suits or proceedings pending against the Company or any of its
Subsidiaries or, to the Company's knowledge, threatened against the Company or
any of its Subsidiaries, at law or in equity, before or by any U.S. federal,
state or non-U.S. court, commission, board, bureau, agency or instrumentality,
14
<PAGE>
that are reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect.
Section Section 5.9 Absence of Certain Changes. From
December 31, 1999 to the date of this Agreement, there has not been (i) any
event or occurrence that has had or is reasonably likely to have a Company
Material Adverse Effect, (ii) any material change by the Company or any of its
Subsidiaries, when taken as a whole, in any of its accounting methods,
principles or practices or any of its tax methods, practices or elections, (iii)
any declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities or (iv) any increase in or establishment of
any bonus, insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option, stock purchase or other employee benefit plan,
except in the ordinary course of business.
Section Section 5.10 Taxes. Each of the Company, its
Subsidiaries and each affiliated, consolidated, combined, unitary or similar
group of which any such corporation is or was a member has (i) duly filed (or
there has been filed on its behalf) on a timely basis with appropriate
governmental authorities all tax returns, statements, reports, declarations,
estimates and forms ("Returns") required to be filed by or with respect to it on
or prior to the date hereof, except to the extent that any failure to file does
not and is not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect, and (ii) duly paid, or deposited in full on a
timely basis or made adequate provision in accordance with generally accepted
accounting principles (or there has been paid or deposited or adequate provision
has been made on its behalf) for the payment of, all taxes required to be paid
by it, except to the extent that any failure to pay or deposit or make adequate
provision for the payment of such taxes does not and is not reasonably likely to
have, individually or in the aggregate, a Company Material Adverse Effect.
Representations made in this Section 5.10 are made to the knowledge of the
Company to the extent that the representations relate to a corporation which
was, but is not currently, a part of the Company's or any Subsidiary's
affiliated, consolidated, combined unitary or similar group.
(a) (i) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any taxes or
Returns of the Company or any of its Subsidiaries as to which any
taxing authority has asserted in writing any claim which, if
adversely determined, is reasonably likely to have a Company
Material Adverse Effect; (ii) no governmental authority is now
asserting in writing any deficiency or claim for taxes or any
adjustment to taxes with respect to which the Company or any of
its Subsidiaries may be liable with respect to income and other
material taxes which have not been fully paid or finally settled,
which, if adversely determined, is reasonably likely to have a
Company Material Adverse Effect; (iii) as of the date of this
Agreement, neither the Company nor any of its Subsidiaries has
granted any requests, agreements, consents or waivers to extend
the statutory period of
15
<PAGE>
limitations applicable to the assessment of any taxes with
respect to any Returns of the Company or any of its Subsidiaries;
(iv) to the knowledge of the Company, neither the Company nor any
of its Subsidiaries is a party to any closing agreement described
in Section 7121 of the Code or any predecessor provision thereof
or any similar agreement under state, local, or non-U.S. tax law;
(v) to the knowledge of the Company, neither the Company nor any
of its Subsidiaries is a party to, is bound by or has any
obligation under any tax sharing, allocation or indemnity
agreement or any similar agreement or arrangement; (vi) neither
the Company nor any of its Subsidiaries is a party to an
agreement that provides for the payment of any amount in
connection with the Merger that would be reasonably likely to
constitute an "excess parachute payment" within the meaning of
Section 280G of the Code; (vii) to the knowledge of the Company,
neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code; (viii) to the
knowledge of the Company, neither the Company nor any of its
Subsidiaries has any liability for taxes under Treas. Reg. (S)
1.1502-6 or any similar provision of state, local, or non-U.S.
tax law, except for taxes of the affiliated group of which the
Company is the common parent, within the meaning of Section
1504(a)(1) of the Code or any similar provision of state, local,
or non-U.S. tax law; and (ix) to the knowledge of the Company,
the Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code
at any time within the past five years.
(b) To the knowledge of the Company, Section 5.10 of the Company
Disclosure Letter lists the net operating loss carryovers, within
the meaning of Section 172 of the Code, of the Company and its
Subsidiaries, together with the year of expiration and any
restrictions thereon.
(c) Neither the Company nor any of the Company Subsidiaries knows
of any fact, or has taken any action or has failed to take any
action, that is reasonably likely to (i) prevent the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code or (ii) cause the Eligible Company
Shareholders who exchange Company Common Stock solely for Parent
Ordinary Shares pursuant to the Merger to recognize taxable gain
with respect to the Merger pursuant to Section 367(a) of the Code
(except with respect to cash received in lieu of fractional
shares).
(d) For purposes of this Agreement, "tax" or "taxes" means all
net income, gross income, gross receipts, sales, use, ad valorem,
transfer, accumulated earnings, personal holding company, excess
profits, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp,
16
<PAGE>
occupation, premium, property, disability, capital stock, or
windfall profits taxes, customs duties or other taxes, fees,
assessments or governmental charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority (U.S. or non-
U.S.).
Section Section 5.11 Employee Benefit Plans. Section 5.11
of the Company Disclosure Letter contains a list of all the Company Benefit
Plans. The term "Company Benefit Plans" means all material employee benefit
plans and other material benefit arrangements, including all "employee benefit
plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), whether or not U.S.-based plans, and all other
employee benefit, bonus, incentive, deferred compensation, stock option (or
other equity-based), severance, employment, change in control, welfare
(including post-retirement medical and life insurance) and fringe benefit plans,
practices or agreements, whether or not subject to ERISA or U.S.-based and
whether written or oral, sponsored, maintained or contributed to or required to
be contributed to by the Company or any of its Subsidiaries, to which the
Company or any of its Subsidiaries is a party or is required to provide benefits
under applicable law or in which any person who is currently, has been or, prior
to the Effective Time, is expected to become an employee of the Company is a
participant. The Company will provide Parent, within 30 days after the date
hereof, with true and complete copies of the Company Benefit Plans and, if
applicable, the most recent trust agreements, Forms 5500, summary plan
descriptions, funding statements, annual reports and actuarial reports, if
applicable, for each such plan.
(a) Except as for such matters as, individually or in the
aggregate, do not or are not reasonably likely to have a Company
Material Adverse Effect: all applicable reporting and disclosure
requirements have been met with respect to the Company Benefit
Plans; there has been no "reportable event," as that term is
defined in Section 4043 of ERISA, with respect to the Company
Benefit Plans subject to Title IV of ERISA for which the 30-day
reporting requirement has not been waived; to the extent
applicable, the Company Benefit Plans comply with the
requirements of ERISA and the Code or with the regulations of any
applicable jurisdiction, and any Company Benefit Plan intended to
be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS; the Company Benefit
Plans have been maintained and operated in accordance with their
terms, and, to the Company's knowledge, there are no breaches of
fiduciary duty in connection with the Company Benefit Plans;
there are no pending or, to the Company's knowledge, threatened
claims against or otherwise involving any Company Benefit Plan,
and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of the Company Benefit
Plan activities) has been brought against or with respect to any
such Company Benefit Plan; all material contributions required to
be made as of the date
17
<PAGE>
hereof to the Company Benefit Plans have been made or provided
for; with respect to the Company Benefit Plans or any "employee
pension benefit plans," as defined in Section 3(2) of ERISA, that
are subject to Title IV of ERISA and have been maintained or
contributed to within six years prior to the Effective Time by
the Company, its Subsidiaries or any trade or business (whether
or not incorporated) which is under common control, or which is
treated as a single employer, with the Company or any of its
Subsidiaries under Section 414(b), (c), (m) or (o) of the Code
(an "ERISA Affiliate"), (i) neither the Company nor any of its
Subsidiaries has incurred any direct or indirect liability under
Title IV of ERISA in connection with any termination thereof or
withdrawal therefrom; and (ii) there does not exist any
accumulated funding deficiency within the meaning of Section 412
of the Code or Section 302 of ERISA, whether or not waived.
(b) Neither the Company nor any of its Subsidiaries nor any of
its ERISA Affiliates contributes to, or has an obligation to
contribute to, and has not within six years prior to the
Effective Time contributed to, or had an obligation to contribute
to, a "multiemployer plan" within the meaning of Section 3(37) of
ERISA, and the execution of, and performance of the transactions
contemplated by, this Agreement, other than Section 7.14(h), will
not (either alone or upon the occurrence of any additional or
subsequent events) constitute an event under any benefit plan,
policy, arrangement or agreement or any trust or loan (in
connection therewith) that will or may result in any payment
(whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligations to fund benefits with respect to any
employee of the Company or any Subsidiary thereof.
(c) No Company Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of the Company or any
Subsidiary of the Company for periods extending beyond their
retirement or other termination of service other than (i)
coverage mandated by applicable law, (ii) death benefits under
any "pension plan" or (iii) benefits the full cost of which is
borne by the current or former employee (or his beneficiary).
Section Section 5.12 Labor Matters. As of the date of
this Agreement, (i) neither the Company nor any of its Subsidiaries is a party
to, or bound by, any collective bargaining agreement or similar contract,
agreement or understanding with a labor union or similar labor organization (A)
covering any U.S. employees or (B) covering, in any single instance, 10% or more
of the employees of the Company and its Subsidiaries taken as a whole, and (ii)
to the Company's knowledge, there are no organizational efforts with respect to
the formation
18
<PAGE>
of a collective bargaining unit presently being made or threatened (x) involving
any U.S. employees or (y) involving, in any single instance, 10% or more of the
employees of the Company and its Subsidiaries taken as a whole.
(a) Except for such matters as do not and are not reasonably
likely to have a Company Material Adverse Effect, (i) neither the
Company nor any Subsidiary of the Company has received any
written complaint of any unfair labor practice or other unlawful
employment practice or any written notice of any material
violation of any federal, state or local statutes, laws,
ordinances, rules, regulations, orders or directives with respect
to the employment of individuals by, or the employment practices
of, the Company or any Subsidiary of the Company or the work
conditions or the terms and conditions of employment and wages
and hours of their respective businesses and (ii) there are no
unfair labor practice charges or other employee related
complaints against the Company or any Subsidiary of the Company
pending or, to the knowledge of the Company threatened, before
any governmental authority by or concerning the employees working
in their respective businesses.
Section Section 5.13 Environmental Matters. The Company
and each Subsidiary of the Company has been and is in compliance with all
applicable final and binding orders of any court, governmental authority or
arbitration board or tribunal and any applicable law, ordinance, rule,
regulation or other legal requirement (including common law) related to human
health and the environment ("Environmental Laws") except for such matters as do
not and are not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect. There are no past or present facts, conditions
or circumstances that interfere with the conduct of any of their respective
businesses in the manner now conducted or which interfere with continued
compliance with any Environmental Law except for any non-compliance or
interference that is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
(a) Except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, a Company
Material Adverse Effect, no judicial or administrative
proceedings or governmental investigations are pending or, to the
knowledge of the Company, threatened against the Company or its
Subsidiaries that allege the violation of or seek to impose
liability pursuant to any Environmental Law, and there are no
past or present facts, conditions or circumstances at, on or
arising out of, or otherwise associated with, any current (or, to
the knowledge of the Company or its Subsidiaries, former)
businesses, assets or properties of the Company or any Subsidiary
of the Company, including but not limited to on-site or off-site
disposal, release or spill of any material, substance or waste
classified, characterized or otherwise regulated as hazardous,
toxic, pollutant,
19
<PAGE>
contaminant or words of similar meaning under Environmental Laws,
including petroleum or petroleum products or byproducts
("Hazardous Materials") which violate Environmental Law or are
reasonably likely to give rise to (i) costs, expenses,
liabilities or obligations for any cleanup, remediation, disposal
or corrective action under any Environmental Law, (ii) claims
arising for personal injury, property damage or damage to natural
resources, or (iii) fines, penalties or injunctive relief.
(b) Neither the Company nor any of its Subsidiaries has (i)
received any notice of noncompliance with, violation of, or
liability or potential liability under any Environmental Law or
(ii) entered into any consent decree or order or is subject to
any order of any court or governmental authority or tribunal
under any Environmental Law or relating to the cleanup of any
Hazardous Materials, except for any such matters as do not and
are not reasonably likely to have a Company Material Adverse
Effect.
Section Section 5.14 Intellectual Property. The Company and
its Subsidiaries own or possess adequate licenses or other valid rights to use
all patents, patent rights, trademarks, trademark rights and proprietary
information used or held for use in connection with their respective businesses
as currently being conducted, except where the failure to own or possess such
licenses and other rights does not and is not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect, and there
are no assertions or claims challenging the validity of any of the foregoing
that are reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. The conduct of the Company's and its Subsidiaries'
respective businesses as currently conducted does not conflict with any patents,
patent rights, licenses, trademarks, trademark rights, trade names, trade name
rights or copyrights of others that are reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect. There is no material
infringement of any proprietary right owned by or licensed by or to the Company
or any of its Subsidiaries that is reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect.
Section Section 5.15 Decrees, Etc. Except for such matters
as do not and are not reasonably likely to have a Company Material Adverse
Effect, (i) no order, writ, fine, injunction, decree, judgment, award or
determination of any court or governmental authority has been issued or entered
against the Company or any Subsidiary of the Company that continues to be in
effect that affects the ownership or operation of any of their respective
assets, and (ii) no criminal order, writ, fine, injunction, decree, judgment or
determination of any court or governmental authority has been issued against the
Company or any Subsidiary of the Company.
Section Section 5.16 Insurance. Except for such matters
as do not and are not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries
maintain insurance coverage with financially
20
<PAGE>
responsible insurance companies in such amounts and against such losses as are
customary in the international offshore drilling business prior to the date
hereof.
(a) Except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, a Company
Material Adverse Effect, no event relating specifically to the
Company or its Subsidiaries (as opposed to events affecting the
drilling service industry in general) has occurred that is
reasonably likely, after the date of this Agreement, to result in
an upward adjustment in premiums under any insurance policies
they maintain. Excluding insurance policies that have expired and
been replaced in the ordinary course of business, no excess
liability, hull or protection and indemnity insurance policy has
been canceled by the insurer within one year prior to the date
hereof, and to the Company's knowledge, no threat in writing has
been made to cancel (excluding cancellation upon expiration or
failure to renew) any such insurance policy of the Company or any
Subsidiary of the Company during the period of one year prior to
the date hereof. Prior to the date hereof, no event has occurred,
including the failure by the Company or any Subsidiary of the
Company to give any notice or information or by giving any
inaccurate or erroneous notice or information, which materially
limits or impairs the rights of the Company or any Subsidiary of
the Company under any such excess liability, hull or protection
and indemnity insurance policies.
Section Section 5.17 No Brokers. The Company has not
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of the Company or Parent to pay any finder's
fees, brokerage or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby, except that the Company has retained Morgan Stanley & Co. Incorporated
as its financial advisor, the arrangements with which have been disclosed in
writing to Parent prior to the date hereof.
Section Section 5.18 Opinion of Financial Advisor. The
Board of Directors of the Company has received the opinion of Morgan Stanley &
Co. Incorporated to the effect that, as of the date of this Agreement, the
Common Stock Merger Ratio is fair, from a financial point of view, to the
holders of Company Common Stock.
Section Section 5.19 Parent Share Ownership. Neither the
Company nor any of its Subsidiaries owns any shares in the capital of Parent or
any other securities convertible into or otherwise exercisable to acquire shares
in the capital of Parent.
Section Section 5.20 Vote Required. The only votes of the
holders of any class or series of Company capital stock necessary to approve any
transaction
21
<PAGE>
contemplated by this Agreement are (a) the affirmative vote in favor of the
adoption of this Agreement of the holders of at least a majority of the
outstanding shares of Company Common Stock and (b) the affirmative vote in favor
of amending the certificate of incorporation of the Company as set forth in
Exhibit A (the "Company Charter Amendment") of the holders of at least a
majority of the outstanding shares of Company Common Stock.
Section Section 5.21 Ownership of Drilling Rigs and
Drillships. As of the date hereof, the Company or a Subsidiary of the Company
has good and marketable title to the drilling rigs and drill ships listed in the
Company's most recent annual report on Form 10-K, in each case free and clear of
all Liens except for (i) defects or irregularities of title or encumbrances of a
nature that do not materially impair the ownership or operation of these assets
and which have not had and are not reasonably likely to have a Company Material
Adverse Effect, (ii) Liens that secure obligations not yet due and payable or,
if such obligations are due and have not been paid, Liens securing such
obligations that are being diligently contested in good faith and by appropriate
proceedings (any such contests involving an amount in excess of $10 million
being described in the Company Disclosure Letter), (iii) Liens for taxes,
assessments or other governmental charges or levies not yet due or which are
being contested in good faith, (iv) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are being contested in good
faith, (v) operators', vendors', suppliers of necessaries to the Company's
drilling rigs, carriers', warehousemen's, repairmen's, mechanics', workmen's,
materialmen's, construction or shipyard liens (during repair or upgrade periods)
or other like Liens arising by operation of law in the ordinary course of
business or statutory landlord's liens, each of which is in respect of
obligations that have not been outstanding more than 90 days (so long as no
action has been taken to file or enforce such Liens within said 90-day period)
or which are being contested in good faith and (vi) other Liens disclosed in the
Company Disclosure Letter (the Liens described in clauses (i), (ii), (iii),
(iv), (v) and (vi), collectively, "Company Permitted Liens"). No such asset is
leased under an operating lease from a lessor that, to the Company's knowledge,
has incurred non-recourse indebtedness to finance the acquisition or
construction of such asset.
Section Section 5.22 Undisclosed Liabilities. Neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature, whether or not fixed, accrued, contingent or otherwise, except
liabilities and obligations that (i) are disclosed in the Company Reports, (ii)
are referred to in the Company Disclosure Letter or (iii) do not and are not
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect.
Section Section 5.23 Certain Contracts. Section 5.23 of
the Company Disclosure Letter contains a list of all of the following contracts
or agreements (other than those set forth on an exhibit index in the Company
Reports filed on or prior to the date of this Agreement) to which the Company or
any Subsidiary of the Company is a party or by which any of them is bound as of
the date of this Agreement: (i) any non-competition agreement that purports to
limit the manner in which, or the localities in which, all or any portion of
their respective businesses
22
<PAGE>
is conducted, other than any such limitation that is not material to the Company
and its Subsidiaries, taken as a whole, (ii) any drilling rig construction or
conversion contract with respect to which the drilling rig has not been
delivered and paid for, (iii) any drilling contracts of one year or greater
remaining duration, (iv) any contract or agreement for the borrowing of money
with a borrowing capacity or outstanding indebtedness of $50 million or more or
(v) any "material contract" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) (all contracts or agreements of the types described
in clauses (i) through (v) being referred to herein as "Company Material
Contracts").
(a) As of the date of this Agreement, each Company Material
Contract is, to the knowledge of the Company, in full force and
effect, and the Company and each of its Subsidiaries have in all
material respects performed all obligations required to be
performed by them to date under each Company Material Contract to
which it is a party, except where such failure to be binding or
in full force and effect or such failure to perform does not and
is not reasonably likely to create, individually or in the
aggregate, a Company Material Adverse Effect. Except for such
matters as do not and are not reasonably likely to have a Company
Material Adverse Effect, neither the Company nor any of its
Subsidiaries (x) knows of, or has received written notice of, any
breach of or violation or default under (nor, to the knowledge of
the Company, does there exist any condition which with the
passage of time or the giving of notice or both would result in
such a violation or default under) any Company Material Contract
or (y) has received written notice of the desire of the other
party or parties to any such Company Material Contract to
exercise any rights such party has to cancel, terminate or
repudiate such contract or exercise remedies thereunder. Each
Company Material Contract is enforceable by the Company or a
Subsidiary of the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors' rights and general
principles of equity, except where such unenforceability is not
reasonably likely to create, individually or in the aggregate, a
Company Material Adverse Effect.
Section Section 5.24 Capital Expenditure Program. As of the
date of this Agreement, the Company Disclosure Letter accurately sets forth in
all material respects, for each of the Company's sustaining, life extension and
newbuild capital expenditure programs, the capital expenditures for all such
programs that were forecasted to be incurred in 2000 and 2001 on a monthly
basis, as previously provided to Parent. The construction in progress
attributable to the newbuilds and included in the consolidated balance sheet of
the Company at June 30, 2000 included in the Company Reports (excluding
capitalized interest on such newbuilds) and the projected newbuild capital
expenditures to be incurred in 2000 and 2001 equal the projected total
construction costs to complete such newbuilds, as at the time of such forecast.
23
<PAGE>
Section Section 5.25 Improper Payments. No bribes,
kickbacks or other improper payments have been made by the Company or any
Subsidiary of the Company or agent of any of them in connection with the conduct
of their respective businesses or the operation of their respective assets, and
neither the Company, any Subsidiary of the Company nor any agent of any of them
has received any such payments from vendors, suppliers or other persons, where
any such payment made or received is reasonably likely to have a Company
Material Adverse Effect.
Section Section 5.26 Amendment to the Company Rights
Agreement. The Company has amended or taken other action under the Company
Rights Agreement so that none of the execution and delivery of this Agreement,
the conversion of shares of Company Common Stock into the right to receive
shares of Parent Ordinary Shares in accordance with Article 4 of this Agreement,
the consummation of the Merger or any other transaction contemplated hereby,
will cause (i) the Company Rights to become exercisable under the Company Rights
Agreement, (ii) Parent or any of its stockholders or Subsidiaries to be deemed
an "Acquiring Person" (as defined in the Company Rights Agreement), (iii) any
such event to be a "Section 11(a)(ii) Event" or a "Section 13 Event" (as
defined in the Company Rights Agreement) or (iv) a "Stock Acquisition Date" or a
"Distribution Date" (each as defined in the Company Rights Agreement) to occur
upon any such event, and so that the Company Rights will expire immediately
prior to the Effective Time. The Company has delivered to Parent a true and
complete copy of the Company Rights Agreement, as amended to date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
OF PARENT, SUB AND MERGER SUB
Except as set forth in the disclosure letter delivered to the Company
by Parent at or prior to the execution hereof (the "Parent Disclosure Letter"),
Parent, Sub and Merger Sub, jointly and severally, represent and warrant to the
Company that:
Section Section 6.1 Existence; Good Standing; Corporate
Authority. Each of Parent, Sub and Merger Sub is a corporation duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation. Parent is duly qualified to do business and, to the extent such
concept or similar concept exists in the relevant jurisdiction, is in good
standing under the laws of any jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified does not and is not reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect (as defined in Section 10.9).
Parent has all requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted. The copies of
Parent's memorandum of association
24
<PAGE>
and articles of association and the comparable charter and organizational
documents of Sub and Merger Sub previously made available to the Company are
true and correct and contain all amendments as of the date hereof.
Section Section 6.2 Authorization, Validity and Effect of
Agreements. Each of Parent, Sub and Merger Sub has the requisite corporate
power and authority to execute and deliver this Agreement and all other
agreements and documents contemplated hereby to which it is a party. The
consummation by each of Parent, Sub and Merger Sub of the transactions
contemplated hereby, including the issuance by Parent and delivery by Sub of
Parent Ordinary Shares pursuant to the Merger, have been duly authorized by all
requisite corporate action on behalf of Parent, other than the approvals
referred to in Section 6.20. This Agreement constitutes the valid and legally
binding obligation of Parent and this Agreement constitutes the valid and
legally binding obligation of Sub and Merger Sub, enforceable against Parent,
Sub or Merger Sub, as applicable, in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights and general principles of equity. Parent has
taken all action necessary to render the restrictions set forth in Article XXVII
of its articles of association inapplicable to this Agreement and the
transactions contemplated hereby.
Section Section 6.3 Capitalization. As of the date of this
Agreement, the authorized share capital of Parent consists of 300,000,000 Parent
Ordinary Shares and 50,000,000 undesignated shares, par value $0.10 per share,
of Parent ("Parent Preference Shares"). As of August 17, 2000, there were
210,648,411 Parent Ordinary Shares issued, 4,456,805 Parent Ordinary Shares
reserved for issuance upon exercise of outstanding Parent options and no Parent
Preference Shares issued. All such issued Parent Ordinary Shares are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. The Parent Ordinary Shares to be issued in connection with the Merger,
when issued in accordance with this Agreement, will be validly issued, fully
paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as set forth in this Section 6.3, there are no outstanding
shares or shares of capital stock, and there are no options, warrants, calls,
subscriptions, convertible securities or other rights, agreements or commitments
which obligate Parent or any of its Subsidiaries to issue, transfer or sell any
shares or shares of capital stock or other voting securities of Parent or any of
its Subsidiaries. Parent has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of Parent on any matter.
Section Section 6.4 Significant Subsidiaries. Each of
Parent's Significant Subsidiaries is a corporation or other legal entity duly
organized, validly existing and, to the extent such concept or similar concept
exists in the relevant jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or other entity
power and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing (where applicable) in each jurisdiction in which the
ownership, operation or lease of its property or the conduct of its business
requires such qualification, except for jurisdictions in which such failure to
be so qualified
25
<PAGE>
or to be in good standing does not and is not reasonably likely to have a Parent
Material Adverse Effect. As of the date of this Agreement, all of the
outstanding shares of capital stock of, or other ownership interests in, each of
Parent's Significant Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable, and are owned, directly or indirectly, by Parent free
and clear of all Liens.
(a) Sub and Merger Sub. All of the outstanding capital stock of
Merger Sub is owned directly by Sub, all of the outstanding
capital stock of Sub is owned directly by Parent, and Merger Sub
has been formed solely for the purpose of engaging in the
transactions contemplated hereby and, as of the Effective Time,
will have not engaged in any activities other than in connection
with the transactions contemplated by this Agreement. Immediately
prior to the Effective Time, Merger Sub will have 1,000,000
outstanding shares of its common stock, par value $0.01 per
share.
Section Section 6.5 Compliance with Laws; Permits. Except
for such matters as, individually or in the aggregate, do not or are not
reasonably likely to have a Parent Material Adverse Effect and except for
matters arising under Environmental Laws which are treated exclusively in
Section 6.13:
(a) Neither Parent nor any Subsidiary of Parent is in violation
of any Applicable Laws relating to the ownership or operation of
any of their respective assets, and no claim is pending or, to
the knowledge of Parent, threatened with respect to any such
matters. No condition exists that is not disclosed in the Parent
Disclosure Letter and which does or is reasonably likely to
constitute a violation of or deficiency under any Applicable Law
relating to the ownership or operation of the assets of Parent or
any Subsidiary of Parent.
(b) Parent and each Subsidiary of Parent hold all permits,
licenses, certifications, variations, exemptions, orders,
franchises and approvals of all governmental or regulatory
authorities necessary for the conduct of their respective
businesses (the "Parent Permits"). All Parent Permits are in full
force and effect and there exists no default thereunder or breach
thereof, and Parent has no notice or actual knowledge that such
Parent Permits will not be renewed in the ordinary course after
the Effective Time. No governmental authority has given, or to
the knowledge of Parent threatened to give, any action to
terminate, cancel or reform any Parent Permit.
(c) Each drilling rig, drillship or other drilling unit owned by
Parent or a subsidiary of Parent which is subject to
classification is in class according
26
<PAGE>
to the rules and regulations of the applicable classifying body
and is duly and lawfully documented under the laws of its flag
jurisdiction.
(d) Parent and each Subsidiary of Parent possess all
permits, licenses, operating authorities, orders,
exemptions, franchises, variances, consents, approvals
or other authorizations required for the present
ownership and operation of all its real property or
leaseholds ("Parent Real Property") except where the
failure to possess any of the same does not and is not
reasonably likely to have a Parent Material Adverse
Effect. There exists no material default or breach with
respect to, and no party or governmental authority has
taken or, to the knowledge of Parent, threatened to
take, any action to terminate, cancel or reform any
such permit, license, operating authority, order,
exemption, franchise, variance, consent, approval or
other authorization pertaining to the Parent Real
Property.
Section Section 6.6 No Conflict. Neither the execution
and delivery by Parent, Sub and Merger Sub of this Agreement nor the
consummation by Parent, Sub and Merger Sub of the transactions contemplated
hereby in accordance with the terms hereof will (i) subject to the approvals
referred to in Section 6.20, conflict with or result in a breach of any
provisions of the memorandum of association or articles of association of Parent
or the certificate of incorporation or bylaws of Sub or Merger Sub; (ii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or give rise to a right of purchase under or
accelerate the performance required by, or result in the creation of any Lien
upon any of the properties of Parent or its Subsidiaries under, or result in
being declared void, voidable, or without further binding effect, or otherwise
result in a detriment to Parent or any of its Subsidiaries under any of the
terms, conditions or provisions of, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, lease, contract, agreement, joint venture or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party, or by which Parent or any of its Subsidiaries or any of their properties
is bound or affected; or (iii) subject to the filings and other matters referred
to in Section 6.6(b), contravene or conflict with or constitute a violation of
any provision of any law, rule, regulation, judgment, order or decree binding
upon or applicable to Parent or any of its Subsidiaries, except for such matters
described in clause (ii) or (iii) as do not and are not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect.
(a) Neither the execution and delivery by Parent, Sub or Merger
Sub of this Agreement nor the consummation by Parent, Sub or
Merger Sub of the transactions contemplated hereby in accordance
with the terms hereof will
27
<PAGE>
require any consent, approval or authorization of, or filing or
registration with, any governmental or regulatory authority,
other than the Regulatory Filings and the filing of a listing
application with the NYSE pursuant to Section 7.9(a) and the
filing of the resolutions relating to the matters specified in
Section 2.1 with the Registrar of Companies of the Cayman
Islands, except for any consent, approval or authorization the
failure of which to obtain and for any filing or registration the
failure of which to make does not and is not reasonably likely to
have a Parent Material Adverse Effect.
Section Section 6.7 SEC Documents. Parent has filed with
the SEC all documents required to be so filed by it since January 1, 2000
pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange Act, and has made
available to the Company each registration statement, report, proxy statement or
information statement (other than preliminary materials) it has so filed, each
in the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Parent Reports"). As of its respective date, each Parent
Report (i) complied in all material respects in accordance with the applicable
requirements of the Exchange Act and the rules and regulations thereunder and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading except for such statements, if any, as have been modified by
subsequent filings with the SEC prior to the date hereof. Each of the
consolidated balance sheets included in or incorporated by reference into the
Parent Reports (including the related notes and schedules) fairly presents in
all material respects the consolidated financial position of Parent and its
Subsidiaries as of its date, and each of the consolidated statements of
operations, cash flows and equity included in or incorporated by reference into
the Parent Reports (including any related notes and schedules) fairly presents
in all material respects the results of operations, cash flows or changes in
equity, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to (x) such
exceptions as may be permitted by Form 10-Q of the SEC and (y) normal year-end
audit adjustments), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein. Except as and to the extent set forth on the
consolidated balance sheet of Parent and its Subsidiaries included in the Parent
Reports, including all notes thereto, as of the date of such balance sheet,
neither Parent nor any of its Subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a balance sheet of Parent
or in the notes thereto prepared in accordance with generally accepted
accounting principles consistently applied, other than liabilities or
obligations which do not and are not reasonably likely to have, individually or
in the aggregate, a Parent Material Adverse Effect.
Section Section 6.8 Litigation. Except as described in the
Parent Reports filed on or prior to the date of this Agreement, there are no
actions, suits or proceedings pending against Parent or any of its Subsidiaries
or, to Parent's knowledge, threatened against Parent or any of its Subsidiaries,
at law or in equity, before or by any U.S. federal, state or
28
<PAGE>
non-U.S. court, commission, board, bureau, agency or instrumentality, that are
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect.
Section Section 6.9 Absence of Certain Changes. From
December 31, 1999 to the date of this Agreement, there has not been (i) any
event or occurrence that has had or is reasonably likely to have a Parent
Material Adverse Effect, (ii) any material change by Parent or any of its
Subsidiaries, when taken as a whole, in any of its accounting methods,
principles or practices or any of its tax methods, practices or elections, (iii)
any declaration, setting aside or payment of any dividend or distribution in
respect of any share capital of Parent or any redemption, purchase or other
acquisition of any of its securities, except dividends on Parent Ordinary Shares
at a rate of not more than $0.03 per share per quarter or (iv) any increase in
or establishment of any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase or other
employee benefit plan, except in the ordinary course of business.
Section Section 6.1 Taxes. Each of Parent, its
Subsidiaries and each affiliated, consolidated, combined, unitary or similar
group of which any such corporation is or was a member has (i) duly filed (or
there has been filed on its behalf) on a timely basis with appropriate
governmental authorities all Returns required to be filed by or with respect to
it on or prior to the date hereof, except to the extent that any failure to file
does not and is not reasonably likely to have, individually or in the aggregate,
a Parent Material Adverse Effect, and (ii) duly paid, or deposited in full on a
timely basis or made adequate provision in accordance with generally accepted
accounting principles (or there has been paid or deposited or adequate provision
has been made on its behalf) for the payment of, all taxes required to be paid
by it, except to the extent that any failure to pay or deposit or make adequate
provision for the payment of such taxes does not and is not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Representations made in this Section 6.10 are made to the knowledge of Parent to
the extent that the representations relate to a corporation which was, but is
not currently, a part of Parent's or any Subsidiary's affiliated, consolidated,
combined unitary or similar group.
(a) (i) No audits or other administrative proceedings or court
proceedings are presently pending with regard to any taxes or
Returns of Parent or any of its Subsidiaries as to which any
taxing authority has asserted in writing any claim which, if
adversely determined, is reasonably likely to have a Parent
Material Adverse Effect; (ii) no governmental authority is now
asserting in writing any deficiency or claim for taxes or any
adjustment to taxes with respect to which Parent or any of its
Subsidiaries may be liable with respect to income and other
material taxes which have not been fully paid or finally settled,
which, if adversely determined, is reasonably likely to have a
Parent Material Adverse Effect; (iii) as of the date of this
Agreement, neither Parent nor any of its Subsidiaries has granted
any requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of
any taxes with respect to any Returns of Parent or any of its
29
<PAGE>
Subsidiaries; (iv) to the knowledge of Parent, neither Parent nor
any of its Subsidiaries is a party to any closing agreement
described in Section 7121 of the Code or any predecessor
provision thereof or any similar agreement under state, local, or
non-U.S. tax law; (v) to the knowledge of Parent, neither Parent
nor any of its Subsidiaries is a party to, is bound by or has any
obligation under any tax sharing, allocation or indemnity
agreement or any similar agreement or arrangement; (vi) neither
Parent nor any of its Subsidiaries is a party to an agreement
that provides for the payment of any amount in connection with
the Merger that would be reasonably likely to constitute an
"excess parachute payment" within the meaning of Section 280G of
the Code; (vii) to the knowledge of Parent, neither Parent nor
any of its Subsidiaries has made an election under Section 341(f)
of the Code; (viii) to the knowledge of Parent, neither Parent
nor any of its Subsidiaries has any liability for taxes under
Treas. Reg. (S) 1.1502-6 or any similar provision of state,
local, or non-U.S. tax law, except for taxes of the affiliated
group of which Parent is the common parent, within the meaning of
Section 1504(a)(1) of the Code or any similar provision of state,
local, or non-U.S. tax law; and (ix) to the knowledge of Parent,
Parent has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code
at any time within the past five years.
(c) Neither Parent nor any of the Parent Subsidiaries knows of any
fact, or has taken any action or has failed to take any action, that is
reasonably likely to (i) prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code or (ii) cause the Eligible
Company Shareholders who exchange Company Common Stock solely for Parent
Ordinary Shares pursuant to the Merger to recognize taxable gain with respect to
the Merger pursuant to Section 367(a) of the Code (except with respect to cash
received in lieu of fractional shares). Neither Parent nor any of its
Subsidiaries has agreed to pay, or will pay, directly or indirectly, any
consideration for shares of stock of the Company other than Parent voting shares
and other than the cash in lieu of fractional shares to be delivered by Sub as
described in this Agreement.
Section Section 6.11 Employee Benefit Plans. Section 6.11
of the Parent Disclosure Letter contains a list of all Parent Benefit Plans.
The term "Parent Benefit Plans" means all material employee benefit plans and
other material benefit arrangements, including all "employee benefit plans" as
defined in Section 3(3) of ERISA, whether or not U.S.-based plans, and all other
employee benefit, bonus, incentive, deferred compensation, stock option (or
other equity-based), severance, employment, change in control, welfare
(including post-retirement medical and life insurance) and fringe benefit plans
or agreements, whether or not subject to ERISA or U.S.-based and whether written
or oral, sponsored, maintained or contributed to or required to be contributed
to by Parent or any of its Subsidiaries, to which Parent or any of its
Subsidiaries is a party or is required to provide benefits under applicable law
or in which any person who is currently, has been or, prior to the Effective
Time, is expected to become an employee of Parent is a
30
<PAGE>
participant. Parent will provide the Company, within 30 days after the date
hereof, with true and complete copies of the Parent Benefit Plans other than
those sponsored by Schlumberger Limited and its subsidiaries and, if applicable,
the most recent trust agreements, Forms 5500, summary plan descriptions, funding
statements, annual reports and actuarial reports, if applicable, for each such
plan.
(a) Except for such matters as, individually or in the aggregate,
do not or are not reasonably likely to have a Parent Material
Adverse Effect: all applicable reporting and disclosure
requirements have been met with respect to Parent Benefit Plans;
there has been no "reportable event," as that term is defined in
Section 4043 of ERISA, with respect to Parent Benefit Plans
subject to Title IV of ERISA for which the 30-day reporting
requirement has not been waived; to the extent applicable, Parent
Benefit Plans comply with the requirements of ERISA and the Code
or with the regulations of any applicable jurisdiction, and any
Parent Benefit Plan intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from
the IRS; Parent Benefit Plans have been maintained and operated
in accordance with their terms, and, to Parent's knowledge, there
are no breaches of fiduciary duty in connection with Parent
Benefit Plans; there are no pending, or to Parent's knowledge,
threatened claims against or otherwise involving any Parent
Benefit Plan, and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of Parent
Benefit Plan activities) has been brought against or with respect
to any such Parent Benefit Plan; all material contributions
required to be made as of the date hereof to Parent Benefit Plans
have been made or provided for; with respect to Parent Benefit
Plans or any "employee pension benefit plans," as defined in
Section 3(2) of ERISA, that are subject to Title IV of ERISA and
have been maintained or contributed to within six years prior to
the Effective Time by Parent, its Subsidiaries or any of its
ERISA Affiliates, (i) neither Parent nor any of its Subsidiaries
has incurred any direct or indirect liability under Title IV of
ERISA in connection with any termination thereof or withdrawal
therefrom; and (ii) there does not exist any accumulated funding
deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived.
(b) Neither Parent nor any of its Subsidiaries nor any of its
ERISA Affiliates contributes to, or has an obligation to
contribute to, and has not within six years prior to the
Effective Time contributed to, or had an obligation to contribute
to, a "multiemployer plan" within the meaning of Section 3(37) of
ERISA, and the execution of, and performance of the transactions
contemplated by, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute
an event
31
<PAGE>
under any benefit plan, policy, arrangement or agreement or any
trust or loan (in connection therewith) that will or may result
in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligations to fund benefits with respect
to any employee of Parent or any Subsidiary thereof.
(c) No Parent Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of Parent or any
Subsidiary of Parent for periods extending beyond their
retirement or other termination of service other than (i)
coverage mandated by applicable law, (ii) death benefits under
any "pension plan" or (iii) benefits the full cost of which is
borne by the current or former employee (or his beneficiary).
Section Section 6.12 Labor Matters. (a) As of the date of
this Agreement, (i) neither Parent nor any of its Subsidiaries is a party to, or
bound by, any collective bargaining agreement or similar contract, agreement or
understanding with a labor union or similar labor organization (A) covering any
U.S. employees or (B) covering, in any single instance, 10% or more of the
employees of Parent and its Subsidiaries taken as a whole, and (ii) to Parent's
knowledge, there are no organizational efforts with respect to the formation of
a collective bargaining unit presently being made or threatened (x) involving
any U.S. employees or (y) involving, in any single instance, 10% or more of the
employees of Parent and its Subsidiaries taken as a whole.
(b) Except for such matters as do not and are not reasonably likely
to have a Parent Material Adverse Effect, (i) neither Parent nor any Subsidiary
of Parent has received any written complaint of any unfair labor practice or
other unlawful employment practice or any written notice of any material
violation of any federal, state or local statutes, laws, ordinances, rules,
regulations, orders or directives with respect to the employment of individuals
by, or the employment practices of, Parent or any Subsidiary of Parent or the
work conditions or the terms and conditions of employment and wages and hours of
their respective businesses and (ii) there are no unfair labor practice charges
or other employee related complaints against Parent or any Subsidiary of Parent
pending or, to the knowledge of Parent, threatened, before any governmental
authority by or concerning the employees working in their respective businesses.
Section Section 6.13 Environmental Matters. Parent and
each Subsidiary of Parent has been and is in compliance with all Environmental
Laws except for such matters as do not and are not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect. There are
no past or present facts, conditions or circumstances that interfere with the
conduct of any of their respective businesses in the manner now conducted or
which interfere with continued compliance with any Environmental Law, except for
any non-compliance or interference that is not reasonably likely to have,
individually or in the aggregate, a
32
<PAGE>
Parent Material Adverse Effect.
(a) Except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, no judicial or administrative
proceedings or governmental investigations are pending or, to the
knowledge of Parent, threatened against Parent or its
Subsidiaries that allege the violation of or seek to impose
liability pursuant to any Environmental Law, and there are no
past or present facts, conditions or circumstances at, on or
arising out of, or otherwise associated with, any current (or, to
the knowledge of Parent or its Subsidiaries, former) businesses,
assets or properties of Parent or any Subsidiary of Parent,
including but not limited to on-site or off-site disposal,
release or spill of any Hazardous Materials which violate
Environmental Law or are reasonably likely to give rise to (i)
costs, expenses, liabilities or obligations for any cleanup,
remediation, disposal or corrective action under any
Environmental Law, (ii) claims arising for personal injury,
property damage or damage to natural resources, or (iii) fines,
penalties or injunctive relief.
(b) Neither Parent nor any of its Subsidiaries has (i) received
any notice of noncompliance with, violation of, or liability or
potential liability under any Environmental Law or (ii) entered
into any consent decree or order or is subject to any order of
any court or governmental authority or tribunal under any
Environmental Law or relating to the cleanup of any Hazardous
Materials, except for any such matters as do not and are not
reasonably likely to have a Parent Material Adverse Effect.
Section Section 6.14 Intellectual Property. Parent and its
Subsidiaries own or possess adequate licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights and proprietary information
used or held for use in connection with their respective businesses as currently
being conducted, except where the failure to own or possess such licenses and
other rights does not and is not reasonably likely to have, individually or in
the aggregate, a Parent Material Adverse Effect, and there are no assertions or
claims challenging the validity of any of the foregoing that are reasonably
likely to have, individually or in the aggregate, a Parent Material Adverse
Effect. The conduct of Parent's and its Subsidiaries' respective businesses as
currently conducted does not conflict with any patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights or copyrights of
others that are reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect. There is no material infringement of any
proprietary right owned by or licensed by or to Parent or any of its
Subsidiaries that is reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect.
33
<PAGE>
Section Section 6.15 Decrees, Etc. Except for such matters
as do not and are not reasonably likely to have a Parent Material Adverse Effect
(i) no order, writ, fine, injunction, decree, judgment, award or determination
of any court or governmental authority has been issued or entered against Parent
or any Subsidiary of Parent that continues to be in effect that affects the
ownership or operation of any of their respective assets, and (ii) no criminal
order, writ, fine, injunction, decree, judgment or determination of any court or
governmental authority has been issued against Parent or any Subsidiary of
Parent.
Section Section 6.16 Insurance. Except for such matters
as do not and are not reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect, Parent and its Subsidiaries
maintain insurance coverage with financially responsible insurance companies in
such amounts and against such losses as are customary in the international
offshore drilling business prior to the date hereof.
(a) Except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, a Parent
Material Adverse Effect, no event relating specifically to Parent
or its Subsidiaries (as opposed to events affecting the drilling
service industry in general) has occurred that is reasonably
likely, after the date of this Agreement, to result in an upward
adjustment in premiums under any insurance policies they
maintain. Excluding insurance policies that have expired and been
replaced in the ordinary course of business, no excess liability,
hull or protection and indemnity insurance policy has been
canceled by the insurer within one year prior to the date hereof,
and to Parent's knowledge, no threat in writing has been made to
cancel (excluding cancellation upon expiration or failure to
renew) any insurance policy of Parent or any Subsidiary of Parent
during the period of one year prior to the date hereof. Prior to
the date hereof, no event has occurred, including the failure by
Parent or any Subsidiary of Parent to give any notice or
information or by giving any inaccurate or erroneous notice or
information, which materially limits or impairs the rights of
Parent or any Subsidiary of Parent under any such excess
liability, hull or protection and indemnity insurance policies.
Section Section 6.17 No Brokers. Parent has not entered
into any contract, arrangement or understanding with any person or firm which
may result in the obligation of the Company or Parent to pay any finder's fees,
brokerage or other like payments in connection with the negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby,
except that Parent has retained Goldman Sachs & Co. and Simmons & Company
International as its financial advisors, the arrangements with which have been
disclosed in writing to the Company prior to the date hereof.
34
<PAGE>
Section Section 6.18 Opinion of Financial Advisor. The
Board of Directors of Parent has received the opinion of each of Goldman Sachs &
Co. and Simmons & Company International to the effect that, as of the date of
this Agreement, the Common Stock Merger Ratio is fair to Parent from a financial
point of view.
Section Section 6.19 Company Stock Ownership. Neither
Parent nor any of its Subsidiaries owns any shares of capital stock of the
Company or any other securities convertible into or otherwise exercisable to
acquire capital stock of the Company.
Section Section 6.20 Vote Required. The only votes of the
holders of any class or series of Parent share capital necessary to approve any
transaction contemplated by this Agreement are (a) the vote of the holders of
Parent Ordinary Shares required by the rules of the NYSE to approve the issuance
of Parent Ordinary Shares pursuant to the Merger and the amendment of Parent's
Long-Term Incentive Plan contemplated by Section 7.4, (b) the affirmative vote
of at least a majority of the votes represented by the holders of the issued
Parent Ordinary Shares present in person or by proxy at a meeting to be held in
accordance with Section 7.4 to approve the increase in authorized ordinary share
capital contemplated by this Agreement, and (c) the affirmative vote of at least
two-thirds of the votes represented by the holders of the issued Parent Ordinary
Shares present in person or by proxy at the meeting to be held in accordance
with Section 7.4 to approve the increase in the maximum number of members of the
Board of Directors of Parent contemplated by this Agreement.
Section Section 6.21 Ownership of Drilling Rigs and
Drillships. As of the date hereof, Parent or a Subsidiary of Parent has good
and marketable title to the drilling rigs and drill ships listed in Parent's
most recent annual report on Form 10-K, in each case free and clear of all Liens
except for (i) defects or irregularities of title or encumbrances of a nature
that do not materially impair the ownership or operation of these assets and
which have not had and are not reasonably likely to have a Parent Material
Adverse Effect, (ii) Liens that secure obligations not yet due and payable or,
if such obligations are due and have not been paid, Liens securing such
obligations that are being diligently contested in good faith and by appropriate
proceedings (any such contests involving an amount in excess of $10 million
being described in the Parent Disclosure Letter), (iii) Liens for taxes,
assessments or other governmental charges or levies not yet due or which are
being contested in good faith, (iv) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are being contested in good
faith, (v) operators', vendors', suppliers of necessaries to the Company's
drilling rigs, carriers', warehousemen's, repairmen's, mechanics', workmen's,
materialmen's, construction or shipyard liens (during repair or upgrade periods)
or other like Liens arising by operation of law in the ordinary course of
business or statutory landlord's liens, each of which is in respect of
obligations that have not been outstanding more than 90 days (so long s no
action has been taken to file or enforce such Liens within said 90-day period)
or which are being contested in good faith and (vi) other Liens disclosed in the
Parent Disclosure Letter (the Liens described in clauses (i), (ii), (iii), (iv),
(v) and (vi), collectively, "Parent Permitted Liens"). No such
35
<PAGE>
asset is leased under an operating lease from a lessor that, to Parent's
knowledge, has incurred non-recourse indebtedness to finance the acquisition or
construction of such asset.
Section Section 6.22 Undisclosed Liabilities. Neither
Parent nor any of its Subsidiaries has any liabilities or obligations of any
nature, whether or not fixed, accrued, contingent or otherwise, except
liabilities and obligations that (i) are disclosed in the Parent Reports, (ii)
are referred to in the Parent Disclosure Letter or (iii) do not and are not
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect.
Section Section 6.23 Certain Contracts. Section 6.23 of
the Parent Disclosure Letter contains a list of all of the following contracts
or agreements (other than those set forth on an exhibit index in the Parent
Reports filed on or prior to the date of this Agreement) to which Parent or any
Subsidiary of Parent is a party or by which any of them is bound as of the date
of this Agreement: (i) any non-competition agreement that purports to limit the
manner in which, or the localities in which, all or any portion of their
respective businesses is conducted other than any such limitation that is not
material to Parent and its Subsidiaries, taken as a whole, (ii) any drilling rig
construction or conversion contract with respect to which the drilling rig has
not been delivered and paid for, (iii) any drilling contracts of one year or
greater remaining duration, (iv) any contract or agreement for the borrowing of
money with a borrowing capacity or outstanding indebtedness of $50 million or
more or (v) any "material contract" (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC) (all contracts or agreements of the types
described in clauses (i) through (v) being referred to herein as "Parent
Material Contracts").
(a) As of the date of this Agreement, each Parent Material
Contract is, to the knowledge of Parent, in full force and
effect, and Parent and each of its Subsidiaries have in all
material respects performed all obligations required to be
performed by them to date under each Parent Material Contract to
which it is a party, except where such failure to be binding or
in full force and effect or such failure to perform does not and
is not reasonably likely to create, individually or in the
aggregate, a Parent Material Adverse Effect. Except for such
matters as do not and are not reasonably likely to have a Parent
Material Adverse Effect, neither Parent nor any of its
Subsidiaries (x) knows of, or has received written notice of, any
breach of or violation or default under (nor, to the knowledge of
Parent, does there exist any condition which with the passage of
time or the giving of notice or both would result in such a
violation or default under) any Parent Material Contract or (y)
has received written notice of the desire of the other party or
parties to any such Parent Material Contract to exercise any
rights such party has to cancel, terminate or repudiate such
contract or exercise remedies thereunder. Each Parent Material
Contract is enforceable by Parent or a Subsidiary of Parent in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights
36
<PAGE>
and general principles of equity, except where such
unenforceability is not reasonably likely to create, individually
or in the aggregate, a Company Material Adverse Effect.
Section Section 6.24 Capital Expenditure Program. As of the
date of this Agreement, the Parent Disclosure Letter accurately sets forth in
all material respects, for each of Parent's sustaining, life extension and
newbuild capital expenditure programs, the capital expenditures for all such
programs that were forecasted to be incurred in 2000 and 2001 on a monthly
basis, as previously provided to the Company. The construction in progress
attributable to the newbuilds and included in the consolidated balance sheet of
Parent at June 30, 2000 included in the Parent Reports and the projected
newbuild capital expenditures to be incurred in 2000 and 2001 equal the
estimated book value of the rigs when complete, as at the time of such forecast.
Section Section 6.25 Improper Payments. No bribes,
kickbacks or other improper payments have been made by Parent or any Subsidiary
of Parent or agent of any of them in connection with the conduct of their
respective businesses or the operation of their respective assets, and neither
Parent, any Subsidiary of Parent, nor any agent of any of them has received any
such payments from vendors, suppliers or other persons, where any such payment
made or received is reasonably likely to have a Parent Material Adverse Effect.
ARTICLE 7
COVENANTS
Section Section 7.1 Conduct of Company Business. Prior to
the Effective Time, except as set forth in the Company Disclosure Letter or as
expressly contemplated by any other provision of this Agreement or as required
by Applicable Laws (provided that the Company has provided Parent with advance
notice of the proposed action to the extent practicable), unless Parent has
consented in writing thereto, the Company:
(a) shall, and shall cause each of its Subsidiaries to, conduct
its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
(b) shall use its commercially reasonable best efforts, and shall
cause each of its Subsidiaries to use its commercially reasonable
best efforts, to preserve intact their business organizations and
goodwill (except that any of its Subsidiaries may be merged with
or into, or be consolidated with any of its Subsidiaries or may
be liquidated into the Company or any of its Subsidiaries), keep
available the services of their respective officers and employees
and maintain satisfactory relationships with those persons having
business relationships with them;
37
<PAGE>
(c) shall not amend its certificate of incorporation or bylaws;
(d) shall promptly notify Parent of any material change in its
condition (financial or otherwise) or business or any
termination, cancellation, repudiation or material breach of any
Company Material Contract (or communications indicating that the
same may be contemplated) or any material litigation or material
governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or
the breach in any material respect of any representation or
warranty contained herein;
(e) shall promptly deliver to Parent true and correct copies of
any report, statement or schedule filed with the SEC subsequent
to the date of this Agreement;
(f) shall not, (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing
on the date hereof and disclosed pursuant to this Agreement
(including the Company Rights issued pursuant to the Company
Rights Agreement) or pursuant to the exercise of awards granted
after the date hereof and expressly permitted under this
Agreement or in connection with transactions permitted by Section
7.1(i) or pursuant to the payment of dividends on shares of
Company Redeemable Preferred Stock in amounts required under the
certificate of designation of the Company establishing the
Company Redeemable Preferred Stock, issue any shares of its
capital stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof, (ii) grant,
confer or award any option, warrant, conversion right or other
right not existing on the date hereof to acquire any shares of
its capital stock, except for (A) (1) awards of options to
acquire up to 15,000 shares of Company Common Stock, per person,
to newly hired employees or to existing employees as the result
of promotions, in each case other than officers or directors of
the Company (including former officers or directors) in the
ordinary course of business consistent with past practices as set
forth in Section 7.1(f) of the Company Disclosure Letter and (2)
in the event the Effective Time does not occur on or before
February 28, 2001, awards of options to employees other than
officers and directors of the Company (including former officers
or directors), to acquire up to 15,000 shares of Company Common
Stock per employee, up to an aggregate of 500,000 shares of
Company Common Stock for all employees, provided in the case of
both clause (1) and (2) that such awards provide for
exercisability in three equal annual installments beginning on
each anniversary of the date of grant of the option subject to
continued employment with the Company or
38
<PAGE>
its affiliates, with no right of acceleration of exercisability
as a result of the transactions contemplated by this Agreement,
with no right to exercise more than three months after
termination of employment, with no right to have shares withheld
upon exercise, for tax purposes, in excess of the number of
shares needed to satisfy the minimum statutory withholding
requirements for federal and state tax withholding, and in all
other respects are made in the ordinary course of business
consistent with past practices, and (B) the issuance of Company
Rights with permitted issuances of Company Common Stock, (iii)
amend or otherwise modify any option, warrant, conversion right
or other right to acquire any shares of its capital stock
existing on the date hereof, (iv) with respect to any of its
former, present or future employees, increase any compensation or
benefits, or enter into, amend or extend (or permit the extension
of) any employment or consulting agreement, except in each case
in the ordinary course of business consistent with past practice,
(v) with respect to any of its former, present or future officers
or directors, increase any compensation or benefits or enter
into, amend or extend (or permit the extension of) any employment
or consulting agreement, (vi) adopt any new employee benefit plan
or agreement (including any stock option, stock benefit or stock
purchase plan) or amend (except as required by law) any existing
employee benefit plan in any material respect, except for changes
which are less favorable to participants in such plans, (vii)
except as approved by good faith action of the Board of Directors
of the Company after the Company has provided Parent with advance
written notice of the proposed action and consulted in advance
with Parent regarding such action, terminate any executive
officer without cause or permit circumstances to exist that would
give any executive officer a right to terminate employment if the
termination would entitle such executive officer to receive
enhanced separation payments upon consummation of the Merger, or
(viii) permit any holder of an option to acquire Company Common
Stock outstanding on the date hereof to have shares withheld upon
exercise, for tax purposes, in excess of the number of shares
needed to satisfy the minimum statutory withholding requirements
for federal and state tax withholding;
(g) except for the payment of dividends on shares of Company
Redeemable Preferred Stock in amounts required under the terms of
the certificate of designation of the Company establishing the
Company Redeemable Preferred Stock, shall not (i) declare, set
aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or (ii)
redeem, purchase or otherwise acquire any shares of its capital
stock or capital stock of any of its Subsidiaries, or make any
commitment for any such action;
39
<PAGE>
(h) shall not, and shall not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of any of its assets (including
capital stock of Subsidiaries) which are material to the Company,
individually or in the aggregate, except for sales of surplus
equipment or sales of other assets in the ordinary course of
business;
(i) shall not, and shall not permit any of its Subsidiaries to,
except pursuant to contractual commitments in effect on the date
hereof and disclosed in the Company Disclosure Letter, acquire or
agree to acquire by merging or consolidating with, or by
purchasing an equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof, in each case (i) for an
aggregate consideration for all such acquisitions in excess of
$10 million (excluding acquisitions approved in writing by
Parent) or (ii) where a filing under the HSR Act or any non-U.S.
competition, antitrust or premerger notification laws is
required;
(j) shall not, except as may be required as a result of a change
in generally accepted accounting principles, change any of the
material accounting principles or practices used by it;
(k) shall, and shall cause any of its Subsidiaries to, use
reasonable efforts to maintain with financially responsible
insurance companies insurance in such amounts and against such
risks and losses as are customary for such party;
(l) shall not, and shall not permit any of its Subsidiaries to,
(i) make or rescind any material election relating to taxes,
including elections for any and all joint ventures, partnerships,
limited liability companies, working interests or other
investments where it has the capacity to make such binding
election, (ii) settle or compromise any material claim, action,
suit, litigation, proceeding, arbitration, investigation, audit
or controversy relating to taxes, or (iii) change in any material
respect any of its methods of reporting any item for tax purposes
from those employed in the preparation of its tax returns for the
most recent taxable year for which a return has been filed,
except as may be required by applicable law;
(m) shall not, and shall not permit any of its Subsidiaries to,
(i) incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company
or any of its Subsidiaries or guarantee any debt securities of
others, (ii) except in the ordinary course of business, enter
into
40
<PAGE>
any material lease (whether such lease is an operating or capital
lease) or create any material mortgages, Liens, security
interests or other encumbrances on its property in connection
with any indebtedness thereof (other than the Company Permitted
Liens) or (iii) make or commit to make aggregate capital
expenditures in excess of $3 million per month for each month
from the date of this Agreement to the Effective Time over the
capital expenditures forecast disclosed in the Company Disclosure
Letter for such month, excluding capital expenditures covered by
insurance (A) for any partial loss not covered by loss of hire
insurance, not in excess of $5 million per occurrence or series
of related occurrences and (B) for any vessel for which the
Company has bound loss of hire insurance, provided, however, that
capital expenditures in connection with the total loss (actual or
constructive) of any vessel shall require the consent of Parent;
(n) except as provided in Section 7.20, shall not, and shall
cause its Subsidiaries not to, purchase or otherwise acquire any
Parent Ordinary Shares, Company Common Stock or Company
Redeemable Preferred Stock;
(o) subject to Section 7.5, shall not take any action that is
reasonably likely to delay materially or adversely affect the
ability of any of the parties hereto to obtain any consent,
authorization, order or approval of any governmental commission,
board or other regulatory body or the expiration of any
applicable waiting period required to consummate the transactions
contemplated by this Agreement;
(p) shall not (i) agree in writing or otherwise to take any of
the foregoing actions or (ii) permit any of its Subsidiaries to
agree in writing or otherwise to take any of the foregoing
actions that refer to Subsidiaries; and
(q) unless in the good faith opinion of the Board of Directors of
the Company after consultation with its outside legal counsel the
following would be inconsistent with its fiduciary duties, (i)
shall not terminate, amend, modify or waive any provision of any
agreement containing a standstill covenant to which it is a
party; and (ii) during such period shall enforce, to the fullest
extent permitted under applicable law, the provisions of such
agreement, including by obtaining injunctions to prevent any
breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States of
America or any state having jurisdiction.
Section 7.1A Conduct of Parent Business. Prior to the Effective
Time, except as set forth in the Parent Disclosure Letter or as expressly
contemplated by any other provision of this Agreement or as required by
Applicable Laws (provided that Parent has provided the Company with
41
<PAGE>
advance written notice of the proposed action to the extent practicable), unless
the Company has consented in writing thereto, Parent:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations in accordance with the primary business focus of Parent and its
Subsidiaries taken as a whole as of the date of this Agreement;
(b) shall use its commercially reasonable best efforts, and shall
cause each of its Subsidiaries to use its commercially reasonable best efforts,
to preserve intact their business organizations and goodwill, keep available the
services of their respective officers and employees and maintain satisfactory
relationships with those persons having business relationships with them;
(c) except in connection with transactions permitted under this
Section 7.1A, shall not propose any shareholder resolution to amend its
memorandum of association or articles of association;
(d) shall promptly notify the Company of any material change in its
condition (financial or otherwise) or business or any termination, cancellation,
repudiation or material breach of any Parent Material Contract (or
communications indicating that the same may be contemplated) or any material
litigation or material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the breach in
any material respect of any representation or warranty contained herein;
(e) shall promptly deliver to the Company true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any of its shares or (ii) redeem,
purchase or otherwise acquire any of its shares or capital stock of any of its
Subsidiaries (other than from one of its Subsidiaries), or make any commitment
for any such action, except for the declaration and payment of regular,
quarterly dividends, consistent with past practice, not to exceed $0.03 per
Parent Ordinary Share per quarter;
(g) shall not, and shall not permit any of its Subsidiaries to, sell,
lease or otherwise dispose of all or substantially all of the assets of Parent
and its Subsidiaries, taken as a whole (including capital stock of
Subsidiaries), except for sales, leases or other dispositions between Parent and
one of its Subsidiaries or between or among its Subsidiaries;
(h) shall not, except as may be required as a result of a change in
generally accepted accounting principles, change any of the material accounting
principles or practices used by it;
42
<PAGE>
(i) shall, and shall cause any of its Subsidiaries to, use reasonable
efforts to maintain with financially responsible insurance companies insurance
in such amounts and against such risks and losses as are customary for such
party;
(j) except for acquisitions by one of Parent's Subsidiaries of Parent
Ordinary Shares from Parent or another Subsidiary of Parent, shall not, and
shall cause its Subsidiaries not to, purchase or otherwise acquire any Parent
Ordinary Shares or Company Common Stock;
(k) subject to Section 7.5, shall not take any action that is
reasonably likely to delay materially or adversely affect the ability of any of
the parties hereto to obtain any consent, authorization, order or approval of
any governmental commission, board or other regulatory body or the expiration of
any applicable waiting period required to consummate the transactions
contemplated by this Agreement;
(l) shall not (i) agree in writing or otherwise to take any of the
foregoing actions or (ii) permit any of its Subsidiaries to agree in writing or
otherwise to take any of the foregoing actions that refer to Subsidiaries; and
(m) except in connection with a transaction permitted by this Section
7.1A, shall not terminate, amend, modify or waive any provision of any agreement
with a standstill covenant to which it is a party; and during such period shall
enforce, to the fullest extent permitted under applicable law, the provisions of
such agreement, including by obtaining injunctions to prevent any breaches of
such agreements and to enforce specifically the terms and provisions thereof in
any court of the United States of America or any state having jurisdiction.
Section Section 7.2 No Solicitation by the Company. The
Company agrees that (i) neither it nor any of its Subsidiaries shall, and it
shall not authorize or permit any of its officers, directors, employees, agents
or representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) to, and on
becoming aware of it will stop such person from continuing to, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
nonpublic information), or take any action designed to facilitate, directly or
indirectly, any inquiry, proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to a tender or exchange
offer, merger, consolidation, business combination, purchase or similar
transaction or series of transactions (other than the transactions contemplated
by this Agreement) involving, individually or in the aggregate, 15% or more of
the assets, net revenues or net income of the Company and its Subsidiaries on a
consolidated basis or 15% or more of any class of capital stock of the Company
(any such proposal, offer or transaction being hereinafter referred to as a
"Company Acquisition Proposal") or cooperate with or assist, participate or
engage in any discussions or negotiations concerning a Company Acquisition
Proposal; and (ii) it will immediately cease and cause to be terminated any
existing negotiations with any parties conducted heretofore with respect to any
of the foregoing; provided that nothing contained in this Agreement shall
prevent the Company or its Board
43
<PAGE>
of Directors from (A) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to a Company Acquisition Proposal or (B) prior to the Cutoff
Date (as defined herein), providing information (pursuant to a confidentiality
and standstill agreement in reasonably customary form with terms at least as
favorable to the Company as the Confidentiality and Standstill Agreement dated
April 24, 2000, between Parent and the Company (the "Confidentiality and
Standstill Agreement") and which does not contain terms that prevent the Company
from complying with its obligations under this Section 7.2) to or engaging in
any negotiations or discussions with any person or entity who has made an
unsolicited bona fide written Company Acquisition Proposal with respect to all
the outstanding capital stock of the Company or all or substantially all the
assets of the Company that, in the good faith judgment of the Board of Directors
of the Company, taking into account the likelihood of financing, and based on
the advice of a financial advisor of recognized national reputation, a written
summary of which shall be promptly provided to Parent, is superior to the Merger
(a "Company Superior Proposal"), to the extent the Board of Directors of the
Company, after consultation with its outside legal counsel, determines that the
failure to do so would be inconsistent with its fiduciary obligations.
(a) Prior to taking any action referred to in Section 7.2(a), if
the Company intends to participate in any such discussions or
negotiations or provide any such information to any such third
party, the Company shall give prompt prior oral and written
notice to Parent of each such action. The Company will
immediately notify Parent orally and in writing of any such
requests for such information or the receipt of any Company
Acquisition Proposal or any inquiry with respect to or that could
lead to a Company Acquisition Proposal, including the identity of
the person or group engaging in such discussions or negotiations,
requesting such information or making such Company Acquisition
Proposal, and the material terms and conditions of any Company
Acquisition Proposal. The Company will (i) keep Parent fully
informed of the status and details (including any changes or
proposed changes to such status or details) on a timely basis of
any such requests, Company Acquisition Proposals or inquiries and
(ii) provide to Parent as soon as practicable after receipt or
delivery thereof with copies of all correspondence and other
written material sent or provided to the Company from any third
party in connection with any Company Acquisition Proposal or sent
or provided by the Company to any third party in connection with
any Company Acquisition Proposal. Any written notice under this
Section 7.2 shall be given by facsimile with receipt confirmed or
personal delivery.
(b) Nothing in this Section 7.2 shall permit the Company to enter
into any agreement with respect to a Company Acquisition Proposal
during the term of this Agreement, it being agreed that during
the term of this Agreement (except pursuant to Section 9.3(c)),
the Company shall not enter into any agreement with any person
that provides for, or in any way facilitates, a
44
<PAGE>
Company Acquisition Proposal, other than a confidentiality and
standstill agreement in reasonably customary form with terms at
least as favorable to the Company as the Confidentiality and
Standstill Agreement and which does not contain terms that
prevent the Company from complying with its obligations under
this Section.
(c) For purposes hereof, the "Cutoff Date," when used with
respect to the Company, means the date the condition set forth in
Section 8.1(a)(i) is satisfied.
Section Section 7.3 No Solicitation by Parent. Parent
agrees that (i) neither it nor any of its Subsidiaries shall, and it shall not
authorize or permit any of its officers, directors, employees, agents or
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) to, and on becoming
aware of it will stop such person from continuing to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing nonpublic
information), or take any action designed to facilitate, directly or indirectly,
any inquiry, proposal or offer (including, without limitation, any proposal or
offer to its shareholders) with respect to a tender or exchange offer, merger,
consolidation, business combination, purchase or similar transaction or series
of transactions (other than the transactions contemplated by this Agreement)
involving, individually or in the aggregate, 15% or more of the assets, net
revenues or net income of Parent and its Subsidiaries on a consolidated basis or
15% or more of any class of share capital of Parent (any such proposal, offer or
transaction being hereinafter referred to as a "Parent Acquisition Proposal") or
cooperate with or assist, participate or engage in any discussions or
negotiations concerning a Parent Acquisition Proposal; and (ii) it will
immediately cease and cause to be terminated any existing negotiations with any
parties conducted heretofore with respect to any of the foregoing; provided that
nothing contained in this Agreement shall prevent Parent or its Board of
Directors from (A) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to a Parent Acquisition Proposal or (B) prior to the Cutoff Date (as
defined herein), providing information (pursuant to a confidentiality and
standstill agreement in reasonably customary form with terms at least as
favorable to Parent as the Confidentiality and Standstill Agreement and which
does not contain terms that prevent Parent from complying with its obligations
under this Section 7.3) to or engaging in any negotiations or discussions with
any person or entity who has made an unsolicited bona fide written Parent
Acquisition Proposal with respect to all the outstanding Parent Ordinary Shares
or all or substantially all the assets of Parent that, in the good faith
judgment of a committee composed solely of the outside directors of Parent,
taking into account the likelihood of financing, and based on the advice of a
financial advisor of recognized national reputation, a written summary of which
shall be promptly provided to the Company, is superior to the Merger (a "Parent
Superior Proposal"), to the extent that committee of the Board of Directors of
Parent, after consultation with its outside legal counsel, determines that the
failure to do so would be inconsistent with its fiduciary obligations.
45
<PAGE>
(a) Prior to taking any action referred to in Section 7.3(a), if
Parent intends to participate in any such discussions or
negotiations or provide any such information to any such third
party, Parent shall give prompt prior oral and written notice to
the Company of each such action. Parent will immediately notify
the Company orally and in writing of any such requests for such
information or the receipt of any Parent Acquisition Proposal or
any inquiry with respect to or that could lead to a Parent
Acquisition Proposal, including the identity of the person or
group engaging in such discussions or negotiations, requesting
such information or making such Parent Acquisition Proposal, and
the material terms and conditions of any Parent Acquisition
Proposal. Parent will (i) keep the Company fully informed of the
status and details (including any changes or proposed changes to
such status or details) on a timely basis of any such requests,
Parent Acquisition Proposals or inquiries and (ii) provide to the
Company as soon as practicable after receipt or delivery thereof
with copies of all correspondence and other written material sent
or provided to Parent from any third party in connection with any
Parent Acquisition Proposal or sent or provided by Parent to any
third party in connection with any Parent Acquisition Proposal.
Any written notice under this Section 7.3 shall be given by
facsimile with receipt confirmed or personal delivery.
(b) Nothing in this Section 7.3 shall permit Parent to enter into
any agreement with respect to a Parent Acquisition Proposal
during the term of this Agreement, it being agreed that during
the term of this Agreement (except pursuant to Section 9.4(c)),
Parent shall not enter into any agreement with any person that
provides for, or in any way facilitates, a Parent Acquisition
Proposal, other than a confidentiality agreement in reasonably
customary form with terms at least as favorable to Parent as the
Confidentiality and Standstill Agreement.
(c) For purposes hereof, the "Cutoff Date," when used with
respect to Parent, means the date the condition set forth in
Section 8.1(a)(ii) is satisfied.
Section Section 7.4 Meetings of Stockholders. Each of
Parent and the Company shall take all action necessary, in accordance with
applicable law and its memorandum of association and articles of association
(Parent) or certificate of incorporation and bylaws (the Company), to convene a
meeting of its shareholders as promptly as practicable to consider and vote upon
(i) in the case of Parent, the approval of the amendments to Parent's articles
of association contemplated hereby, the approval of the increase in the
authorized share capital contemplated herein, the issuance of Parent Ordinary
Shares pursuant to the Merger and, at the discretion of Parent, an amendment of
its Long-Term Incentive Plan to increase the number of Parent Ordinary Shares
reserved for issuance thereunder and (ii) in the case of the Company, the
adoption
46
<PAGE>
of this Agreement and the Company Charter Amendment. Parent and the Company
shall coordinate and cooperate with respect to the timing of such meetings and
shall use their best efforts to hold such meetings on the same day.
Notwithstanding any other provision of this Agreement, unless this Agreement is
terminated in accordance with the terms hereof, the Company and Parent shall
each submit this Agreement to its stockholders and shareholders, respectively,
whether or not the Board of Directors of the Company or Parent, as the case may
be, withdraws, modifies or changes its recommendation and declaration regarding
the foregoing matters.
(a) Each of Parent and the Company, through its Board of
Directors, shall recommend approval of such matters and use its
best efforts to solicit from its shareholders proxies in favor of
such matters; provided, however, that the Board of Directors of
Parent or the Board of Directors of the Company may at any time
prior to the Effective Time upon five business days' prior
written notice to the Company or Parent, respectively, withdraw,
modify or change any recommendation and declaration regarding
such matters or recommend and declare advisable any Company
Superior Proposal or Parent Superior Proposal, as the case may
be, if in the good faith opinion of such Board of Directors after
consultation with its outside legal counsel the failure to so
withdraw, modify or change its recommendation and declaration or
to so recommend and declare advisable any Company Superior
Proposal or Parent Superior Proposal, as the case may be, would
be inconsistent with its fiduciary obligations.
Section Section 7.5 Filings; Commercially Reasonable Best
Efforts, Etc. Subject to the terms and conditions herein provided, the
Company and Parent shall:
(i) make their respective required filings under the HSR Act and
any applicable non-U.S. competition, antitrust or premerger notification laws
("Non-U.S. Antitrust Laws") to be made pursuant to Section 8.1(b) (and shall
share equally all filing fees incident thereto), which filings shall be made
promptly, and which filings as required under the HSR Act and the antitrust,
trade and competition laws of Brazil shall be made in not more than 15 business
days from the date hereof, and thereafter shall promptly make any other required
submissions under the HSR Act or other such laws;
(ii) use their commercially reasonable best efforts to cooperate
with one another in (a) determining which filings are required to be made prior
to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states,
and non-U.S. jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the transactions contemplated
hereby; and (b) timely making all such filings and timely seeking all such
consents, approvals, permits or authorizations without causing a Parent Material
Adverse Effect or a Company Material Adverse Effect;
47
<PAGE>
(iii) promptly notify each other of any communication
concerning this Agreement or the transactions contemplated hereby to that party
from any governmental authority and permit the other party to review in advance
any proposed communication concerning this Agreement or the transactions
contemplated hereby to any governmental entity;
(iv) not agree to participate in any meeting or discussion with any
governmental authority in respect of any filings, investigation or other inquiry
concerning this Agreement or the transactions contemplated hereby unless it
consults with the other party in advance and, to the extent permitted by such
governmental authority, gives the other party the opportunity to attend and
participate thereat;
(v) furnish the other party with copies of all correspondence,
filings and communications (and memoranda setting forth the substance thereof)
between them and their affiliates and their respective representatives on the
one hand, and any government or regulatory authority or members or their
respective staffs on the other hand, with respect to this Agreement and the
transactions contemplated hereby; and
(vi) furnish the other party with such necessary information and
reasonable assistance as such other party and its affiliates may reasonably
request in connection with their preparation of necessary filings, registrations
or submissions of information to any governmental or regulatory authorities,
including, without limitation, any filings necessary or appropriate under the
provisions of the HSR Act or any applicable Non-U.S. Antitrust Laws.
(a) Without limiting Section 7.5(a), but subject to Sections
7.5(c), 7.5(d) and 7.19, Parent and the Company shall:
(i) each use commercially reasonable best efforts to avoid the
entry of, or to have vacated, terminated or modified, any decree, order or
judgment that would restrain, prevent or delay the Closing; and
(ii) each use commercially reasonable best efforts to take any and
all steps necessary to obtain any consents or eliminate any impediments to the
Merger.
(b) At the request of Parent, the Company shall take all
commercially reasonable steps necessary to avoid or eliminate
each and every impediment under any of the HSR Act, Non-U.S.
Antitrust Laws or other antitrust, competition or premerger
notification, trade regulation law, regulation or order
("Antitrust Laws") that may be asserted by any governmental
entity with respect to the Merger so as to enable the Closing to
occur as soon as reasonably possible, including without
limitation, proposing, negotiating, committing to and effecting,
by consent decree, hold separate order or otherwise, the sale,
divestiture or disposition of such assets or businesses of
48
<PAGE>
the Company or any of its Subsidiaries or otherwise take or
commit to take any action that limits its freedom of action with
respect to, or its ability to retain, any of the businesses or
assets of the Company or its Subsidiaries, as may be required in
order to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order or other order in any
suit or proceeding relating to Antitrust Laws which would
otherwise have the effect of preventing or delaying the Closing,
provided that any such action or commitment may be conditioned
upon the consummation of the Merger and the transactions
contemplated hereby. At the request of Parent, the Company shall
agree to divest, hold separate or otherwise take or commit to
take any action that limits its freedom of action with respect
to, or its ability to retain, any of the businesses, product
lines or assets of the Company or any of its Subsidiaries,
provided that any such action may be conditioned upon the
consummation of the Merger and the transactions contemplated
hereby. Notwithstanding anything to the contrary contained in
this Agreement, in connection with any filing or submission
required or action to be taken by Parent, the Company or any of
their respective Subsidiaries to consummate the Merger or other
transactions contemplated in this Agreement, the Company shall
not, without Parent's prior written consent, recommend, suggest
or commit to any divestiture of assets or businesses of the
Company and its Subsidiaries. In the event that this Agreement is
terminated at any time prior to the Effective Time, Parent shall
pay the reasonable out-of-pocket expenses of the Company incurred
in connection with its compliance with this Section 7.5(c);
provided that Parent shall not be so obligated to pay such
expenses for services rendered by advisers to the Company unless
such advisors are selected by Parent.
(c) Nothing in this Agreement shall require Parent to dispose of
any of its assets or to limit its freedom of action with respect
to any of its businesses, or to consent to any disposition of the
Company's assets or limits on the Company's freedom of action
with respect to any of its businesses, whether prior to or after
the Effective Time, or to commit or agree to any of the
foregoing, to obtain any consents, approvals, permits or
authorizations or to remove any impediments to the Merger
relating to Antitrust Laws or to avoid the entry of, or to effect
the dissolution of, any injunction, temporary restraining order
or other order in any suit or proceeding relating to Antitrust
Laws, other than dispositions, limitations or consents,
commitments or agreements which in each such case may be
conditioned upon the consummation of the Merger and the
transactions contemplated hereby and which, in the reasonable
judgment of Parent, in each such case do not and are not
reasonably likely to individually or in the aggregate either (i)
have a Parent Material Adverse Effect; (ii) have a Company
Material Adverse
49
<PAGE>
Effect; (iii) materially impair the benefits or advantages which
Parent expects to receive from the Merger and the transactions
contemplated hereby; or (iv) have a material adverse effect on
Parent's business plan or business strategy for the combined
company.
(d) Parent and the Company intend that the Merger will qualify as
a reorganization within the meaning of Section 368(a) of the
Code. Parent and the Company shall use commercially reasonable
best efforts to cause the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Code, and shall not
take actions, cause actions to be taken, or fail to take actions
that (i) could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code or (ii) could reasonably be expected to cause
the Eligible Company Shareholders who exchange Company Common
Stock solely for Parent Ordinary Shares pursuant to the Merger to
recognize taxable gain with respect to the Merger pursuant to
Section 367(a) of the Code (except with respect to cash received
in lieu of fractional shares).
(e) Immediately prior to the Effective Time, the Company shall
file with the Secretary of State of Delaware the Company Charter
Amendment. Parent shall file with the Registrar of Companies of
the Cayman Islands the resolutions relating to the matters
specified in Section 2.1.
Section Section 7.6 Inspection. From the date hereof to the
Effective Time, each of the Company and Parent shall allow all designated
officers, attorneys, accountants and other representatives of Parent or the
Company, as the case may be, access, at all reasonable times, upon reasonable
notice, to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of Parent and the
Company and their respective Subsidiaries, including inspection of such
properties; provided that no investigation pursuant to this Section 7.6 shall
affect any representation or warranty given by any party hereunder, and provided
further that notwithstanding the provision of information or investigation by
any party, no party shall be deemed to make any representation or warranty
except as expressly set forth in this Agreement. Notwithstanding the foregoing,
no party shall be required to provide any information which it reasonably
believes it may not provide to the other party by reason of applicable law,
rules or regulations, which constitutes information protected by attorney/client
privilege, or which it is required to keep confidential by reason of contract or
agreement with third parties. The parties hereto shall make reasonable and
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply. Each of Parent and the Company
agrees that it shall not, and shall cause its respective representatives not to,
use any information obtained pursuant to this Section 7.6 for any purpose
unrelated to the consummation of the transactions
50
<PAGE>
contemplated by this Agreement. All non-public information obtained pursuant to
this Section 7.6 shall be governed by the Confidentiality and Standstill
Agreement.
Section Section 7.7 Publicity. The parties will consult
with each other and will mutually agree upon any press releases or public
announcements pertaining to this Agreement or the transactions contemplated
hereby and shall not issue any such press releases or make any such public
announcements prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case the party proposing to
issue such press release or make such public announcement shall use its best
efforts to consult in good faith with the other party before issuing any such
press releases or making any such public announcements.
Section Section 7.8 Registration Statement on Form S-4.
Each of Parent and the Company shall cooperate and promptly prepare and Parent
shall file with the SEC as soon as practicable a Registration Statement on Form
S-4 (the "Form S-4") under the Securities Act, with respect to the Parent
Ordinary Shares issuable in the Merger, a portion of which Registration
Statement shall also serve as the joint proxy statement with respect to the
meetings of the stockholders of Parent and of the Company in connection with the
transactions contemplated by this Agreement (the "Proxy Statement/Prospectus").
The respective parties will cause the Proxy Statement/Prospectus and the Form S-
4 to comply as to form in all material respects with the applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Parent shall use commercially reasonable best efforts, and the
Company shall cooperate with Parent, to have the Form S-4 declared effective by
the SEC as promptly as practicable. Parent shall use commercially reasonable
best efforts to obtain, prior to the effective date of the Form S-4, all
necessary non-U.S., state securities law or "Blue Sky" permits or approvals
required to carry out the transactions contemplated by this Agreement and the
parties shall share equally all expenses incident thereto (including all SEC and
other filing fees and all printing and mailing expenses associated with the Form
S-4 and the Proxy Statement/Prospectus). Parent will advise the Company,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the Parent Ordinary
Shares issuable in connection with the Merger for offering or sale in any
jurisdiction or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information. Each of the parties shall
also promptly provide each other party copies of all written correspondence
received from the SEC and summaries of all oral comments received from the SEC
in connection with the transactions contemplated by this Agreement. Each of the
parties shall promptly provide each other party with drafts of all
correspondence intended to be sent to the SEC in connection with the
transactions contemplated by this Agreement and allow each such party the
opportunity to comment thereon prior to delivery to the SEC.
51
<PAGE>
(a) Parent and the Company shall each use its best efforts to
cause the Proxy Statement/Prospectus to be mailed to its
stockholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act.
(b) Each of Parent and the Company shall ensure that the
information provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the respective
meetings of stockholders of Parent and the Company, or, in the
case of information provided by it for inclusion in the Form S-4
or any amendment or supplement thereto, at the time it becomes
effective, (i) will not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and
(ii) will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act.
Section Section 7.9 Listing Applications. (a) Parent shall
promptly prepare and submit to the NYSE a listing application covering the
Parent Ordinary Shares issuable in the Merger and shall use commercially
reasonable best efforts to obtain, prior to the Effective Time, approval for the
listing of such Parent Ordinary Shares, subject to official notice of issuance.
(b) The Company shall promptly prepare and submit to the NYSE,
another national securities exchange or the Nasdaq National Market System a
listing application covering the Company Redeemable Preferred Stock and shall
use commercially reasonable best efforts to obtain, prior to the record date for
the meeting of the stockholders of the Company to adopt this Agreement, approval
for the listing of the Company Redeemable Preferred Stock.
Section Section 7.10 Letters of Accountants. The Company
shall use commercially reasonable best efforts to cause to be delivered to
Parent "comfort" letters of Arthur Andersen LLP, the Company's independent
public accountants, dated the effective date of the Form S-4 and the Closing
Date, respectively, and addressed to Parent with regard to certain financial
information regarding the Company included in the Form S-4, in form reasonably
satisfactory to Parent and customary in scope and substance for "comfort"
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(a) Parent shall use commercially reasonable best efforts to
cause to be delivered to the Company "comfort" letters of Ernst &
Young LLP and PricewaterhouseCoopers LLP, Parent's independent
public accountants, dated the effective date of the Form S-4 and
the Closing Date, respectively, and addressed to the Company,
with regard to certain financial information regarding Parent
included in the Form S-4, in form reasonably satisfactory to
52
<PAGE>
the Company and customary in scope and substance for "comfort"
letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
Section Section 7.11 Agreements of Rule 145 Affiliates.
Prior to the Effective Time, the Company shall cause to be prepared and
delivered to Parent a list identifying all persons who the Company believes, at
the date of the meeting of the Company's stockholders to consider and vote upon
the adoption of this Agreement, may be deemed to be "affiliates" of the Company,
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "Rule 145 Affiliates"). The Company shall use commercially reasonable
best efforts to cause each person who is identified as a Rule 145 Affiliate in
such list to deliver to Parent, at or prior to the Effective Time, a written
agreement, in the form of Exhibit B. Parent shall be entitled to place
restrictive legends on any Parent Ordinary Shares issued to such Rule 145
Affiliates pursuant to the Merger.
Section Section 7.12 Expenses. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except as expressly provided herein or as otherwise agreed in
writing by the parties. Notwithstanding any other provision of the Agreement,
in no case will Parent directly or indirectly use its own funds to pay any
expenses arising in connection with the Merger that are incurred by stockholders
of the Company.
Section Section 7.13 Indemnification and Insurance. From
and after the Effective Time, Parent and the Surviving Entity shall indemnify,
defend and hold harmless to the fullest extent permitted under applicable law
each person who is, or has been at any time prior to the Effective Time, an
officer or director of the Company (or any Subsidiary or division thereof) and
each person who served at the request of the Company as a director, officer,
trustee or fiduciary of another corporation, partnership, joint venture, trust,
pension or other employee benefit plan or enterprise (individually, an
"Indemnified Party" and, collectively, the "Indemnified Parties") against all
losses, claims, damages, liabilities, costs or expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement in connection
with any claim, action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions, by them in their
capacities as such, whether commenced, asserted or claimed before or after the
Effective Time. In the event of any such claim, action, suit, proceeding or
investigation (an "Action"), (i) Parent and the Surviving Entity shall pay, as
incurred, the fees and expenses of counsel selected by the Indemnified Party,
which counsel shall be reasonably acceptable to the Surviving Entity, in advance
of the final disposition of any such Action to the fullest extent permitted by
applicable law and, if required, upon receipt of any undertaking required by
applicable law, and (ii) Parent and the Surviving Entity will cooperate in the
defense of any such matter; provided, however, the Surviving Entity shall not be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld or delayed), and provided further, that
Parent and the
53
<PAGE>
Surviving Entity shall not be obligated pursuant to this Section 7.13 to pay the
fees and disbursements of more than one counsel for all Indemnified Parties in
any single Action, unless, in the good faith judgment of any of the Indemnified
Parties, there is or may be a conflict of interests between two or more of such
Indemnified Parties, in which case there may be separate counsel for each
similarly situated group.
(a) The parties agree that the rights to indemnification,
including provisions relating to advances of expenses incurred in
defense of any action or suit, in the certificate of
incorporation and bylaws of the Company and its Subsidiaries with
respect to matters occurring through the Effective Time, shall
survive the Merger.
(b) For a period of six years after the Effective Time, Parent
and the Surviving Entity shall cause to be maintained officers'
and directors' liability insurance covering the Indemnified
Parties who are, or at any time prior to the Effective Time,
covered by the Company's existing officers' and directors'
liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing
insurance, provided that Parent and the Surviving Entity shall
not be required to pay annual premiums in excess of 150% of the
last annual premium paid by the Company prior to the date hereof
(the amount of which premium is set forth in the Company
Disclosure Letter), but in such case shall purchase as much
coverage as reasonably practicable for such amount.
(c) The rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have
under the certificate of incorporation or bylaws of the Company
or any of its Subsidiaries, under applicable law or otherwise.
The provisions of this Section 7.13 shall survive the
consummation of the Merger and expressly are intended to benefit
each of the Indemnified Parties.
(d) In the event Parent, the Surviving Entity or any of their
respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or
surviving corporation or entity in such consolidation or merger
or (ii) transfers all or substantially all of its properties and
assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of
Parent or the Surviving Entity, as the case may be, shall assume
the obligations set forth in this Section 7.13.
Section Section 7.1 Employee Matters. At the Effective
Time, Parent will cause the Surviving Entity and its Subsidiaries to continue
the employment of all of the employees of the Company and its Subsidiaries
initially at the same salaries and wages of such
54
<PAGE>
employees immediately prior to the Effective Time. Nothing in this Agreement
shall be considered a contract between Parent, the Surviving Entity, its
Subsidiaries and any employee or consideration for, or inducement with respect
to, any employee's continued employment and, without limitation, all such
employees are and will continue to be considered to be employees at will
pursuant to the applicable employment at will laws or doctrines, subject to any
express written agreement to the contrary with such employee, and the Surviving
Entity and its Subsidiaries will have the right, in their discretion and subject
to this Section 7.14, to alter the salaries, wages and terms of employment of
such employees at any time after the Effective Time.
(a) With respect to each employee of the Company and its
Subsidiaries ("Affected Employee"), Parent shall cause the
Surviving Entity to deem the period of employment with the
Company and its Subsidiaries to have been employment and service
with Parent for purposes of determining the Affected Employee's
eligibility to join and vesting (but not benefit accrual for any
purpose other than vacation pay and sick leave) under all
employee benefit plans, programs, policies or similar employment
related arrangements of Parent and its Subsidiaries in which the
Affected Employee is eligible to participate. Parent shall waive,
and to the extent necessary to effect the terms hereof, shall use
its best efforts to cause the relevant insurance carriers and
other third parties to waive, any restrictions and limitations
for medical conditions existing as of the Effective Time of those
Affected Employees and their dependents who were covered
immediately prior to the Effective Time under a group health plan
maintained by the Company, but only to the extent that such
medical condition would be covered by Parent's or the Surviving
Entity's group health plan if it were not a pre-existing
condition and only to the extent that such limitations would not
have applied under the Company's group health plan prior to the
Effective Time. Further, Parent shall cause the Surviving Entity
to offer at the Effective Time to each Affected Employee coverage
under a group health plan (as defined in Section 5000(b)(1) of
the Code) which credits such Affected Employee towards the
deductibles, coinsurance and maximum out-of-pocket provisions
imposed under such group health plan, for the year during which
the Effective Time (or such later date as the Affected Employees
participate in such group health plan) occurs, with any
applicable expenses already incurred during such year under the
Company's group health plan.
(b) Parent agrees to cause the Surviving Entity to continue the
Company Severance Pay Benefit Plan (as amended and restated
effective as of January 1, 1999 and attached to the Company
Disclosure Letter, the "Severance Plan"), for the benefit of any
Affected Employee who would be eligible for severance benefits
under that plan due to an involuntary termination of employment
within nine months after the Effective Time; provided, that any
55
<PAGE>
Affected Employee who would otherwise have satisfied the
eligibility requirements for such severance benefits but whose
employment is involuntarily terminated during the period
commencing nine months following the Effective Time and ending
twelve months following the Effective Time shall be treated as if
such Affected Employee was terminated within nine months after
the Effective Time if in the good faith determination of Parent
such Affected Employee would have been terminated within nine
months following the Effective Time if the integration of
Parent's and the Company's operations in respect of such Affected
Employee had been completed at such earlier time. For purposes
of the Severance Plan, cause shall be determined consistent with
the Company's Involuntary Termination Policy as in effect on the
date hereof ("Cause").
(c) Parent agrees that employees of the Company and its
Subsidiaries immediately prior to the Effective Time (the
"Employees") will continue to be provided through December 31,
2001 with benefits under employee benefit plans, programs,
policies or arrangements which in the aggregate are, in Parent's
discretion, either (i) not less favorable than those provided to
the Employees immediately prior to the Effective Time, or (ii)
not less favorable than those provided to similarly situated
employees of Parent and its Subsidiaries, taking into account for
purposes of determining similarly situated employees such factors
as Parent reasonably deems relevant; provided, that employees who
retired from the Company and its Subsidiaries prior to the
Effective Time shall continue to be provided through December 31,
2001 with the retiree health and life insurance benefits provided
to such retirees immediately prior to the Effective Time without
adverse changes during such period.
(d) Notwithstanding anything in this Agreement to the contrary,
the Company shall be permitted to continue to accrue its annual
bonuses for employees of the Company and its Subsidiaries in
respect of the Company's 2000 fiscal year (the "Year 2000
Bonuses") consistent with the level of bonuses actually paid to
employees for the Company's 1999 fiscal year, subject to such
discretionary determinations as were made consistent with the
practices of the Company for the 1999 fiscal year; provided,
however, that the Company shall be permitted to continue to
accrue Year 2000 Bonuses for the individuals set forth in Section
7.14(e) of the Company Disclosure Letter in the amounts set forth
therein. The Company agrees to pay the bonuses to the individuals
set forth in Section 7.14(e) of the Company Disclosure Letter, in
the amount set forth therein, on or before December 31, 2000. If
the Year 2000 Bonuses have not been paid prior to the Effective
Time, Parent shall cause the Company to pay the Year 2000 Bonuses
in accordance with the
56
<PAGE>
foregoing. All determinations and allocations in respect of the
Year 2000 Bonuses shall be made in accordance with the foregoing
by Company management as constituted prior to the Effective Time.
In addition, if the Effective Time has not occurred by March 31,
2001, the Company shall be permitted to accrue a pro-rated bonus
during the period from January 1, 2001 through the Effective Time
in respect of the Company's 2001 fiscal year in accordance with
the foregoing (the "Year 2001 Bonuses"). Parent shall cause the
Company to pay the Year 2001 Bonuses consistent with the
practices of the Company for the 1999 fiscal year; provided,
however, that the Year 2001 Bonuses for the individuals set forth
in Section 7.14(e) of the Company Disclosure Letter shall be a
pro-rated amount of their Year 2000 Bonuses, payable in cash, and
any Year 2001 Bonuses due hereunder to such individuals shall be
applied toward any pro-rata bonus awards the individuals become
entitled to receive under the terms of the CIC Agreements for the
2001 fiscal year.
(e) Notwithstanding anything in this Agreement to the contrary,
Parent and the Company agree that Parent shall cause the Company
to take all actions on its part to amend each of the employment
and change in control agreements for the seven executive officers
set forth in Section 7.14(f) of the Company Disclosure Letter
(the "CIC Agreements") immediately following the Effective Time,
to provide that the officer shall have the right, for a 30-day
period commencing on the first anniversary of the Effective Time,
to voluntarily terminate employment for any reason and such
termination shall be deemed to be a "Qualifying Termination"
within the "Window Period" as defined in the CIC Agreements.
Parent acknowledges that, solely for purposes of the CIC
Agreements, "Good Reason" shall exist pursuant to the terms of
the CIC Agreements if the officer is not assigned, immediately
following the Effective Time, to a position with Parent with
duties that are not materially inconsistent with the authorities,
duties, responsibilities and status (including offices, titles,
and reporting relationships) that the officer held with the
Company immediately prior to the Effective Time, or if there is a
reduction or alteration in the nature or status of the officer's
authorities, duties, or responsibilities from those in effect
during the fiscal year immediately preceding the fiscal year in
which the Effective Time occurs. Notwithstanding and in addition
to the foregoing, if Parent has not notified the officer in
writing by the date that is 30 days immediately preceding the
date on which the Effective Time occurs whether or not such
officer's employment is to be continued on terms that would not
give rise to Good Reason under the terms of the CIC Agreements
and this Section 7.14(f), then such officer shall be treated by
Parent and the Company as if such officer had incurred
immediately following the Effective Time a Qualifying Termination
57
<PAGE>
within the Window Period under the CIC Agreement and the Company
shall pay the amounts described in Section 7.1(a) through (d) of
the CIC Agreement to the officer by the close of the day on which
the Effective Time occurs, and all other cash amounts payable
under the terms of the CIC Agreements shall be paid as soon as
practicable but in no event later than 30 days following the
Effective Time; provided, however, that the foregoing provisions
of this sentence shall not apply if an event occurs after the
date notice is given and prior to the Effective Time that was
unanticipated by Parent and is considered, in the good faith
determination of Parent's Chief Executive Officer or Board of
Directors, to materially change Parent's determination not to
continue the officer's employment on such terms, and Parent in
fact promptly following such event notifies the officer of its
decision to continue and in fact continues the officer's
employment on terms that would not give rise to Good Reason under
the terms of the CIC Agreements and this Section 7.14(f). Parent
further agrees that the amounts payable to an executive officer
whose employment terminates due to a "Qualifying Termination"
within the "Window Period" under the CIC Agreements (as amended
to reflect this Section 7.14(f)) shall be no less than the
amounts set forth in Section 7.14(f) of the Company Disclosure
Letter. Parent and the Company further agree that following the
Effective Time none of such executive officers shall be bound by
any of the noncompetition provisions of the CIC Agreements.
Parent agrees that the CIC Agreements shall be binding upon, and
shall inure to the benefit of, any successor to the Company, and
any such successor shall be deemed substituted for all purposes
as the "Company" under the terms of the CIC Agreements.
(f) Except with respect to offers of employment to prospective
new employees in the ordinary course of business consistent with
past practices and other than statements that merely repeat or
summarize the effects of this Section 7.14, the Company agrees
that it shall not make, and it shall not permit its Subsidiaries
to make, any representations or promises, oral or written, to
employees of the Company and its Subsidiaries concerning
continued employment following the Effective Time, or the terms
and conditions of that employment, except as requested by Parent
under Section 7.14(i) or otherwise in writing with the prior
written consent of Parent.
(g) The Company will cause to vest and become exercisable
effective 48 hours prior to the Effective Time (conditioned on
the subsequent occurrence of the Effective Time) all or any
portion of the unvested Company Options and restricted stock,
other than those granted after the date hereof as permitted by
Section 7.1(f)(ii) that would not otherwise become vested and
exercisable as a result of the Merger.
58
<PAGE>
(h) To the extent allowed by Applicable Laws, prior to the
Effective Time, the Company shall take any action reasonably
requested by Parent as part of Parent's preparation for a prompt
and efficient integration of Parent's and the Company's
operations following the Effective Time. To the extent allowed by
Applicable Law, in furtherance of such cooperation, the Company
agrees to supply Parent, in a prompt manner, with such
information and documentation as the officers of Parent deem
relevant to the integration, and to use its commercially
reasonable best efforts to make its supervisory employees
available, on a reasonable basis, to discuss staffing and
integration issues with Parent. The actions requested of the
Company pursuant to this Section 7.14(i) shall be at reasonable
times and on reasonable notice. Nothing in this Section 7.14(i)
shall require the Company to begin the implementation of the
integration prior to the Effective Time. Notwithstanding the
foregoing, the Company shall not be deemed to make any
representation or warranty except as expressly set forth in this
Agreement and shall not be required to provide any information
which it reasonably believes it may not provide to Parent by
reason of applicable law, rules or regulations, which constitutes
information protected by attorney/client privilege, or which it
is required to keep confidential by reason of contract or
agreement with third parties. The parties hereto shall make
reasonable and appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding
sentence apply. Each of Parent and the Company agrees that it
shall not, and shall cause its respective representatives not to,
use any information obtained pursuant to this Section 7.14(i) for
any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. All non-public information
obtained pursuant to this Section 7.14(i) shall be governed by
the Confidentiality and Standstill Agreement.
Section Section 7.15 Rights Agreement. Except for actions
contemplated by this Agreement that are taken by the Company simultaneously with
its entering into a binding definitive agreement pursuant to Section 9.3(c),
neither the Board of Directors of the Company nor the Company shall take any
other action to (a) terminate the Company Rights Agreement, (b) redeem the
Company Rights, (c) amend the Company Rights Agreement in a manner adverse to
Parent, or (d) cause any person not to be or become an "Acquiring Person."
Section Section 7.16 Delivery of Parent Ordinary Shares.
Prior to the Merger, Sub shall purchase from Parent and Parent shall sell to Sub
all or a portion of that number of Parent Ordinary Shares which Sub is required
to deliver pursuant to Section 4.3(a). If Sub purchases fewer than all such
shares from Parent, Parent will otherwise provide to Sub the remaining required
shares.
59
<PAGE>
Section Section 7.17 Consulting Agreements. As of the
Effective Time, Parent shall cause the Surviving Entity to execute and deliver
to Mr. Paul B. Loyd, Jr. a consulting agreement substantially in the form of
Exhibit C, and the Company shall use commercially reasonable efforts to cause
Mr. Loyd to enter into such consulting agreement.
Section Section 7.18 Assets in the Coastwise Trade. Prior
to the Closing Date, the Company and its Subsidiaries shall at the request of
Parent (a) use their commercially reasonable best efforts to sell, transfer,
assign, contribute or otherwise dispose of all their respective vessels involved
in the coastwise trade (within the meaning of that term as used in Section 2 of
the Shipping Act, 1916, as amended (46 USC (S) 808)) to such person or persons
as designated by Parent and as directed by and on such terms and conditions as
specified by Parent, provided that any such action may be conditioned upon the
consummation of the Merger and the transactions contemplated hereby, (b) cancel
and refrain from extending any agreement that would require the operation of
vessels and other assets involved in the coastwise trade after the Effective
Time and (c) take any action designed to facilitate the termination of the
operation of vessels involved in the coastwise trade and the Company's business
related thereto as of the Effective Time. The Company will provide reasonable
cooperation with Parent, Sub and their advisors retained in connection with the
matters described in this Section 7.18. The Company shall promptly take any
other reasonably requested actions in connection with this Section 7.18. The
Company shall not retain any advisors to the Company with respect to the
foregoing without the consent of Parent.
Section Section 7.19 Obtaining Investment Grade Rating. (a)
As promptly as practicable after the date of this Agreement, Parent and the
Company shall request that both Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Service ("S&P") rate the $400,000,000 11% Senior
Secured Notes due 2006 of RBF Finance Co., a Delaware corporation ("RBF Finance
Co."), RBF Finance Co.'s $400,000,000 11 3/8% Senior Secured Notes due 2009, the
Company's $200,000,000 12 1/2% Senior Notes due 2006, the Company's $100,000,000
9 1/8% Senior Notes due 2003 and the Company's $300,000,000 9 1/2% Senior Notes
due 2008 (collectively, the "Company High Yield Debt") "Investment Grade" or
give the Company High Yield Debt an "Investment Grade Rating" (as such terms are
defined in the applicable Company High Yield Debt indentures) at or prior to the
Effective Time. In connection with such request, each of the Company and Parent
shall use its commercially reasonable best efforts to cooperate promptly and
fully with all reasonable requests of the other, including without limitation,
attending and preparing for meetings and presentations, providing information
and making any related or required applications or filings and taking other
reasonable action as may be requested by Moody's and S&P with respect to
obtaining such rating. Actions reasonably requested by Moody's or S&P or by
Parent or the Company are those relating to the process of obtaining such rating
(and such actions are specifically not those related to the financial condition,
business or operations of Parent or the Company and their respective
Subsidiaries).
(b) If the Company High Yield Debt is not given an "Investment Grade
Rating" or rated "Investment Grade" (as such terms are defined in the applicable
Company High Yield Debt
60
<PAGE>
indentures) at the time when the conditions to Parent's obligations to effect
the Merger have otherwise been fulfilled, then Parent agrees that immediately
prior to the Effective Time it shall deliver a full senior unsecured
unconditional payment guarantee (the "Parent Guarantee") on terms reasonably
satisfactory to Parent of the principal of, interest and premium, if any, on the
Company High Yield Debt which shall become effective only upon the Effective
Time. Without limiting the generality of any other provisions hereof, Parent
shall have no obligation under this Agreement to provide financial assistance of
any type to the Company or in respect of the Company High Yield Debt, other than
with respect to its obligation to provide such Parent Guarantee.
Section Section 7.20 Agreement Regarding Company Redeemable
Preferred Stock. (a) As promptly as practicable after the date of filing of
the Form S-4, the Company shall file with the SEC either a post-effective
amendment to its Registration Statement on Form S-3 (Registration No. 333-39500)
or another registration statement on an appropriate form registering a number of
shares of Company Common Stock sufficient to complete the Public Offering (as
defined below) (in either case, the "Shelf Registration Statement"). The
Company shall use commercially reasonable best efforts, and Parent shall
cooperate with the Company, to have the Shelf Registration Statement declared
effective by the SEC prior to the vote of the Company's stockholders in respect
of the Merger. The Company shall advise Parent, promptly after it receives
notice thereof, of the time when the Shelf Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order or any request by the SEC for amendment of the Shelf Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information. The Company shall provide Parent with drafts of the
Shelf Registration Statement, any prospectus supplement, the underwriting
agreement and all other customary documentation in connection with the Public
Offering reasonably in advance of the anticipated date of use thereof.
(b) In the event that this Agreement shall have been adopted and the
Company Charter Amendment shall have been approved by the affirmative vote of
the holders of at least a majority of the outstanding shares of Company Common
Stock entitled to vote thereon and Parent and the Company are each satisfied
that the other conditions to effect the Merger have otherwise been fulfilled, as
promptly as practicable after receiving written notice from Parent directing it
to do so, the Company shall commence and consummate an underwritten public
offering of shares of Company Common Stock with aggregate net proceeds to the
Company of at least $105 million (but not greater than any amount specified by
Parent) pursuant to the Shelf Registration Statement (the "Public Offering").
The Company shall be deemed to be in compliance with its obligations under this
Section 7.20(b) during the time that its failure to commence and consummate the
Public Offering results only from the good faith inability of the Company to
commence or consummate the Public Offering with the price and terms established
by Parent. The Company shall promptly take any action in connection with the
Public Offering as Parent reasonably directs, including without limitation (x)
establishing the price to the public, the underwriting discount and the number
of shares of Company Common Stock to be sold pursuant to the Public Offering,
(y) selecting the commencement and pricing date for the Public Offering, and (z)
selection of any underwriter or
61
<PAGE>
group of underwriters for the Public Offering, and any agreement regarding any
fees or expenses in connection therewith. The Company shall place any proceeds
of the Public Offering in a separate account to be used for the purposes
specified in Section 7.20(c).
(c) Promptly upon closing of the Public Offering, the Company shall
give notice of redemption of shares of Company Redeemable Preferred Stock having
an aggregate liquidation preference of up to $105 million at a price in cash
equal to 113.875% of the liquidation preference thereof, plus accrued and unpaid
dividends, if any, to the redemption date with the net cash proceeds from the
Public Offering. The Company shall comply with all applicable terms of the
Company Redeemable Preferred Stock in connection with such redemption, and funds
necessary for redemption (including an amount in cash in respect of all
dividends that will accumulate to the redemption date) shall be irrevocably
deposited by the Company in trust for the equal and ratable benefit for the
holders of the shares to be redeemed (the "Irrevocable Deposit"). In making the
Irrevocable Deposit, the Company shall use only the funds placed in the separate
account described in the last sentence of Section 7.20(b).
(d) The Company may, in accordance with its previously announced
intention, cause to be repurchased shares of Company Redeemable Preferred Stock
in price and amount and on terms and conditions approved from time to time in
writing by Parent, by causing Unrestricted Subsidiaries (as defined in the
Company High Yield Debt indentures) to repurchase such stock with funds which
such Unrestricted Subsidiaries have on hand. No payment will be made to holders
of Company Redeemable Preferred Stock with funds received, directly or
indirectly, from Parent or any of its Subsidiaries. The parties acknowledge
that, if the Company's disposition program is successfully completed, it will
have estimated $150-200 million in unrestricted funds available for such
repurchases, which unrestricted funds represent cash in excess of the funds
reasonably anticipated to be necessary for such Unrestricted Subsidiaries'
business needs. In no case will Parent or any of its Subsidiaries make
contributions to the Company or the Unrestricted Subsidiaries to replenish funds
used to redeem or repurchase Company stock.
(e) Notwithstanding anything in this Agreement to the contrary (other
than Section 7.5(e)), Parent and each of its Subsidiaries shall be entitled to
acquire shares of Company Redeemable Preferred Stock by exchange for Parent
Ordinary Shares or other voting shares of Parent.
ARTICLE 8
CONDITIONS
Section Section 8.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligation of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
62
<PAGE>
(a) (i) This Agreement shall have been adopted and the Company
Charter Amendment shall have been approved by the affirmative
vote of holders of a majority of the outstanding shares of
Company Common Stock entitled to vote thereon; and
(ii) Each of the increase in the authorized ordinary share
capital of Parent and the issuance of Parent Ordinary Shares pursuant to the
Merger shall have been approved by the holders of issued Parent Ordinary Shares
as and to the extent required by Cayman Islands law, Parent's memorandum of
association and articles of association and the rules of the NYSE.
(b) (i) Any waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been
terminated, (ii) there shall not be pending or threatened in
writing any governmental claim, proceeding or action by an agency
of the government of the United States, of the United Kingdom or
of the European Union seeking to restrain, prohibit or rescind
any transactions contemplated by this Agreement as an actual or
threatened violation of any Antitrust Law, as applicable, or
seeking to penalize a party for completing any such transaction
which in any of such cases is, in the reasonable judgment of
Parent, reasonably likely to have any of the effects described in
Section 7.5(d)(i) through (iv), (iii) in the event of any review
by the U.K. Office of Fair Trading or, if applicable, the U.K.
Secretary of State for Trade and Industry, indications reasonably
satisfactory to each of the Company and Parent that the Merger
will not be referred to the Competition Commission shall have
been received, (iv) any mandatory waiting period under any
applicable Non-U.S. Antitrust Laws (where the failure to observe
such waiting period referred to in this clause (iv) would, in the
reasonable judgment of Parent, reasonably be expected to have any
of the effects described in Section 7.5(d)(i) through (iv)) shall
have expired or been terminated and (v) there shall not have been
a final or preliminary administrative order denying approval of
or prohibiting the Merger issued by a governmental authority with
jurisdiction to enforce applicable Non-U.S. Antitrust Laws, which
order is in the reasonable judgment of Parent reasonably likely
to have any of the effects described in Section 7.5(d)(i) through
(iv).
(c) None of the parties hereto shall be subject to any decree,
order or injunction of a court of competent jurisdiction, U.S. or
non-U.S., which prohibits the consummation of the Merger;
provided, however, that, prior to invoking this condition, each
party agrees to comply with Section 7.5, and with respect to
other matters not covered by Section 7.5, to use its commercially
reasonable best efforts to have any such decree, order or
injunction lifted or vacated; and no statute, rule or regulation
shall have been
63
<PAGE>
enacted by any governmental authority which prohibits or makes
unlawful the consummation of the Merger.
(d) The Form S-4 shall have become effective and no stop order
with respect thereto shall be in effect.
(e) The Parent Ordinary Shares to be issued pursuant to the
Merger shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
(f) The Company Charter Amendment shall have been filed with the
Secretary of State of the State of Delaware and become effective.
Section Section 8.2 Conditions to Obligation of the Company
to Effect the Merger. The obligation of the Company to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Parent, Sub and Merger Sub shall have performed, in all
material respects, their covenants and agreements contained in
this Agreement required to be performed on or prior to the
Closing Date, and the representations and warranties of Parent,
Sub and Merger Sub contained in this Agreement (i) that are
qualified as to materiality or Parent Material Adverse Effect
shall be true and correct in all respects as of the Closing Date,
except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such
earlier date), and (ii) those not so qualified shall be true and
correct in all respects as of the Closing Date, except to the
extent such representations and warranties expressly relate to an
earlier date (in which case as of such earlier date), except for
such breaches of representations and inaccuracies in warranties
in this clause (ii) that do not and are not reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse
Effect, and the Company shall have received a certificate of each
of Parent, Sub and Merger Sub, executed on its behalf by its
President or one of its Vice Presidents, dated the Closing Date,
certifying to such effect.
(b) The Company shall have received the opinion of Cravath,
Swaine & Moore, counsel to the Company, in form and substance
reasonably satisfactory to the Company and dated the Closing Date
to the effect that, for United States federal income tax
purposes, the Merger will qualify as a reorganization under
Section 368(a) of the Code and no gain or loss will be recognized
by the stockholders of the Company who exchange Company Common
Stock solely for Parent Ordinary Shares pursuant to the Merger
64
<PAGE>
(except with respect to (i) cash received in lieu of fractional
shares or (ii) stockholders of the Company who are not Eligible
Company Shareholders). In rendering such opinion, such counsel
shall be entitled to receive and rely upon representations of
officers of the Company, Parent, Sub and Merger Sub,
substantially in the form of Exhibit D, dated as of the Closing
Date.
(c) At any time after the date of this Agreement, there shall not
have been any event or occurrence, or series of events or
occurrences, that has had or is reasonably likely to have,
individually or in the aggregate with all other events or
occurrences since the date of this Agreement, a Parent Material
Adverse Effect.
Section Section 8.3 Conditions to Obligation of Parent, Sub
and Merger Sub to Effect the Merger. The obligations of Parent, Sub and Merger
Sub to effect the Merger shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) The Company shall have performed, in all material respects,
its covenants and agreements contained in this Agreement required
to be performed on or prior to the Closing Date, and the
representations and warranties of the Company contained in this
Agreement (i) that are qualified as to materiality or Company
Material Adverse Effect shall be true and correct in all respects
as of the Closing Date, except to the extent such representations
and warranties expressly relate to an earlier date (in which case
as of such earlier date), and (ii) those not so qualified shall
be true and correct in all respects as of the Closing Date,
except to the extent such representations and warranties
expressly relate to an earlier date (in which case as of such
earlier date), except for such breaches of representations and
inaccuracies in warranties in this clause (ii) that do not and
are not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect, and Parent shall
have received a certificate of the Company, executed on its
behalf by its President or one of its Vice Presidents, dated the
Closing Date, certifying to such effect.
(b) Parent shall have received the opinion of Baker Botts L.L.P.,
counsel to Parent, in form and substance reasonably satisfactory
to Parent and dated the Closing Date to the effect that, for
United States federal income tax purposes, the Merger will
qualify as a reorganization under Section 368(a) of the Code and
no gain or loss will be recognized by the stockholders of the
Company who exchange Company Common Stock solely for Parent
Ordinary Shares pursuant to the Merger (except with respect to
(i) cash received in lieu of fractional shares or (ii)
stockholders of the Company who are not Eligible Company
Shareholders). In rendering such opinion, such counsel shall be
65
<PAGE>
entitled to receive and rely upon representations of officers of
the Company, Parent, Sub and Merger Sub, substantially in the
form of Exhibit E, dated as of the Closing Date.
(c) At any time after the date of this Agreement, there shall not
have been any event or occurrence, or series of events or
occurrences, that has had or is reasonably likely to have,
individually or in the aggregate with all other events or
occurrences since the date of this Agreement, a Company Material
Adverse Effect.
(d) The shares of Company Redeemable Preferred Stock shall have
been listed on the NYSE, another national securities exchange or
the Nasdaq National Market System prior to the record date for
the meeting of the Company's stockholders to adopt this
Agreement.
(e) Parent shall have received from each Rule 145 Affiliate an
agreement to the effect set forth in Section 7.11.
(f) The closing of the Public Offering shall have occurred, the
notice of redemption contemplated by Section 7.20(c) shall have
been duly given and the Company shall have completed the
Irrevocable Deposit; provided, that this Section 8.3(f) shall
expire as a condition to the obligations of Parent, Sub and
Merger Sub to effect the Merger if (i) the other conditions to
the obligations of each party to effect the Merger (other than
those that are expected to be fulfilled but can only be fulfilled
on the Closing Date) have been fulfilled (and Parent shall have
received a written notice from the Company as to such
fulfillment) for a period of eight business days, (ii) the
Company has complied with its obligations under Section 7.20 and
(iii) the Shelf Registration Statement shall have become
effective and no stop order shall be in effect during such period
of eight business days, provided that any such noneffectiveness
or stop order is not the result of any act or omission by Parent,
Parent's advisors or any underwriter selected by Parent.
(g) The Company High Yield Debt shall have been rated "Investment
Grade" or been given an "Investment Grade Rating" (as such terms
are defined in the applicable Company High Yield Debt indentures)
by Moody's and S&P.
66
<PAGE>
ARTICLE 9
TERMINATION
Section Section 9.1 Termination by Mutual Consent. This
Agreement may be terminated at any time prior to the Effective Time by the
mutual written consent of the Company and Parent.
Section Section 9.2 Termination by Parent or the Company.
This Agreement may be terminated at any time prior to the Effective Time by
action of the Board of Directors of Parent or the Company if:
(a) the Merger shall not have been consummated by August 31, 2001;
provided, however, that the right to terminate this Agreement
pursuant to this clause (a) shall not be available to any party
whose failure to perform or observe in any material respect any
of its obligations under this Agreement in any manner shall have
been the cause of, or resulted in, the failure of the Merger to
occur on or before such date;
(b) a meeting (including adjournments and postponements) of the
Company's stockholders for the purpose of obtaining the approvals
required by Section 8.1(a)(i) shall have been held and such
stockholder approvals shall not have been obtained;
(c) a meeting (including adjournments and postponements) of
Parent's shareholders for the purpose of obtaining the approvals
required by Section 8.1(a)(ii) shall have been held and such
shareholder approvals shall not have been obtained; or
(d) a U.S. federal, state or non-U.S. court of competent
jurisdiction or federal, state or non-U.S. governmental,
regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
nonappealable; provided, however, that the party seeking to
terminate this Agreement pursuant to this clause (d) shall have
complied with Section 7.5 and, with respect to other matters not
covered by Section 7.5, shall have used its commercially
reasonable best efforts to remove such injunction, order or
decree.
67
<PAGE>
Section Section 9.3 Termination by the Company. This
Agreement may be terminated at any time prior to the Effective Time by action of
the Board of Directors of the Company, after consultation with its outside legal
advisors, if
(a) (i) there has been a breach by Parent or Merger Sub of any
representation, warranty, covenant or agreement set forth in this
Agreement or if any representation or warranty of Parent or
Merger Sub shall have become untrue, in either case such that the
conditions set forth in Section 8.2(a) would not be satisfied and
(ii) such breach is not curable, or, if curable, is not cured
within 30 days after written notice of such breach is given to
Parent by the Company; provided, however, that the right to
terminate this Agreement pursuant to Section 9.3(a) shall not be
available to the Company if it, at such time, is in breach of any
representation, warranty, covenant or agreement set forth in this
Agreement such that the condition set forth in Section 8.3(a)
shall not be satisfied;
(b) the Board of Directors of Parent shall have withdrawn or
materially modified, in a manner adverse to the Company, its
approval or recommendation of the amendments to Parent's articles
of association or the issuance of Parent Ordinary Shares pursuant
to the Merger or recommended a Parent Acquisition Proposal, or
resolved to do so; or
(c) prior to the Cutoff Date, (i) the Board of Directors of the
Company has received a Company Superior Proposal, (ii) in light
of such Company Superior Proposal the Board of Directors of the
Company shall have determined in good faith, (A) after
consultation with its outside legal advisors, that proceeding
with the Merger would be inconsistent with its fiduciary
obligations and (B) that there is a substantial likelihood that
the adoption by the Company's stockholders of this Agreement will
not be obtained by reason of the existence of such Company
Superior Proposal, (iii) the Company has complied in all material
respects with Section 7.2, (iv) the Company has previously paid
the fee due under Section 9.5(a), (v) the Board of Directors of
the Company concurrently approves, and the Company concurrently
enters into, a binding definitive written agreement providing for
the implementation of such Company Superior Proposal and (vi)
Parent is not at such time entitled to terminate this Agreement
pursuant to Section 9.4(a); provided that the Company may not
effect such termination pursuant to this Section 9.3(c) unless
and until (i) Parent receives at least ten business days' prior
written notice from the Company of its intention to effect such
termination pursuant to this Section 9.3(c); and (ii) during such
ten business day period, the Company shall, and shall cause its
respective financial and
68
<PAGE>
legal advisors to, consider any adjustment in the terms and
conditions of this Agreement that Parent may propose.
Section Section 9.4 Termination by Parent. This Agreement
may be terminated at any time prior to the Effective Time by action of the Board
of Directors of Parent, after consultation with its outside legal advisors, if:
(a) (i) there has been a breach by the Company of any
representation, warranty, covenant or agreement set forth in this
Agreement or if any representation or warranty of the Company
shall have become untrue, in either case such that the conditions
set forth in Section 8.3(a) would not be satisfied and (ii) such
breach is not curable, or, if curable, is not cured within 30
days after written notice of such breach is given by Parent to
the Company; provided, however, that the right to terminate this
Agreement pursuant to Section 9.4(a) shall not be available to
Parent if it, at such time, is in breach of any representation,
warranty, covenant or agreement set forth in this Agreement such
that the conditions set forth in Section 8.2(a) shall not be
satisfied; or
(b) the Board of Directors of the Company shall have withdrawn or
materially modified, in a manner adverse to Parent, its approval
or recommendation of the Merger or the Company Charter Amendment
or recommended a Company Acquisition Proposal, or resolved to do
so; or
(c) prior to the Cutoff Date, (i) the Board of Directors of Parent
has received a Parent Superior Proposal, (ii) in light of such
Parent Superior Proposal the Board of Directors of Parent shall
have determined in good faith, (A) after consultation with its
outside legal advisors, that proceeding with the Merger would be
inconsistent with its fiduciary obligations and (B) that there is
a substantial likelihood that the adoption by Parent's
stockholders of this Agreement will not be obtained by reason of
the existence of such Parent Superior Proposal, (iii) Parent has
complied in all material respects with Section 7.3, (iv) Parent
has previously paid the fee due under Section 9.5(b), (v) the
Board of Directors of Parent concurrently approves, and Parent
concurrently enters into, a binding definitive written agreement
providing for the implementation of such Parent Superior Proposal
and (vi) the Company is not at such time entitled to terminate
this Agreement pursuant to Section 9.3(a); provided that Parent
may not effect such termination pursuant to this Section 9.4(c)
unless and until (i) the Company receives at least ten business
days' prior written notice from Parent of its intention to effect
such termination pursuant to this Section 9.4(c); and (ii) during
such ten business day period, Parent shall, and shall cause its
69
<PAGE>
respective financial and legal advisors to, consider any
adjustment in the terms and conditions of this Agreement that the
Company may propose.
Section Section 9.5 Effect of Termination. (i) If
this Agreement is terminated:
(A) by the Company or Parent pursuant to Section 9.2(b)
[failure to obtain Company stockholder approval] after the public announcement
of a Company Acquisition Proposal, whether or not the Company Acquisition
Proposal is still pending or has been consummated; or
(B) by Parent pursuant to Section 9.4(b) [withdrawal of Company
recommendation to stockholders]; or
(C) by the Company pursuant to Section 9.3(c) [fiduciary out];
then the Company shall pay Parent a fee of $225 million at the time of such
termination in cash by wire transfer to an account designated by Parent.
(ii) If this Agreement is terminated by the Company pursuant to
Section 9.3(c) and in accordance with the terms thereof, no fee additional to
the fee specified in Section 9.3(c) shall be payable by the Company to Parent.
(a) (i) If this Agreement is terminated:
(A) by the Company or Parent pursuant to Section 9.2(c)
[failure to obtain Parent shareholder approval] after the public announcement of
a Parent Acquisition Proposal, whether or not the Parent Acquisition Proposal is
still pending or has been consummated; or
(B) by the Company pursuant to Section 9.3(b) [withdrawal of
Parent recommendation to shareholders]; or
(C) by Parent pursuant to Section 9.4(c) [fiduciary out];
then Parent shall pay the Company a fee of $225 million at the time of such
termination in cash by wire transfer to an account designated by the Company.
(ii) If this Agreement is terminated by Parent pursuant to Section
9.4(c) and in accordance with the terms thereof, no fee additional to the fee
specified in Section 9.4(c) shall be payable by Parent to the Company.
(b) If this Agreement is terminated by the Company or Parent
pursuant to Section 9.2(b) other than in circumstances covered
by Section 9.5(a), then
70
<PAGE>
the Company shall pay Parent a fee of $10 million to reimburse it
for its costs and expenses incurred in connection with this
transaction. If this Agreement is terminated by the Company or
Parent pursuant to Section 9.2(c), other than in circumstances
covered by Section 9.5(b), then Parent shall pay the Company a
fee of $10 million to reimburse it for its costs and expenses
incurred in connection with this transaction.
(c) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, all
obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 9.5, Section
7.5(c) and Section 7.12 and except for the provisions of Sections
10.3, 10.4, 10.6, 10.8, 10.9, 10.11, 10.12 and 10.13, provided
that nothing herein shall relieve any party from any liability
for any willful and material breach by such party of any of its
representations, warranties, covenants or agreements set forth in
this Agreement and all rights and remedies of such nonbreaching
party under this Agreement in the case of such a willful and
material breach, at law or in equity, shall be preserved.
Section Section 9.6 Extension; Waiver. At any time prior to
the Effective Time, each party may by action taken by its Board of Directors, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 10
GENERAL PROVISIONS
Section Section 10.1 Nonsurvival of Representations,
Warranties and Agreements. All representations, warranties and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement shall
not survive the Merger; provided, however, that the agreements contained in
Article 4 and in Sections 3.3, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16, 7.17 and this
Article 10 and the agreements delivered pursuant to this Agreement shall survive
the Merger. The Confidentiality and Standstill Agreement shall survive any
termination of this Agreement, and the provisions of such Confidentiality and
Standstill Agreement shall apply to all information and material delivered by
any party hereunder.
Section Section 10.2 Notices. Except as otherwise provided
herein, any notice required to be given hereunder shall be sufficient if in
writing, and sent by
71
<PAGE>
facsimile transmission or by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and first-
class postage prepaid), addressed as follows:
(a) if to the Company:
R & B Falcon Corporation
901 Threadneedle
Houston, Texas 77027
Attention: Wayne K. Hillin, Esq.
Facsimile: (281) 496-0285
with a copy to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: Richard Hall, Esq.
Facsimile: (212) 474-3700
(b) if to Parent, Sub or Merger Sub:
Transocean Sedco Forex Inc.
4 East Greenway Plaza
Houston, Texas 77046
Attention: Eric Brown, Esq.
Facsimile: (713) 232-7600
with a copy to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Gene J. Oshman, Esq.
Facsimile: (713) 229-1522
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
Section Section 10. Assignment; Binding Effect; Benefit.
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by
72
<PAGE>
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article 4, Section 7.13, 7.14(f) and 7.17 and except as provided in any
agreements delivered pursuant hereto (collectively, the "Third-Party
Provisions"), nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third-Party
Provisions may be enforced by the beneficiaries thereof.
Section Section 10.4 Entire Agreement. This Agreement, the
exhibits to this Agreement, the Company Disclosure Letter, the Parent Disclosure
Letter and any documents delivered by the parties in connection herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto, except that the Confidentiality and Standstill
Agreement shall continue in effect. No addition to or modification of any
provision of this Agreement shall be binding upon any party hereto unless made
in writing and signed by all parties hereto.
Section Section 10.5 Amendments. This Agreement may be
amended by the parties hereto, by action taken or authorized by their Boards of
Directors, at any time before or after approval of matters presented in
connection with the Merger by the stockholders of the Company or Parent, but
after any such stockholder approval, no amendment shall be made which by law
requires the further approval of stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section Section 10.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to its rules of conflict of laws.
Section Section 10.7 Counterparts. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
Section Section 10.8 Headings. Headings of the Articles and
Sections of this Agreement are for the convenience of the parties only and shall
be given no substantive or interpretative effect whatsoever.
73
<PAGE>
Section Section 10.9 Interpretation. In this Agreement:
(a) Unless the context otherwise requires, words describing the
singular number shall include the plural and vice versa, words
denoting any gender shall include all genders, and words denoting
natural persons shall include corporations and partnerships and
vice versa.
(b) The phrase "to the knowledge of" and similar phrases relating
to knowledge of the Company or Parent, as the case may be, shall
mean the actual knowledge of its executive officers.
(c) "Material Adverse Effect" with respect to the Company or
Parent shall mean a material adverse effect or change on (a) the
business, assets, conditions (financial or otherwise) or
operations of a party (including the Surviving Entity when used
with respect to the Company) and its Subsidiaries on a
consolidated basis, except for such changes or effects in general
economic, capital market, regulatory or political conditions or
changes that affect generally the drilling services industry or
changes arising out of the announcement of this Agreement, or (b)
the ability of the party to consummate the transactions
contemplated by this Agreement or fulfill the conditions to
closing. "Company Material Adverse Effect" and "Parent Material
Adverse Effect" mean a Material Adverse Effect with respect to
the Company and Parent, respectively.
(d) The term "Subsidiary," when used with respect to any party,
means any corporation or other organization (including a limited
liability company), whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls at least
a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to
such corporation or other organization or any organization of
which such party is a general partner.
Section Section 10.10 Waivers. Except as provided in this
Agreement, no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
74
<PAGE>
Section Section 10.11 Incorporation of Exhibits. The Company
Disclosure Letter, the Parent Disclosure Letter and all exhibits attached hereto
and referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
Section Section 10.12 Severability. Any term or provision of
this Agreement which is invalid or unenforceable in any jurisdiction shall, as
to that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
Section Section 10.13 Enforcement of Agreement. (a) The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
(b) Each of the parties hereto (i) consents to submit itself to
the personal jurisdiction of any Delaware state court or any Federal court
located in the State of Delaware in the event any dispute arises out of this
Agreement or any of the transactions contemplated herein, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated herein
in any court other than any Delaware state court or any Federal court sitting in
the State of Delaware and (iv) waives any right to trial by jury with respect to
any action related to or arising out of this Agreement or any of the
transactions contemplated herein.
(c) Parent designates and appoints The Corporation Trust Company
and such person's successors and assigns as its lawful agent in the United
States of America upon which may be served, and which may accept and
acknowledge, for and on behalf of Parent all process in any action, suit or
proceedings that may be brought against Parent in any of the courts referred to
in this Section, and agrees that such service of process, or the acceptance or
acknowledgment thereof by said agent, shall be valid, effective and binding in
every respect.
75
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
TRANSOCEAN SEDCO FOREX INC.
By:
----------------------------------------
Name:
Title:
TRANSOCEAN HOLDINGS INC.
By:
----------------------------------------
Name:
Title:
TSF DELAWARE INC.
By:
----------------------------------------
Name:
Title:
R&B FALCON CORPORATION
By:
----------------------------------------
Name:
Title:
76
<PAGE>
EXHIBIT A
AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
OF
R&B FALCON CORPORATION
R&B FALCON CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "Company"),
DOES HEREBY CERTIFY:
FIRST: Section 4 of the Certificate of Designations, Preferences and
Relative, Participating, Optional and Other Special Rights of Preferred Stock
and Qualifications, Limitations and Restrictions Thereof (the "Certificate of
Designations") in respect of the Company's 13-7/8 Senior Cumulative Redeemable
Preferred Stock (the "Preferred Stock") is amended by adding at the end of said
Section 4 the following:
Effective immediately prior to the effective time of the merger
contemplated by the Agreement and Plan of Merger among Transocean Sedco Forex
Inc., Transocean Holdings Inc., TSF Delaware Inc. and the Corporation dated as
of August 19, 2000, as it may be amended from time to time (the "Merger
Agreement"), the Preferred Stock shall have the following additional voting
rights (capitalized terms used herein without definition shall have the meanings
assigned thereto in the Merger Agreement):
The Preferred Stock shall be entitled to vote in the election of
directors and shall vote together with the Common Stock and any other class or
series of shares that generally votes together with the Common Stock as one
class in such election. Each share of Preferred Stock shall have 0.1787 votes
per share [the number (rounded to the nearest ten-thousandth) equal to the
quotient of (a) $1,000 divided by (b) the product of (1) the quotient of the
number of shares of Company Common Stock outstanding as of August 17, 2000
divided by the number of shares of common stock, par value $.01 per share, of
the Surviving Entity (as defined in the Merger Agreement) to be outstanding
immediately after the Effective Time multiplied by (2) the closing price of the
Parent Ordinary Shares on August 18, 2000 multiplied by (3) the Common Stock
Merger Ratio].
SECOND: The foregoing amendment to the Certificate of Designations was
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed in its name and on its behalf by its duly authorized officer and its
corporate seal to be affixed hereto on this ___ day of ______________, ______.
R&B FALCON CORPORATION
By:
------------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
EXHIBIT B
_________, 2000
Transocean Sedco Forex Inc.
4 East Greenway Plaza
Houston, TX 77046
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of R&B Falcon Corporation, a Delaware corporation (the
"Company"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"). I have been further advised
that pursuant to the terms of the Agreement and Plan of Merger dated as of
August ___, 2000 (the "Merger Agreement") among Transocean Sedco Forex Inc., a
Cayman Islands exempted company ("Parent"), Transocean Holdings Inc., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), TSF Delaware Inc.,
a Delaware corporation and a wholly owned subsidiary of Sub ("Merger Sub"), and
the Company, Merger Sub will be merged with and into the Company (the "Merger")
and that as a result of the Merger, I may receive Parent Ordinary Shares (as
defined in the Merger Agreement) in exchange for shares of Company Common Stock
(as defined in the Merger Agreement) owned by me.
I represent, warrant and covenant to Parent that in the event I receive any
Parent Ordinary Shares as a result of the Merger:
(a) I shall not make any sale, transfer or other disposition of such
Parent Ordinary Shares in violation of the Act or the Rules and
Regulations.
(b) I have carefully read this letter and discussed its requirements and
other applicable limitations upon my ability to sell, transfer or
otherwise dispose of Parent Ordinary Shares to the extent I believed
necessary with my counsel or counsel for the Company.
(c) I have been advised that the issuance of Parent Ordinary Shares to me
pursuant to the Merger will be registered with the Commission under
the Act on a Registration Statement on Form S-4. However, I have also
been advised that, since at the time the Merger will be submitted for
a vote of the stockholders of the Company I may be deemed to have been
an affiliate of the Company for purposes of paragraphs (c) and (d) of
Rule 145 of the Rules and Regulations, I may not sell, transfer or
otherwise dispose of Parent Ordinary Shares issued to me in the
<PAGE>
Merger within one year following the Merger if I am not at such time
an affiliate of Parent and later, if I am then an affiliate of Parent,
unless (i) such sale, transfer or other disposition has been
registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with the volume and other
limitations of Rule 145 of the Rules and Regulations, or (iii) in the
opinion of counsel reasonably acceptable to Parent, such sale,
transfer or other disposition is otherwise exempt from registration
under the Act.
(d) I understand that Parent is under no obligation to register such sale,
transfer or other disposition by me or on my behalf under the Act or
take any other action necessary in order to make compliance with an
exemption from such registration available.
(e) I also understand that stop transfer instructions will be given to
Parent's transfer agents with respect to the Parent Ordinary Shares
and that there will be placed on the certificate for the Parent
Ordinary Shares issued to me in connection with the Merger, or any
substitutions therefor, a legend substantially in the form set forth
below:
"The securities represented by this certificate have been issued
in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The securities may not be sold
or otherwise transferred except in compliance with the
requirements of said Rule 145 or pursuant to a registration
statement under said act or an exemption from such registration."
It is understood and agreed that the legend set forth in paragraph (e)
above shall be removed by delivery of substitute certificates without such
legend (i) prior to the first anniversary of the Merger if I am not at such time
an affiliate of Parent, if the undersigned shall have delivered to Parent a copy
of a letter from the staff of the Commission, or an opinion of counsel
reasonably satisfactory to Parent in form and substance reasonably satisfactory
to Parent, to the effect that such legend is no longer required for purposes of
the Act or (ii) thereafter at the request of the undersigned if I am not at such
time an affiliate of Parent.
Execution of this letter should not be construed as an admission,
stipulation or acknowledgment by me that I am an "affiliate" of the Company as
described in the first paragraph hereof or considered as a waiver of any rights
that I may have to object to any claim that I am such an affiliate on or after
the date of this letter.
Very truly yours,
--------------------------------
Name:
<PAGE>
ACCEPTED AND AGREED THIS
____ DAY OF ____________, 2000.
TRANSOCEAN SEDCO FOREX INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT C
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement") is made and entered into effective as of
the ____ day of _______________, by and between R&B Falcon Corporation, a
Delaware corporation ("Company"), and Paul B. Loyd, Jr., an individual
("Consultant").
WHEREAS, in connection with the transactions contemplated by that certain
Agreement and Plan of Merger, dated as of the date hereof, among Transocean
Sedco Forex Inc. ("Parent"), Transocean Holdings Inc., TSF Delaware Inc. and
Company (the "Merger Agreement"), Company will become an indirect wholly-owned
subsidiary of Parent; and
WHEREAS, in the event of the termination of Consultant's employment with Company
following the transactions contemplated by the Merger Agreement, Company and
Parent wish to have Consultant provide consulting services to the Company for
the period provided in this Agreement and Consultant wishes to provide services
to Company for such period, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set
forth, and intending to be legally bound hereby the parties agree as follows:
1. ENGAGEMENT. Company hereby retains Consultant to provide consulting
services with respect to strategies and policies, special projects, incentives,
goals and other matters related to the development and growth of Company. Such
services shall be as directed by the Chief Executive Officer of Company or other
person or persons as designated by the Chief Executive Officer from time to
time. Consultant shall be required to be generally available to Company to
perform the services and agrees to provide upon request a minimum of thirty
hours of service per month to Company at such times and places as may be
reasonably requested by Company and consistent with Consultant's other
activities. Further, Consultant agrees not to perform substantially similar
services during the term hereof to any other company which provides offshore
contract drilling services; provided that Consultant may request a waiver of
such restriction on a case by case basis and Company agrees not to unreasonably
withhold, condition or delay such waiver.
2. TERM. The term of this Agreement shall commence on the effective date of
Consultant's termination of employment with Company at any time following the
Effective Time (as defined in the Merger Agreement) (the "Effective Date") and
continue in effect for a period of three (3) years thereafter; provided,
however, that in the event Consultant becomes a member of the Board of Directors
of Parent ("Parent Board"), the Agreement shall continue in effect only until
the second anniversary of the Effective Date; provided, further, that Consultant
may terminate this Agreement on thirty (30) days' advance written notice to
Company. Upon such an expiration or termination of this Agreement, neither
party shall have any further obligation towards the other in connection herewith
except as provided in Article 5(g).
1
<PAGE>
3. COMPENSATION. As compensation for the performance by Consultant of
services under this Agreement, Company agrees to pay to Consultant the
following:
(a) an annual retainer fee of THREE HUNDRED THOUSAND DOLLARS ($300,000);
provided, that if Consultant becomes a member of the Parent Board, the
annual retainer fee shall thereafter be THREE HUNDRED SIXTY THOUSAND
DOLLARS ($360,000) and Consultant hereby waives any fees or other
remuneration that would otherwise be payable to Consultant for services as
a member of the Parent Board; and
(b) Company agrees to pay direct to the vendor or reimburse Consultant,
as the case may be, reasonable expenses incurred by Consultant in
connection with the performance of his services under this Agreement. These
expenditures and expenses incurred by and on behalf of Consultant shall be
in accordance with those policies in effect for Company from time to time.
These expenses shall include but shall not be limited to:
(1) Transportation, meals and lodging, parking, tips or any other
expenses incurred in accordance with Company's policies and procedures;
(2) Telephone, facsimile or other communication costs, and
(3) Company's current per mile rate for Consultant's use of his
personal automobile on Company's business.
Consultant shall not be entitled to any other remuneration, benefit or
reimbursement in connection with this Agreement or the services performed
hereunder except as may otherwise be expressly set forth herein.
4. PAYMENTS.
(a) The annual retainer referred to in Article 3(a) above shall be paid in
monthly installments of TWENTY FIVE THOUSAND DOLLARS ($25,000) (or THIRTY
THOUSAND DOLLARS ($30,000) in the event Consultant becomes a member of the
Parent Board), payable on the last day of the calendar month for services
performed during the month.
(b) Expense statements shall be submitted by Consultant with reasonable
documentation in accordance with the policies of Company. Reimbursement shall be
paid within ten (10) business days of receipt of an expense statement by
Company.
(c) Consultant may request cash advances for special purposes such as trips
incurred at Company's request. Such cash advances shall be approved by Company's
designated person, and such amount shall be deducted from Consultant's first
expense statement submitted after such cash advance or any balance outstanding
shall be repaid with submittal of the expense statement.
5. GENERAL.
(a) Consultant agrees that the extent and character of the work to be done by
Consultant shall be subject to the general supervision, direction, control and
approval of Company's Chief
2
<PAGE>
Executive Officer to whom Consultant shall report and be responsible. In the
performance of the work and services hereunder, Consultant shall be deemed an
independent contractor and shall not be an employee of Company. Consultant shall
have no right to bind Company and shall limit the services to be provided
hereunder to those requested or directed to be performed in accordance with
Article 1.
(b) Consultant shall be responsible for the payment of all taxes or other
charges imposed by any governmental authority on his services and fees.
(c) Any suggestions, analyses, programs, products, materials conceived,
prepared or developed by Consultant during the term of this Agreement, whether
alone or jointly with others, which relate to the Company's core offshore
drilling business shall be Company's sole and exclusive property.
(d) All information obtained by Consultant or communicated to Consultant by
Company in the course of conduct of Consultant's work and services hereunder
shall be considered confidential and shall not be divulged by Consultant to any
person, firm or corporation other than Company's representative without
Company's prior written consent unless required to be disclosed by court order,
subpoena or other government process, in which case Consultant shall notify
Company promptly after learning of any such court order, subpoena or government
process. Company shall furnish any information necessary for Consultant to carry
out Consultant's duties.
(e) Consultant shall not assign or subcontract any of Consultant's obligations
hereunder without the prior written consent of Company; provided, that
Consultant shall be permitted to assign this Agreement to any entity that is
wholly-owned by Consultant. This Agreement shall inure to the benefit of and be
binding on the executors, administrators, personal representatives, permitted
assigns and successors of the respective parties.
(f) In acknowledgement of the fees and occasional transportation, meals and
lodgings being provided by Company to enable and assist Consultant in the
execution of his duties and in exchange for Company's agreement to release,
defend and indemnify Consultant from any and all claims, suits, actions,
damages, liabilities and expenses (including attorney fees and court costs)
(collectively, "Claims") for personal injury to the employees, officers,
directors and agents of Company and Company's clients, or damage to Company's
and Company's clients' property arising out of the services to be provided
hereunder, regardless of whether Consultant may be negligent or otherwise
legally at fault, Consultant agrees to release, defend and indemnify Company and
its clients and their respective employees, officers, directors and agents from
any Claims for personal injury to, or death of, Consultant or damage to or loss
of Consultant's property arising out of the services to be provided hereunder,
regardless of whether Company may be or may be alleged to be negligent or
otherwise legally at fault.
(g) The provisions of Article 5(c), (d) and (f) shall survive the expiration of
this Agreement.
6. MODIFICATION. No modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless made in writing with
specific reference to this Agreement and signed by each of the parties hereto.
3
<PAGE>
7. NOTICES. Any notices required or permitted hereunder shall be in writing
and shall be delivered in person or mailed certified or registered mail, return
receipt requested, properly addressed:
(a) If to Company:
R&B Falcon Corporation
Attn: Chief Executive Officer
(b) If to Consultant:
Paul B. Loyd, Jr.
-------------------------
-------------------------
Either party hereto may designate a different address by written notice given to
the other party in accordance herewith.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof.
9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to its rules of
conflict of laws.
10. EFFECTIVENESS. Notwithstanding anything herein to the contrary, this
Agreement is conditioned upon the consummation of the Merger (as defined in the
Merger Agreement) and shall be void ab initio and of no force and effect upon
the termination of the Merger Agreement prior to the Effective Time.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed as of the day and year first above written.
--------------------------------
Paul B. Loyd, Jr.
R&B FALCON CORPORATION
By:
------------------------------
Title:
---------------------------
4
<PAGE>
EXHIBIT D
TO THE MERGER AGREEMENT
[Letterhead of R&B Falcon Corporation]
[ ], 2000
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Baker Botts LLP
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
8.2(b) and 8.3(c) of the Agreement and Plan of Merger (the "Merger Agreement")
dated as of [ ], 2000, among TRANSOCEAN SEDCO FOREX INC, a company
organized under the laws of the Cayman Islands ("Parent"), TRANSOCEAN HOLDINGS
INC, a company organized under the laws of Delaware and a wholly owned
subsidiary of Parent ("Sub"), TSF DELAWARE INC., a company organized under the
laws of Delaware and a wholly owned subsidiary of Sub ("Merger Sub"), and
R&B FALCON CORPORATION, a company organized under the laws of Delaware (the
"Company"), pursuant to which Merger Sub will merge with and into the Company,
with the Company being the surviving entity (the "Merger"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the Joint Proxy Statement of Parent, Sub and the Company, each as
amended or supplemented through the date hereof, the undersigned certifies and
represents on behalf of the Company, after due inquiry and investigation, as
follows (any capitalized term used
<PAGE>
but not defined herein having the meaning given to such term in the Merger
Agreement):
1. The facts relating to the Merger as described in the Merger Agreement,
Registration Statement and the other documents described in the Registration
Statement are, insofar as such facts pertain to the Company, true, correct and
complete in all material respects. The Merger will be consummated in accordance
with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which each
issued and outstanding share of the Company's common stock, par value $.01 per
share, (the "Company Common Stock"), will be converted into fully paid and
nonassessable shares of common stock, par value $.01 per share, of Parent
("Parent Ordinary Shares"), is the result of arm's length bargaining.
3. In the Merger, shares of Company stock representing at least 80
percent of the total combined voting power of all classes of Company stock
entitled to vote and at least 80 percent of the total number of shares of all
other classes of Company stock will be exchanged solely for Parent voting stock.
For purposes of this representation, (i) shares of Company stock exchanged for
cash or other property furnished, directly or indirectly, by Parent, Sub or
Merger Sub and (ii) shares of Company stock, if any, issued pursuant to the
Public Offering, as described in Section 7.20 of the Merger Agreement, in each
case will be treated as outstanding Company stock on the Closing Date. Except
for the issuance of voting rights as described in paragraph 4, no shares or
other securities of the Company will be issued to the shareholders of the
Company pursuant to the Merger (although shares of the Company may be issued to
other persons pursuant to the Public Offering, as described in Section 7.20 of
the Merger Agreement). Following the Merger, the Company has no plan or
intention to issue additional shares of its stock that would result in Sub
failing to own after the Merger, directly or indirectly, at least 80 percent of
the total combined voting power of all classes of Company stock entitled to vote
and at least 80 percent of the total number of shares of all other classes of
Company stock. To the best knowledge of the management of the Company, Sub has
no plan or intention to, and Parent has no plan or intention to cause Sub to,
sell, transfer or dispose of any stock of the Company or to cause the Company to
issue additional shares of its stock that would in either case result in Sub
failing to own after the Merger, directly or indirectly, at least 80 percent of
the total combined voting power of all classes of Company stock entitled to vote
and at
<PAGE>
least 80 percent of the total number of shares of all other classes of Company
stock.
4. The 13.875% Cumulative Redeemable Preferred Stock of the Company (the
"Company Redeemable Preferred Stock") shall continue to be outstanding in
substantially identical form except for (i) the additional voting rights
pursuant to the Company Preferred Stock Voting Right Charter Amendment and (ii)
Company Redeemable Preferred Stock redeemed by the Company or repurchased by
any of its subsidiaries pursuant to and in accordance with Section 7.20 of the
Merger Agreement.
5. If cash payments are made to holders of Company Common Stock in lieu
of fractional shares of Parent Ordinary Shares that would otherwise be issued to
such holders in the merger, such payments will be made for the purpose of saving
Parent the expense and inconvenience of issuing and transferring fractional
shares of Parent Ordinary Shares, and will not represent separately bargained
for consideration. The total cash consideration that will be paid in the Merger
to holders of Company Common Stock in lieu of fractional shares of Parent
ordinary Shares will not exceed one percent of the total consideration that will
be issued in the Merger to shareholders of Company in exchange for their shares
of Common Stock.
6. (i) Except pursuant to and in accordance with Section 7.20 of the
Merger Agreement, neither the Company nor any corporation related to the Company
(as defined in Treasury Regulation Section 1.368-1(e)) has acquired or has any
plan or intention to acquire any Company stock in contemplation of the Merger,
or otherwise as part of a plan of which the Merger is a part (including, without
limitation, in connection with the Public Offering).
(ii) The Company is not aware of any plan or intention on the part of
Parent or Sub to acquire to redeem any of the Parent stock issued in the merger,
either directly or through any transaction, agreement or arrangement with any
other person. The Company has no plan or intention, nor is the Company aware of
any plan or intention on the part of any person related to parent or Sub (as
defined in Treasury Regulation Section 1.368-1(e)), to acquire or redeem any of
the Parent stock issued in the Merger, either directly or through any
transaction, agreement or arrangement with any other person. For purposes of
this stock owned or acquired (as the case may be) by a partnership in which such
person is a partner in proportion to such person's interest in the partnership.
<PAGE>
7. Except for deemed distributions, if any, made pursuant to and in
accordance with Section 7.20 of the Merger Agreement, the Company has not made,
and does not have any plan or intention to make, any distributions with respect
to any stock of the Company prior to, in contemplation of or otherwise made in
connection with, the Merger (other than dividends made in the ordinary
course of business).
8. The Company is not aware of any present plan or intention on the part
of Sub to, or of any present plan or intention of Parent to cause Sub to,
following the Merger, liquidate the Company, merge the Company with or into
another corporation in which the Company is not the survivor, sell or otherwise
dispose of shares of the Company, cause the Company to distribute the proceeds
of any borrowings incurred by the Company or cause the Company or any of its
subsidiaries to sell, distribute or otherwise dispose of any of their assets,
except for (i) dispositions made in the ordinary course of business and
transfers permitted under Section 368(a) (2) (C) of the Code of Treasury
Regulation Section 1.368-1(d) or 1.368-2(k) and (ii) dispositions of assets of
the Company or its subsidiaries having a fair market value, individually or in
the aggregate, not in excess of 70% of the gross fair market value of 90% of the
net fair market value of the assets held by the Company immediately prior to the
Merger. For this purpose, assets used to pay reorganization expenses, to
repurchase Company Redeemable Preferred Stock, to pay dissenters or to make any
other redemption shall be treated as held immediately prior to the Merger.
9. Except as specifically provided in the Merger Agreement, the Company
and stockholders of the Company will pay their respective expenses, if any,
incurred in connection with the Merger. The Company has neither paid (directly
or indirectly) nor agreed to assume and expense or other liability, stockholders
of the Company in connection with or part of the Merger or any related
transactions.
10. Except as otherwise specifically contemplated under the Merger
Agreement, immediately prior to the time of the Merger, the Company will not
have outstanding any warrants, options, convertible securities or any type of
right pursuant to which any person could acquire Company stock. Simultaneously
with the Merger, all outstanding options and related stock appreciation rights,
if any, to purchase or acquire a share of Company stock granted under employee
incentive or benefits plans, programs or arrangements and non-employee director
plans presently maintained by the Company, together with
<PAGE>
all other outstanding awards granted under such plans, will be canceled or
converted into similar instruments or Parent. Immediately following the Merger,
the only classes of Company stock outstanding will be the Company Common Stock
held by Sub and the Company Redeemable Stock held by the historic shareholders
of the Company.
11. No assets of the Company have been sold, transferred or otherwise
disposed of which would prevent Sub from continuing the "historic business" of
Company or from using a significant portion of the "historic business assets" of
the Company in a business following the Merger (as such terms are defined in
Treasury Regulation Section 1.368-1(d)).
12. In connection with the Merger and related transactions, the Company
Common Stock will be converted solely into Parent voting stock (except for cash
paid in lieu of fractional shares of parent Ordinary Shares). For purposes of
this representation, Company stock redeemed for cash or other property
furnished, directly or indirectly, by parent or Sub will be considered as
acquired by Sub. In connection with the Merger as related transactions, no
liabilities of the Company or any of its subsidiaries or any holders of Company
stock will assumed by Parent or Sub, nor, to the best knowledge of the
management of the Company, will any of the Company stock acquired by Sub in
connection with the merger be subject to any liabilities.
13. The Company is not an investment Company as defined in Section
368(a) (2) (F) (iii) and (iv) of the Code.
14. The Company will not take, and, to the best knowledge of the
management of Company, there is no plan or intention by stockholders of Company
to take, any position or any Federal, state or local income or franchise tax
return, or take any other tax reporting position, that is inconsistent with the
meaning of Section 368(a) of the Code and as a transaction qualifying for the
exemption from gain recognition pursuant to Section 367(a) (1) of the Code
(assuming where applicable the filing of valid gain recognition agreements by
five-percent transferee shareholders as defined in Treasury Regulation Section
1.367(a)-3(c) (5) (ii)), unless otherwise required by a "determination" (as
defined in Section 1313(a) (1) of the Code) or by applicable state or local tax
law (and then only to the extent required by such applicable state or local law
tax law).
15. None of the compensation received by any stockholder-employee or
stockholder-independent contractor of the Company in respect of periods at or
prior to the Effective Time
<PAGE>
represents separate consideration for, or in allocable to, any of its Company
stock. None of the Parent shares that will be received by any
stockholder-employee or stockholder-independent contractor of the Company in the
Merger represents separately bargained for consideration which is allocable to
any employment agreement or arrangement. The compensation paid to any
stockholder-employee or stockholder-independent contractor will be for services
actually rendered and will be determined by bargaining at arm's length
16. The Company is not under the jurisdiction of a court in a title 11 or
similar case within the meaning of Section 368(a) (3) (A) of the Code.
17. On the date of the Merger, the fair market value of the assets of the
Company will exceed the sum of its liabilities, plus the amount of liabilities,
if any, to which such assets are subject.
18. Any funds used by the Company's Unrestricted Subsidiaries to
repurchase any Company Redeemable Preferred Stock will represent funds in excess
of the funds reasonable anticipated to be necessary for such Unrestricted
Subsidiaries' business needs.
19. No warrants, options or similar interests in the Company were issued
or, to the knowledge of the management of the Company, acquired with the
principal purpose of avoiding the general rule contained in Section 367(a) (1)
of the Code.
20. The Company will comply with the reporting requirements set forth in
Treasury Regulation Section 1.367(a)-3(c) (6).
21. There will be no dissenters to the Merger.
22. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of the Company with respect to the Merger.
23. The Merger is being undertaken for purposes of enhancing the business
of the Company and for other good and valid business purposes of the Company.
24. The undersigned is authorized to make all the representation set
forth herein on behalf of the Company.
<PAGE>
The undersigned acknowledges that (i) your opinion will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinion will be subject to the certain
limitations and qualifications including that it may not be relied upon if any
such representations or warranties are not accurate or if any of such covenants
or obligations are not satisfied in all material respects.
The undersigned acknowledges that your opinion will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinion.
Very truly yours,
[Company]
by
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT E
TO THE MERGER AGREEMENT
[Letterhead of Transocean Sedco Forex Inc.]
[ ], 2000
Baker Botts LLP
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Ladies and Gentlemen:
In connection with the opinions to be delivered pursuant to Sections
8.2(b) and 8.3(c) of the Merger Agreement and Plan of Merger (the "Merger
Agreement") dated as of [ ], 2000, among TRANSOCEAN SEDCO FOREX INC., a
company organized under the laws of the Cayman Islands ("Parent"), TRANSOCEAN
HOLDINGS INC., a company organized under the laws of Delaware and a wholly owned
subsidiary of Parent ("Sub"), TSF DELAWARE INC., a company organized under
the laws of Delaware and a wholly owned subsidiary of Sub ("Merger Sub"), and
R&B FALCON CORPORATION, a company organized under the laws of Delaware (the
"Company"), pursuant to which Merger Sub will merge with and into the Company,
with the Company being the surviving entity (the "Merger"), and in connection
with the filing with the Securities and Exchange Commission (the "SEC") of the
registration statement on Form S-4 (the "Registration Statement"), which
includes the Joint Proxy Statement of Parent, Sub and the Company, each as
amended or supplemented through the date hereof, the undersigned certifies and
represents on behalf of Parent, after due inquiry and investigation, as follows
(any capitalized term used but not
<PAGE>
defined herein having the meaning given to such term in the Merger Agreement):
1. The facts relating to the Merger as described in the Merger
Agreement, Registration Statement and the other documents described in the
Registration Statement are, insofar as such facts pertain to Parent, Sub and
Merger Sub, true, correct and complete in all material respects. The Merger
will be consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which
each issued and outstanding share of the Company's common stock, par value $.01
per share, (the "Company Common Stock"), will be converted into fully paid and
nonassessable shares of common stock, par value $.01 per share of Parent
("Parent Ordinary Shares"), is the result of arm's length bargaining.
3. In the Merger, Sub will acquire at least 80 percent of the total
combined voting power of all classes of Company stock entitled to vote and at
least 80 percent of the total number of shares of all other classes of Company
stock, solely in exchange for Parent voting stock. For purposes of this
representation, (i) shares of Company stock exchanged for cash or other property
furnished, directly or indirectly, by Parent, Sub or Merger Sub and (ii) shares
of Company stock, if any, issued pursuant to the Public Offering, as described
in Section 7.20 of the Merger Agreement, in each case will be treated as
outstanding Company stock on the Closing Date. Sub has no present plan or
intention to, and Parent has no plan or intention to cause Sub to, sell,
transfer or dispose of any stock of the Company or to cause the Company to issue
additional shares of its stock that would in either case result in Sub failing
to own after the Merger, directly or indirectly, at least 80 percent of the
total combined voting power of all classes of Company stock entitled to vote and
at least 80 percent of the total number of shares of all other classes of
Company stock.
4. The 13.875% cumulative Redeemable Preferred Stock of the Company
(the "Company Redeemable Preferred Stock") shall continue to be outstanding in
substantially indentical form except for (i) the addition of voting rights
pursuant to the Company Preferred Stock Voting Right Charter Amendment and (ii)
Company Redeemable Preferred Stock redeemed by the Company or repurchased by any
of its subsidiaries pursuant to and in accordance with Section 7.20 of the
Merger Agreement.
5. If cash payments are made to holders of Company Common Stock in
lieu of fractional shares of Parent Ordinary
<PAGE>
Shares that would otherwise be issued to such holders in the Merger, such
payments will be made for the purpose of saving Parent the expense and
inconvenience of issuing and transferring fractional shares of Parent Ordinary
Shares, and will not represent separately bargained for consideration. The total
cash consideration that will be paid in the Merger to holders of Company Common
Stock in lieu of fractional shares of Parent Ordinary Shares will not exceed one
percent of the total consideration that will be issued in the Merger to
shareholders of Company in exchange for their shares of Company Stock.
6. Neither Parent nor Sub has a plan or intention to cause the
Company to redeem any Company Redeemable Preferred Stock after the Merger,
except that Parent intends to cause the Company to redeem those shares on their
mandatory redemption date, as required by their terms.
7. Neither Parent nor sub has a plan or intention to acquire or
redeem any of the Parent stock issued in the Merger, either directly or through
any transaction, agreement or arrangement with any other person. To the best
knowledge of the managements of Parent and Sub, no person related to Parent or
Sub (as defined in Treasury Regulation Section 1.368-1(e)) has a plan or
intention to acquire or redeem any of the Parent stock issued in the Merger,
either directly or through any transaction, agreement or arrangement with any
other person. For purposes of this representation letter, a person is considered
to own or acquire stock owned or acquired (as the case may be) by a partnership
in which such person is a partner in proportion to such person's interest in the
partnership.
8. Parent does not have any plan or intention to make any
distributions after, but in connection with, the Merger to holders of Parent
stock (other than dividends made in the ordinary course of business).
9. None of Parent, Sub, Merger Sub or any corporation related to
Parent, Sub or Merger Sub (as defined in Treasury Regulation Section 1.368-1(e))
has acquired or will, prior to the Effective Time, acquire (including, without
limitation, in connection with the Public Offering), or has owned in the past
five years, any Company stock, except that Parent owns [ ] shares of Company
Common Stock which it acquired in [ ] in an open market purchase that was not
in contemplation of, or otherwise part of a plan including, the Merger. Prior to
the vote described in Section 8.1(a)(1) of the Merger Agreement, Parent will
sell such shares for cash on the open market.
<PAGE>
10. Sub has no present plan or intention to, and Parent has no present
plan or intention to cause Sub to, following the Merger, liquidate the Company,
merge the Company with or into another corporation in which the Company is not
the survivor, sell or otherwise dispose of shares of the Company, cause the
Company to distribute the proceeds of any borrowings incurred by the Company or
cause the Company or any of its subsidiaries to sell, distribute or otherwise
dispose of any of their assets, except for (i) dispositions made in the
ordinary course of business and transfers permitted under Section 368(a)(2)(C)
of the Code or Treasury Regulation Section 1.368-1(d) or 1.368-2(k) and (ii)
dispositions of assets of the Company or its subsidiaries having a fair market
value, individually or in the aggregate, not in excess of 70% of the gross fair
market value and 90% of the net fair market value of the assets held by the
Company immediately prior to the Merger. For this purpose, assets used to pay
reorganization expenses, to repurchase Company Redeemable Preferred Stock, to
pay dissenters or to make any other redemption shall be treated as held
immediately prior to the Merger.
11. Parent and Sub will pay their respective expenses, if any,
incurred in connection with the Merger. Except as specifically provided in the
Merger Agreement, neither Parent nor Sub has paid (directly or indirectly) or
agreed to assume any expense or other liability, whether fixed or contingent, of
the Company or any of its subsidiaries or any holder of Company Stock.
12. In connection with the Merger and related transactions, Company
Common Stock will be converted solely into Parent voting stock (except for cash
paid in lieu of fractional shares of Parent Ordinary Shares). For purposes of
this representation, Company stock redeemed for cash or other property
furnished, directly or indirectly, by Parent or Sub will be considered as
exchanged for other than Parent voting stock. In connection with the Merger and
related transactions, no liabilities of the Company or any of its subsidiaries
or any of the holders of Company stock will be assumed by Parent or Sub, nor, to
the best knowledge of the managements of Parent or Sub, will any of the Company
stock acquired by Sub in connection with the Merger be subject to any
liabilities.
13. Following the Merger, Parent and Sub intend to cause the Company
to continue its "historic business" or to use a significant portion of its
"historic business assets" in a business (as such terms are defined in Treasury
Regulation Section 1.368-1(d)).
<PAGE>
14. Neither Parent nor Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
15. At the Effective Time, Parent will own all of the stock of Sub,
and Parent has no present plan or intention to sell, transfer or dispose of the
stock of Sub or to cause Sub to issue additional shares of its stock that would
result in Parent's failing to own at least 80 percent of the total combined
voting power of all classes of Sub stock entitled to vote and at least 80
percent of the total number of shares of all other classes of Sub stock.
16. Neither Parent nor Sub will take any position on any Federal,
state or local income or franchise tax return, or take any other tax reporting
position, that is inconsistent with the treatment of the Merger as a
reorganization within the meaning of Section 368(a) of the Code and as a
transaction qualifying for the exemption from gain recognition pursuant to
Section 367(a)(1) of the Code (assuming where applicable the filing of a valid
gain recognition agreement by five-percent transferee shareholders as defined in
Treasury Regulation Section 1.367(a)-3(c)(5)(ii), unless otherwise required by
a "determination" (as defined in Section 1313(a)(1) of the Code) or by
applicable state or local tax law (and then only to the extent required by such
applicable state or local tax law).
17. None of the compensation received by any stockholder-employee or
stockholder-independent contractor of Company in respect of periods after
the Effective Time represents separate consideration for, or is allocable to,
any of its Company stock. None of the Parent stock that will be received by any
stockholder-employee or stockholder-independent contractor of the Company in the
Merger represents separately bargained-for consideration which is allocable to
any employment agreement or arrangement. The compensation paid to any
stockholder-employee or stockholder-independent contractor will be for services
actually rendered and will be determined by bargaining at arm's length.
18. In no case will Parent or any of its Subsidiaries make any
contributions the Company or the Unrestricted Subsidiaries to replenish funds
used to repurchase Company Redeemable Preferred Stock.
19. Neither Parent nor any of its subsidiaries has agreed to pay, or
will pay, directly or indirectly, any consideration for shares of stock of the
Company other than the Parent voting shares, and the cash in lieu of fractional
shares to be delivered by Sub as described in this Agreement.
<PAGE>
20. Neither Parent nor Sub is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code.
21. Sub and Merger Sub are corporations newly formed for the purpose
of participating in the Merger, and at no time prior to the Merger have they had
assets or business operations.
22. In connection with the Merger, the Parent Ordinary Shares received
in the Merger by holders of Company stock in exchange for Company Common Stock
will not represent more than 50% of the total voting power or more than 50% of
the total value of all shares of Parent stock outstanding immediately after the
Merger.
23. No more than 50% of the total voting power and no more than 50% of
the total value of all shares of Parent outstanding immediately after the Merger
will be owned, in the aggregate and taking into account the rules set forth in
Treasury Regulation Section 1.367(a)-3(c) (4), by U.S. persons that are either
officers or directors of the Company or that are five-percent shareholders of
the Company (within the meaning of Treasury Regulation Section
1.367(a)-3(c)(5)(iii)).
24. No warrants, options or similar interests in Parent were issued
or, to the knowledge of the managements of Parent or Sub, acquired with the
principal purpose of avoiding the general rule contained in Section 367(a)(1)
of the Code.
25. Parent will cause the Company to comply with the reporting
requirements set forth in Treasury Regulation Section 1.367(a)-3(c)(6).
26. Parent or one or more of its qualified subsidiaries or
qualified partnerships (as defined in Treasury Regulations Sections 1.367(a)-
3(c)(5)(vii) or (viii)), has been engaged in the active conduct of a trade or
business (within the meaning of Treasury Regulation Section 1.367(a)-3(c)(3))
outside the United States (the "Parent Business") throughout the 36-month period
ending at the Effective Time. Parent has no plan or intention to substantially
dispose of or discontinue (including by way of disposal) the active conduct of
the Parent Business after the Merger.
27. At the Effective Time, the market capitalization of Parent will
be at least equal to the market capitalization of the Company, in each case,
taking into account the application of Treasury Regulation Section
1.367(a)-3(c)(3)(iii)(B).
<PAGE>
28. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement represent the entire
understanding of Parent with respect to the Merger.
29. The Merger is being undertaken for purposes of enhancing the
business of Parent and for other good and valid business purposes of Parent.
30. The undersigned is authorized to make all the representations set
forth herein on behalf of Parent and Sub.
31. Parent believes that Parent will not be a passive foreign
investment company, as defined in Section 1297(a) of the Code (a "PFIC") for the
calendar year in which the Merger occurs and has no reason, on the basis of
facts presently known, to believe that Parent will become a PFIC for any
subsequent year.
32. Parent believes that it is not a controlled foreign corporation,
within the meaning of Section 957(a) of the Code.
The undersigned acknowledges that (i) your opinion will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto, and (ii) your opinion will be subject to certain limitations
and qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any of such convenants or
obligations are not satisfied in all material respects.
<PAGE>
The undersigned acknowledges that your opinion will not address any tax
consequences of the Merger or any action taken in connection therewith except
as expressly set forth in such opinion.
Very truly yours,
[Parent]
by
----------------------
Name:
Title:
[Sub]
by
-----------------------
Name:
Title:
