<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
DUAL DRILLING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[DUAL LOGO]
DUAL DRILLING COMPANY
5956 SHERRY LANE, SUITE 1500
DALLAS, TEXAS 75225
May 14, 1996
To the Stockholders of DUAL DRILLING COMPANY:
Enclosed are a Notice of Special Meeting of Stockholders, a Prospectus/Proxy
Statement, and a Proxy for a Special Meeting of Stockholders (the "Special
Meeting") of DUAL DRILLING COMPANY ("DUAL") to be held on June 12, 1996 at 10:00
a.m., Central time, at Park City Club, 5956 Sherry Lane., Suite 1700, Dallas,
Texas 75225.
At the Special Meeting you will be asked to consider and vote on a proposal
to approve and adopt a Merger Agreement pursuant to which a wholly-owned
subsidiary of ENSCO International Incorporated ("ENSCO") will be merged with and
into DUAL, as a result of which DUAL will become a wholly-owned subsidiary of
ENSCO. The terms of the Merger Agreement provide that holders of the common
stock of DUAL will receive for each share of DUAL common stock owned as of the
effective time of the merger 0.625 of a share of ENSCO common stock.
Additionally, you will be asked to approve the DUAL Special Performance Unit
Plan. Details of the matters to be considered at the Special Meeting are set
forth in the accompanying Prospectus/Proxy Statement which you should read
carefully.
After careful consideration, the Board of Directors of DUAL has approved the
Merger Agreement and recommends that all stockholders vote for its approval. The
Board of Directors of DUAL has received a written opinion from its financial
advisor, Simmons & Company International, dated as of March 21, 1996, that the
consideration to be received by DUAL stockholders pursuant to the Merger
Agreement is fair to the DUAL stockholders from a financial point of view as of
that date.
All stockholders are invited to attend the Special Meeting in person. The
affirmative vote of a majority of the outstanding shares of common stock of DUAL
will be necessary for approval and adoption of the Merger Agreement, and the
affirmative vote of a majority of the total number of shares of common stock of
DUAL represented and entitled to vote at the Special Meeting or any adjournment
thereof will be necessary for approval of the adoption of the DUAL Special
Performance Unit Plan.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. If you
attend the Special Meeting in person you may, if you wish, vote personally on
all matters brought before the Special Meeting even if you have previously
returned your Proxy.
Sincerely,
[LOGO]
DAVID W. SKARKE
CHAIRMAN OF THE BOARD
<PAGE>
DUAL DRILLING COMPANY
5956 SHERRY LANE, SUITE 1500
DALLAS, TEXAS 75225
TEL: (214) 373-6200
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 12, 1996
---------------------
A Special Meeting of Stockholders (the "Special Meeting") of DUAL DRILLING
COMPANY, a Delaware corporation ("DUAL"), will be held on June 12, 1996 at 10:00
a.m., Central time, at Park City Club, 5956 Sherry Lane., Suite 1700, Dallas,
Texas 75225, for the following purposes:
(i) To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of March 21, 1996 (restated, as amended, the
"Merger Agreement") among ENSCO International Incorporated, a Delaware
corporation ("ENSCO"), DDC Acquisition Company, a Delaware corporation
and a wholly-owned subsidiary of ENSCO ("Merger Subsidiary"), and DUAL,
pursuant to which, among other things (a) Merger Subsidiary would be
merged with and into DUAL, as a result of which DUAL would become a
wholly-owned subsidiary of ENSCO and (b) each stockholder of DUAL would
receive for each share of DUAL's common stock owned as of the effective
time of the Merger 0.625 of a share of ENSCO common stock, par value $.10
per share, as described in the accompanying Prospectus/Proxy Statement. A
copy of the Merger Agreement is attached to the Prospectus/Proxy
Statement as Appendix A.
(ii) To consider and vote on a proposal to approve the DUAL Special
Performance Unit Plan.
(iii) To transact such other business as may properly come before the
Special Meeting or any adjournment(s) or postponement(s) thereof.
Stockholders of record of DUAL's common stock at the close of business on
May 1, 1996, will be entitled to vote as set forth in the accompanying
Prospectus/Proxy Statement at the Special Meeting and any adjournment thereof.
Only holders of record of DUAL's common stock at the close of business on the
record date are entitled to notice of, and to vote at, the Special Meeting. A
complete list of stockholders entitled to vote at the Special Meeting will be
available for examination by any Company stockholder at DUAL's office, for
purposes pertaining to the Special Meeting, during normal business hours for a
period of ten days prior to the Special Meeting.
You are cordially invited and urged to attend the Special Meeting in person.
Whether or not you plan to attend, please complete, sign, date and promptly
return the enclosed Proxy in the enclosed self-addressed, stamped envelope. A
stockholder of DUAL who has given a proxy may revoke such proxy at any time
prior to its exercise at the Special Meeting.
THE BOARD OF DIRECTORS OF DUAL HAS APPROVED AND ADOPTED THE MERGER AGREEMENT
AND HAS ADOPTED THE DUAL SPECIAL PERFORMANCE UNIT PLAN. THE BOARD OF DIRECTORS
OF DUAL RECOMMENDS THAT YOU VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND APPROVAL OF THE DUAL SPECIAL PERFORMANCE UNIT PLAN. IN
ORDER TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS BEING SOLICITED BY THE
BOARD OF DIRECTORS OF DUAL, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. YOUR COOPERATION IS APPRECIATED.
By order of the Board of Directors,
DUAL DRILLING COMPANY
[LOGO]
ROBERT F. CHRONE
SECRETARY
Dallas, Texas
May 14, 1996
<PAGE>
PROSPECTUS/PROXY STATEMENT
<TABLE>
<S> <C>
[LOGO] [DUAL LOGO]
ENSCO INTERNATIONAL INCORPORATED DUAL DRILLING COMPANY
4,651,474 SHARES SPECIAL MEETING OF STOCKHOLDERS
OF COMMON STOCK, TO BE HELD
PAR VALUE $.10 PER SHARE JUNE 12, 1996
</TABLE>
This Prospectus/Proxy Statement (the "Prospectus/Proxy Statement") is being
furnished to the stockholders of DUAL DRILLING COMPANY, a Delaware corporation
("DUAL"), in connection with the solicitation of proxies by the Board of
Directors of DUAL for use at a special meeting of stockholders of DUAL to be
held on June 12, 1996, and any adjournments or postponements thereof (the
"Special Meeting").
At the Special Meeting, holders of shares of common stock, par value $.01
per share, of DUAL ("DUAL Common Stock") will consider and vote upon a proposal
to approve and adopt an Agreement and Plan of Merger dated as of March 21, 1996
(restated, as amended, the "Merger Agreement"), among ENSCO International
Incorporated, a Delaware corporation ("ENSCO"), DDC Acquisition Company, a
Delaware corporation and a wholly owned subsidiary of ENSCO ("Merger
Subsidiary"), and DUAL, pursuant to which DUAL will merge with and into Merger
Subsidiary (the "Merger"). As a result of the Merger, DUAL will become a
wholly-owned subsidiary of ENSCO and each share of DUAL Common Stock outstanding
at the effective time of the Merger (the "Effective Time") will be converted
into 0.625 of a share of common stock of ENSCO, par value $.10 per share (the
"ENSCO Common Stock"). A copy of the Merger Agreement is attached to this
Prospectus/Proxy Statement as Appendix A and is incorporated herein by
reference. The stockholders of DUAL also will consider and vote upon a proposal
to approve the DUAL Special Performance Unit Plan and consider and vote upon
such other business as may come before the Special Meeting. Consummation of the
Merger is not subject to or conditioned upon approval of the proposal to approve
the DUAL Special Performance Unit Plan.
This Prospectus/Proxy Statement also constitutes the prospectus for the
offering of shares of ENSCO Common Stock to be issued in the Merger to the
holders of DUAL Common Stock. ENSCO has filed a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") with
the Securities and Exchange Commission (the "Commission") of which this
Prospectus/Proxy Statement is a part. All information concerning DUAL contained
or incorporated by reference in this Prospectus/Proxy Statement has been
furnished by DUAL, and all information concerning ENSCO contained or
incorporated by reference in this Prospectus/Proxy Statement has been furnished
by ENSCO.
SEE "RISK FACTORS" ON PAGE 17 FOR INFORMATION THAT SHOULD BE CONSIDERED
REGARDING THE SECURITIES OFFERED HEREBY.
This Prospectus/Proxy Statement and the accompanying proxy are first being
mailed to DUAL stockholders on or about May 14, 1996.
------------------------
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus/Proxy Statement is May 14, 1996.
<PAGE>
AVAILABLE INFORMATION
ENSCO and DUAL are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements (if required) and other
information with the Commission. The reports, proxy statements and other
information filed by ENSCO or DUAL with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should be available at the Commission's Regional Offices at 7 World Trade
Center, 13th Floor, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
shares of ENSCO Common Stock are listed on the New York Stock Exchange ("NYSE")
and the shares of DUAL Common Stock are quoted on the Nasdaq National Market,
and certain of ENSCO's and DUAL's reports, proxy materials and other information
may be available for inspection at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005 or The Nasdaq Stock Market at
1735 K Street, N.W., Washington, D.C. 20006, respectively.
ENSCO has filed with the Commission the Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of ENSCO Common Stock to be issued pursuant to the Merger. This
Prospectus/Proxy Statement does not contain all the information set forth in the
Registration Statement and the Appendices thereto, certain parts of which were
omitted as permitted by the rules and regulations of the Commission. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by ENSCO (File No. 1-8097)
are incorporated by reference in this Prospectus/Proxy Statement:
1. Annual Report on Form 10-K, as amended, for the year ended December 31,
1995 (the "ENSCO 1995 Form 10-K");
2. The description of ENSCO's Preferred Share Purchase Rights contained in
its Registration Statement on Form 8-A filed with the Commission on
February 23, 1995;
3. The description of ENSCO Common Stock contained in its Registration
Statement on Form 8-B, filed with the Commission on November 12, 1987,
and its Registration Statement on Form 8-A, filed with the Commission on
February 3, 1981, as amended by Form 8, filed with the Commission on
August 22, 1985;
4. Current Report on Form 8-K of January 25, 1996;
5. Current Report on Form 8-K of March 21, 1996; and
6. Quarterly Report on Form 10-Q for the three months ended March 31, 1996.
The following documents filed with the Commission by DUAL (File No. 0-11758) are
incorporated by reference in this Prospectus/Proxy Statement:
1. DUAL's Annual Report on Form 10-K, as amended, for the year ended
December 31, 1995 (the "DUAL 1995 Form 10-K");
2. The description of DUAL Common Stock contained in its Registration
Statement on Form S-1 filed with the Commission on June 16, 1993;
3. Current Report on Form 8-K of January 25, 1996;
4. Current Report on Form 8-K of March 21, 1996; and
2
<PAGE>
5. Quarterly Report on Form 10-Q for the three months ended March 31, 1996.
All documents filed by ENSCO or DUAL pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus/Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference herein from the date of filing such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Proxy Statement to the extent that a statement
contained herein (or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus/Proxy Statement.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
APPENDICES TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
HEREIN) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM, IN THE CASE OF DOCUMENTS
RELATING TO ENSCO, ATTN.: CORPORATE SECRETARY, AT 2700 FOUNTAIN PLACE, 1445 ROSS
AVENUE, DALLAS, TEXAS 75202-2792, (214) 922-1500 AND IN THE CASE OF DOCUMENTS
RELATING TO DUAL, ATTN.: CORPORATE SECRETARY, AT 5956 SHERRY LANE, SUITE 1500,
DALLAS, TEXAS 75225, (214) 373-6200. TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY JUNE 5, 1996.
No person is authorized to give any information or to make any
representation not contained in this Prospectus/Proxy Statement or in the
documents incorporated herein by reference in connection with the solicitation
and the offering made hereby and, if given or made, such information or
representation should not be relied upon as having been authorized by ENSCO or
DUAL. This Prospectus/ Proxy Statement does not constitute an offer to sell, or
a solicitation of an offer to purchase, the securities offered by this
Prospectus/Proxy Statement, or the solicitation of a proxy from any person, in
any jurisdiction in which it is unlawful to make such offer, solicitation of an
offer or proxy solicitation. Neither the delivery of this Prospectus/Proxy
Statement nor any distribution of the securities made under this
Prospectus/Proxy Statement shall, under any circumstances, create an implication
that there has not been any change in the affairs of ENSCO or DUAL since the
date of this Prospectus/Proxy Statement other than as set forth in the documents
incorporated herein by reference.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION.......................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE..................................... 2
SUMMARY........................................ 5
Risk Factors................................. 5
The Companies................................ 5
The Special Meeting.......................... 5
The Merger and Certain Provisions of the
Merger Agreement............................ 6
Principal Stockholder Agreement.............. 10
Comparisons of Stockholders' Rights.......... 11
Comparative Market Prices and Dividends...... 11
Selected Historical Financial Data........... 12
Selected Unaudited Combined Condensed Pro
Forma Financial Data........................ 14
Proposal to Approve the DUAL Special
Performance Unit Plan....................... 15
RISK FACTORS................................... 17
Industry Conditions and Competition.......... 17
Environmental Matters........................ 17
Limitations on Ownership by Non-U.S.
Citizens.................................... 18
Operational Risks and Insurance.............. 18
Government Regulation........................ 18
International Operations..................... 19
Certain Anti-takeover Effects................ 19
Interests of Certain Persons; Possible
Conflicts of Interests of Certain Persons in
the Merger.................................. 19
No Dividends................................. 19
THE SPECIAL MEETING............................ 19
General...................................... 19
Purposes of the Special Meeting.............. 20
Vote Required................................ 20
Voting of Proxies............................ 20
Revocability of Proxies...................... 20
Solicitation of Proxies...................... 20
Record Date; Shares Entitled to Vote......... 21
Quorum....................................... 21
THE MERGER..................................... 21
General...................................... 21
Background of the Merger..................... 21
DUAL's Reasons for the Merger; Recommendation
of DUAL's Board of Directors................ 24
ENSCO's Reasons for the Merger............... 25
Effective Time............................... 26
Terms of the Merger.......................... 26
Fairness Opinion............................. 26
Certain United States Federal Income Tax
Consequences................................ 32
Regulatory Approvals......................... 33
Accounting Treatment......................... 34
NYSE Listing................................. 34
Interests of Certain Persons; Possible
Conflicts of Interest....................... 34
Restrictions on Resales by Affiliates........ 37
Management................................... 37
Effect of Merger on Certain Debt of DUAL..... 37
CERTAIN PROVISIONS OF THE MERGER AGREEMENT..... 38
Exchange Procedures.......................... 38
Certain Representations and Warranties....... 40
Conduct of Business Pending the Merger....... 41
No Solicitation of Transactions.............. 41
<CAPTION>
PAGE
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<S> <C>
Conditions to the Consummation of the
Merger...................................... 42
Termination.................................. 43
Alternative Proposal Fee; Expenses;
Damages..................................... 43
Amendment and Waiver......................... 44
Effect of the Merger on Stock Options........ 44
Effect of the Merger on Certain Benefit
Plans....................................... 45
PRINCIPAL STOCKHOLDER AGREEMENT................ 46
Voting and Proxy............................. 46
Abstention from Voting....................... 47
Covenants and Representations................ 47
Registration of Merger Shares................ 47
No Solicitation.............................. 48
THE COMPANIES.................................. 48
ENSCO International Incorporated............. 48
DUAL DRILLING COMPANY........................ 49
Merger Subsidiary............................ 49
PRINCIPAL STOCKHOLDERS......................... 50
UNAUDITED COMBINED CONDENSED PRO FORMA
FINANCIAL INFORMATION......................... 51
Notes to Unaudited Combined Condensed Pro
Forma Financial Statements.................. 55
Pro Forma Adjustments to Historical Combined
Condensed Balance Sheet..................... 55
Pro Forma Adjustments to Historical Combined
Condensed Statements of Operations.......... 55
COMPARISONS OF STOCKHOLDERS'
RIGHTS........................................ 56
Capital Stock................................ 56
Special Meetings of Stockholders............. 56
Number of Directors.......................... 57
Classification of Board...................... 57
Removal of Directors......................... 57
Anti-Takeover Provisions..................... 57
Indemnification and Limitation of Monetary
Liabilities................................. 57
Dissolution.................................. 58
Preemptive Rights............................ 58
Payment of Dividends......................... 59
Restrictions on Alien Ownership.............. 59
Dissenting Stockholders' Rights.............. 59
Stockholders' Lists and Inspection of Books
and Records................................. 59
PROPOSAL TO APPROVE THE ADOPTION OF THE DUAL
SPECIAL PERFORMANCE UNIT PLAN................. 59
NEW PLAN BENEFITS.............................. 60
COMPENSATION OF DUAL'S EXECUTIVE OFFICERS...... 62
Option Cancellations......................... 63
Option Grants................................ 65
Aggregated Exercises of Options/SARs and
Fiscal Year-End Option/SAR Value Table...... 65
Supplemental Executive Retirement Plan....... 65
LEGAL MATTERS.................................. 66
EXPERTS........................................ 66
STOCKHOLDER PROPOSALS.......................... 66
INDEX -- Defined Terms......................... 67
APPENDICES
A -- Merger Agreement........................ A-1
B -- Fairness Opinion........................ B-1
C -- DUAL Special Performance Unit Plan...... C-1
D -- Principal Stockholder Agreement......... D-1
</TABLE>
4
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY STATEMENT. IT DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT,
INCLUDING THE APPENDICES ATTACHED HERETO. CERTAIN CAPITALIZED TERMS USED IN THIS
SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT. THE
INFORMATION CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT WITH RESPECT TO ENSCO
AND ITS AFFILIATES HAS BEEN PROVIDED BY ENSCO, AND THE INFORMATION WITH RESPECT
TO DUAL AND ITS AFFILIATES HAS BEEN PROVIDED BY DUAL.
RISK FACTORS
STOCKHOLDERS OF DUAL SHOULD CAREFULLY EVALUATE CERTAIN RISK FACTORS RELATING
TO THE COMBINED COMPANY AFTER THE MERGER. SEE "RISK FACTORS."
THE COMPANIES
ENSCO. ENSCO is an international offshore contract drilling company that
also provides marine transportation services in the U.S. Gulf of Mexico. ENSCO's
complement of offshore drilling rigs includes 24 jackup rigs and 10 barge
drilling rigs, and ENSCO's marine transportation fleet consists of 37 vessels.
ENSCO's operations are integral to the exploration, development, and production
of oil and gas.
ENSCO was formed as a Texas corporation in 1975 and was reincorporated in
Delaware in 1987. At ENSCO's Annual Meeting of Stockholders held on May 23,
1995, the stockholders of ENSCO approved the change in ENSCO's name from Energy
Service Company, Inc. to ENSCO International Incorporated. ENSCO's principal
office is located at 2700 Fountain Place, 1445 Ross Avenue, Dallas, Texas
75202-2792, and its telephone number is (214) 922-1500.
DUAL. DUAL is a domestic and international offshore drilling contractor.
DUAL was formed in 1951 as a domestic onshore drilling contractor. In 1975, DUAL
entered the offshore drilling business and built a fleet of deep drilling,
self-contained platform rigs. During 1981, DUAL entered the international sector
of the offshore drilling business when it began to acquire a fleet of premium
independent-leg cantilever jackup rigs. Since that time, DUAL has expanded its
offshore fleet by purchasing additional platform and jackup rigs, and by
bareboat chartering jackup rigs. DUAL now operates a fleet of 20 premium
offshore rigs represented by 10 self-contained platform rigs and 10
independent-leg cantilever jackup rigs. DUAL's principal executive office is
located at 5956 Sherry Lane, Suite 1500, Dallas, Texas 75225, and its telephone
number is (214) 373-6200.
MERGER SUBSIDIARY. Merger Subsidiary was formed on March 5, 1996, by ENSCO
solely for the purpose of effecting the Merger. It has no material assets and
has not engaged in any activities except in connection with the Merger. Its
principal executive office is located at 2700 Fountain Place, 1445 Ross Avenue,
Dallas, Texas 75202-2792, and its telephone number is (214) 922-1500.
THE SPECIAL MEETING
TIME, DATE AND PLACE. The Special Meeting is scheduled to be held on June
12, 1996 at 10:00 a.m., Central time, at Park City Club, 5956 Sherry Lane, Suite
1700, Dallas, Texas 75225.
PURPOSES OF THE SPECIAL MEETING. The purposes of the Special Meeting are to
(i) consider and vote upon a proposal to approve and adopt the Merger Agreement,
(ii) consider and vote upon a proposal to approve the DUAL Special Performance
Unit Plan (the "Unit Plan"), and (iii) transact such other business as may
properly be brought before the Special Meeting or any adjournments or
postponements thereof.
VOTE REQUIRED. The affirmative vote of the holders of a majority of all
outstanding shares of DUAL Common Stock is required to approve and adopt the
Merger Agreement. As a result, abstentions, failures to vote and broker
non-votes will have the same effect as votes against the Merger Agreement since
they are not votes for approval. The affirmative vote of the holders of a
majority of the shares of DUAL Common Stock present and voting at the Special
Meeting is required to approve
5
<PAGE>
the Unit Plan. Abstentions from voting on the Unit Plan will be included in the
voting tally and will have the same effect as a vote against that proposal.
Because broker non-votes are not considered "shares present" with respect to a
matter requiring the affirmative vote of a majority of shares present in person
or by proxy at the Special Meeting, broker non-votes will not affect the outcome
with respect to the proposal to approve the Unit Plan. Pursuant to the Principal
Stockholder Agreement (as hereafter defined), the Principal Stockholder Shares
(as hereafter defined) (representing approximately 59.6% of the outstanding
shares of DUAL Common Stock) will be present and voted at the Special Meeting in
favor of the Merger Agreement and the Unit Plan. Therefore, no additional votes
from the stockholders of DUAL are necessary to approve the Merger Agreement or
the Unit Plan. See "Principal Stockholder Agreement."
VOTING OF PROXIES. Shares of DUAL Common Stock represented by properly
executed proxies received at or prior to the Special Meeting, and which have not
thereafter been properly revoked as described below, will be voted in accordance
with the instructions indicated therein. If no instructions are indicated, such
proxies will be voted FOR approval and adoption of the Merger Agreement, FOR
approval of the Unit Plan, and in the discretion of the proxy holder as to any
other matter that may properly come before the Special Meeting. See "The Special
Meeting -- Voting of Proxies."
REVOCABILITY OF PROXIES. A DUAL stockholder who has given a proxy may
revoke such proxy at any time prior to its exercise at the Special Meeting by
any manner permitted by law, including (i) giving written notice of revocation
by mail or facsimile to DUAL prior to the Special Meeting or (ii) properly
submitting to DUAL by mail or facsimile a duly executed proxy bearing a later
date. Submissions to DUAL should be made to DUAL DRILLING COMPANY, Attn:
Corporate Secretary, at 5956 Sherry Lane, Suite 1500, Dallas, Texas 75225,
facsimile number (214) 373-0533. Any beneficial owner whose shares of DUAL
Common Stock are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to change such stockholder's vote
should contact such registered holder promptly and instruct such registered
holder on such beneficial owner's behalf. There is no guarantee that there will
be sufficient time prior to the Special Meeting for the registered holder to
deliver a revocation upon instruction by the beneficial owner. See "The Special
Meeting -- Revocability of Proxies."
RECORD DATE; SHARES ENTITLED TO VOTE. The close of business on May 1, 1996
has been fixed as the record date (the "Record Date") for determining holders of
shares of DUAL Common Stock entitled to notice of and to vote at the Special
Meeting. As of the Record Date, 15,765,713 shares of DUAL Common Stock were
outstanding and held of record by 28 holders. The DUAL Common Stock is the only
class of capital stock of DUAL issued and outstanding. Each stockholder of
record as of the close of business on the Record Date is entitled at the Special
Meeting to one vote for each share of DUAL Common Stock held. See "The Special
Meeting -- Record Date; Shares Entitled to Vote."
QUORUM. The presence, in person or by proxy, of the holders of a majority
of the outstanding shares of DUAL Common Stock entitled to vote at the Special
Meeting is necessary to constitute a quorum for the transaction of business at
the Special Meeting. Pursuant to the Principal Stockholder Agreement, the
Principal Stockholder Shares will be present and voted at the Special Meeting in
favor of the Merger Agreement and the Unit Plan. Therefore, no additional
stockholders are necessary to be present at the Special Meeting to constitute a
quorum. See "The Special Meeting -- Quorum" and "Principal Stockholder
Agreement."
THE MERGER AND CERTAIN PROVISIONS OF THE MERGER AGREEMENT
GENERAL. If all stockholder approvals are obtained and all other conditions
to the Merger are satisfied (or waived, if permissible), then at the Effective
Time, Merger Subsidiary will be merged with and into DUAL, with DUAL to be the
surviving corporation (the "Surviving Corporation") and automatically renamed
DUAL Holding Company. In the Merger, each share of DUAL Common Stock outstanding
immediately prior to the Effective Time (other than shares of DUAL Common Stock
6
<PAGE>
owned by DUAL, ENSCO or a subsidiary of either of them ("Cancelable Shares"))
will be converted into 0.625 of a share of ENSCO Common Stock. See "Certain
Provisions of the Merger Agreement -- Exchange Procedures."
RECOMMENDATION OF THE BOARD OF DIRECTORS OF DUAL. DUAL'S BOARD OF DIRECTORS
HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE MERGER
OFFER THE BEST VALUE REASONABLY AVAILABLE TO, AND ARE IN THE BEST INTERESTS OF,
DUAL AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS OF DUAL HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE STOCKHOLDERS
OF DUAL VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. The
recommendation of the Board of Directors of DUAL is based on a number of factors
described in "The Merger -- Background of the Merger" and "The Merger -- DUAL's
Reasons for the Merger; Recommendation of DUAL's Board of Directors."
EFFECTIVE TIME. The Effective Time will occur as soon as practicable after
the requisite approval of the stockholders of DUAL has been obtained and all
other conditions have been satisfied or waived, and in no event later than the
first business day after all conditions to the Merger have been satisfied or
waived, unless the parties agree otherwise. The Effective Time will occur upon
the filing of a Certificate of Merger with the Secretary of State of the State
of Delaware.
FAIRNESS OPINION. On March 21, 1996, Simmons & Company International
("Simmons"), financial advisor to DUAL, delivered a written opinion to the Board
of Directors of DUAL that, as of that date, the consideration to be provided to
DUAL stockholders pursuant to the Merger Agreement is fair to the holders of
shares of DUAL Common Stock from a financial point of view. The Board of
Directors of DUAL has not requested that Simmons update its opinion. The full
text of the written opinion of Simmons, which sets forth the procedures followed
and the factors considered by Simmons, is attached as Appendix B to this
Prospectus/Proxy Statement. HOLDERS OF SHARES OF DUAL COMMON STOCK ARE URGED TO,
AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. See "The Merger -- Fairness
Opinion."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The Merger is
intended to qualify, for federal income tax purposes, as a "tax-free
reorganization" so that generally no gain or loss would be recognized by DUAL
stockholders who exchange their DUAL Common Stock solely for shares of ENSCO
Common Stock. Holders of shares of DUAL Common Stock who receive cash in lieu of
fractional shares generally will be treated as if the fractional shares had been
issued and subsequently redeemed by ENSCO. Unless the redemption is found to be
essentially equivalent to a dividend, each stockholder of DUAL will recognize
gain or loss measured by the difference between such stockholder's basis in the
fractional share and the amount of cash received. DUAL has received the opinion
of Akin, Gump, Strauss, Hauer & Feld, L.L.P., its counsel, (the "Tax Opinion")
that the Merger should constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and that,
generally, the DUAL stockholders should not recognize gain or loss on the
exchange of their DUAL stock for the stock of ENSCO pursuant to the Merger.
Depending upon uncertain factual developments, it is possible that the Merger
might not be treated as a reorganization within the meaning of Section 368(a) of
the Code, as a result of which each holder of shares of DUAL Common Stock would
recognize gain or loss in the amount of the difference between the fair market
value of the shares of ENSCO Common Stock and any cash received in lieu of
fractional shares, and such holder's adjusted tax basis in the DUAL Common Stock
exchanged therefor. In particular, tax-free "reorganization" status is
dependent, in part, on stockholders of DUAL that receive a certain percentage of
the ENSCO Common Stock distributed in the reorganization not having a present
plan or intention to dispose of such stock. The conclusions in the Tax Opinion
were predicated on certain assumptions and representations regarding the plans
or intentions of certain stockholders of DUAL (or the Principal Stockholder),
including the Principal Stockholder. The Principal Stockholder intends to sell,
for cash, a portion of the ENSCO Common Stock received in the Merger. Because
the number of shares to be sold by the Principal Stockholder cannot be
determined at this time, there is no assurance that the assumptions upon which
the Tax Opinion is
7
<PAGE>
in part based will be correct, in which event (i) the Tax Opinion would be
rendered inapplicable and (ii) the Merger may or may not be treated as a
tax-free "reorganization" depending on all the facts and circumstances. See "The
Merger -- Certain United States Federal Income Tax Consequences."
REGULATORY APPROVALS. ENSCO and DUAL are aware of no government regulatory
approvals remaining to be obtained for consummation of the Merger, other than
compliance with notification requirements of environmental agencies, with
federal securities laws, with state securities or "Blue Sky" laws, and with the
U.S. Maritime Administration. The Merger was subject to the premerger
notification provisions of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"). Filings were made under the HSR Act by ENSCO
and DUAL with the Federal Trade Commission and the Department of Justice
Antitrust Division. On February 28, 1996, early termination of the waiting
period under the HSR Act was granted, thus permitting the Merger to proceed
pursuant to the HSR Act, subject to stockholder approval and the other
conditions described herein. ENSCO, DUAL, and Merger Subsidiary have each agreed
to use their best efforts to obtain any additional regulatory approvals. See
"The Merger -- Regulatory Approvals."
ACCOUNTING TREATMENT. ENSCO intends to account for the Merger as a purchase
of DUAL in accordance with generally accepted accounting principles ("GAAP").
See "The Merger -- Accounting Treatment".
NYSE LISTING. The shares of ENSCO Common Stock to be issued in connection
with the Merger will be listed on the NYSE. Evidence from the NYSE that the
shares of ENSCO Common Stock to be issued in connection with the Merger will be
listed on the NYSE immediately following the Effective Time is a condition to
consummation of the Merger. See "Certain Provisions of the Merger Agreement --
Conditions to the Consummation of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the
recommendation of the Board of Directors of DUAL with respect to the Merger
Agreement and the transactions contemplated thereby, stockholders should be
aware that certain members of the management of DUAL and of its Board of
Directors have certain interests in the Merger that are in addition to the
interests of stockholders of DUAL generally including, without limitation, the
rights to receive certain severance and other employee benefits and to
indemnification. See "The Merger -- Interests of Certain Persons; Possible
Conflicts of Interest" and "-- Management."
MANAGEMENT. After the Merger, the officers and directors of ENSCO will not
change. Pursuant to the Merger Agreement, upon the consummation of the Merger,
the officers and directors of Merger Subsidiary immediately prior to the
Effective Time will be the initial officers and directors of the Surviving
Corporation. See "The Merger -- Management."
PROCEDURES FOR EXCHANGE OF CERTIFICATES. As soon as reasonably practicable
after the Effective Time, a letter of transmittal and instructions for
surrendering stock certificates will be mailed to each holder of DUAL Common
Stock for use in exchanging such holder's stock certificates for certificates
evidencing shares of ENSCO Common Stock and cash in lieu of fractional shares
and any dividends or other distributions to which such holder is entitled as a
result of the Merger. See "Certain Provisions of the Merger Agreement --
Exchange Procedures."
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
representations and warranties of ENSCO, the Merger Subsidiary, and DUAL. See
"Certain Provisions of the Merger Agreement -- Certain Representations and
Warranties."
CONDUCT OF BUSINESS PENDING THE MERGER; NO SOLICITATIONS. The Merger
Agreement restricts the ability of DUAL and ENSCO to take certain actions and
enter into certain transactions pending the Merger. See "Certain Provisions of
the Merger Agreement -- Conduct of Business Pending the Merger" and "-- No
Solicitation of Transactions."
CONDITIONS TO THE CONSUMMATION OF THE MERGER. The obligations of ENSCO,
Merger Subsidiary, and DUAL to consummate the Merger are subject to the
satisfaction or, where legally permissible,
8
<PAGE>
waiver of various conditions, including, among others: (i) the effectiveness of
the Registration Statement and the absence of any stop order suspending the
effectiveness thereof; (ii) approval of the Merger Agreement and the
transactions contemplated thereunder by the holders of the requisite number of
shares of DUAL Common Stock; (iii) the absence of any order, executive order,
stay, decree, judgment, injunction, statute, rule, or regulation issued by any
United States (federal, state, or local) or foreign government, or governmental,
regulatory, or administrative authority, agency, or commission or court of
competent jurisdiction prohibiting consummation of the Merger or making the
Merger illegal; and (iv) evidence from the NYSE that the shares of ENSCO Common
Stock to be issued to the holders of DUAL Common Stock in the Merger will be
listed on the NYSE immediately following the Effective Time. See "Certain
Provisions of the Merger Agreement -- Conditions to the Consummation of the
Merger."
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time by mutual consent of ENSCO, Merger Subsidiary, and DUAL, or
by either ENSCO or DUAL if, subject to certain limitations: (i) the Effective
Time has not occurred on or before July 31, 1996; (ii) there exists any order,
executive order, stay, decree, judgment or injunction (each, an "Order") which
is final and nonappealable preventing the consummation of the Merger; (iii) the
other party has breached any representation, warranty, covenant or agreement in
the Merger Agreement such that the related closing conditions would not be
satisfied (unless the breach is curable by the breaching party through the
exercise of its best efforts and it continues to exercise its best efforts to
cure the breach); or (iv) by mutual written consent of ENSCO, Merger Subsidiary,
and DUAL. In addition, ENSCO may terminate the Merger Agreement, if (i) a tender
offer or exchange offer for 50% or more of the outstanding shares of DUAL's
capital stock is commenced and the Board of Directors of DUAL fails to recommend
against the holders of DUAL tendering their shares into such tender offer or
exchange offer, or (ii) the stockholders of DUAL fail to approve and adopt the
Merger Agreement and the transactions contemplated thereunder. See "Certain
Provisions of the Merger Agreement -- Termination."
ALTERNATIVE PROPOSAL FEE; EXPENSES. In connection with the termination of
the Merger Agreement, upon the occurrence of certain events, DUAL would be
required to pay to ENSCO a fee (the "Alternative Proposal Fee") of $5 million
(which amount is inclusive of all expenses incurred by ENSCO related to the
Merger). Upon the occurrence of certain other events, DUAL would be required to
pay to ENSCO its expenses only. See "Certain Provisions of the Merger Agreement
- -- Alternative Proposal Fee; Expenses; Damages."
DISSENTING STOCKHOLDERS' RIGHTS. Holders of DUAL Common Stock and ENSCO
Common Stock are not entitled to dissenters' rights in connection with the
Merger.
TREATMENT OF STOCK OPTIONS. Pursuant to the Merger Agreement, all options
to purchase shares of stock in DUAL ("DUAL Options") outstanding under the DUAL
DRILLING COMPANY Non-Employee Director Stock Option Plan (the "Non-Employee
Director Plan") and the DUAL DRILLING COMPANY 1993 Long-Term Incentive Plan (the
"1993 Plan"), each as amended, will be surrendered and canceled and/or redeemed.
Within two days after the Effective Time, the Surviving Corporation will deliver
to the holders of each such DUAL Option a number of whole shares of ENSCO Common
Stock equal to the excess, if any, of 0.625 over a fraction, the numerator of
which is the exercise price under such DUAL Option, and the denominator of which
is the average of the closing prices of ENSCO Common Stock on the NYSE for the
five business days preceding the Effective Time, multiplied by the number of
shares covered by such DUAL Option. See "Certain Provisions of the Merger
Agreement -- Effect of the Merger on Stock Options."
TREATMENT OF BENEFIT PLANS. ENSCO and DUAL have agreed to continue certain
of DUAL's employee benefit plans following the Effective Time. Certain other
such plans will be terminated and/ or modified. See "Certain Provisions of the
Merger Agreement -- Effect of the Merger on Certain Benefit Plans."
9
<PAGE>
PRINCIPAL STOCKHOLDER AGREEMENT
VOTING AND PROXY. ENSCO has entered into an agreement with Dual Invest ASA
(formerly Mosvold Shipping AS), a Norwegian corporation (the "Principal
Stockholder"), which owns approximately 59.6% of the outstanding shares of DUAL
Common Stock (the "Principal Stockholder Shares"), dated March 21, 1996 (the
"Principal Stockholder Agreement"), a copy of which is attached to this
Prospectus/Proxy Statement as Appendix D. Pursuant to the terms of the Principal
Stockholder Agreement, the Principal Stockholder has agreed to vote, and has
granted a proxy to allow ENSCO to vote, the Principal Stockholder Shares (i) in
favor of the Merger and the Merger Agreement, (ii) in favor of adoption and
approval of the Unit Plan, and (iii) against any proposal for any
recapitalization, merger (other than the Merger), sale of assets or other
business combination between DUAL and any person or entity (other than ENSCO or
Merger Subsidiary) or any other action or agreement that ENSCO notifies the
Principal Stockholder in writing before any vote would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of
DUAL under the Merger Agreement or which could result in any of the conditions
to the Merger Agreement not being fulfilled. ENSCO and Merger Subsidiary intend
that the Principal Stockholder Shares be so voted.
ABSTENTION FROM VOTING. Pursuant to the Principal Stockholder Agreement,
the Principal Stockholder has agreed that until July 31, 1996, it will not vote
any of the Principal Stockholder Shares at any annual, special or adjourned
meeting of the stockholders of DUAL, including the right to sign its name (as
stockholder) to any consent, certificate or other document relating to DUAL that
the law of the State of Delaware may permit or require, (i) to approve of the
adoption of the Unit Plan, effective August 21, 1995, in any manner except as
contemplated by the Merger Agreement, or (ii) in any manner that is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the transactions contemplated by the Merger
Agreement. See "Principal Stockholder Agreement -- Abstention from Voting."
COVENANTS AND REPRESENTATIONS. Pursuant to the Principal Stockholder
Agreement, the Principal Stockholder has agreed that it has been advised that
(i) the offer, sale and delivery of the ENSCO Common Stock to the Principal
Stockholder pursuant to the Merger may not be registered under the Securities
Act, despite ENSCO's obligations to use commercially reasonable efforts to
effect such registration; (ii) if the offer, sale and delivery of the ENSCO
Common Stock to the Principal Stockholder pursuant to the Merger has not been
registered under the Securities Act, then such shares may not be offered, sold,
pledged, hypothecated or otherwise transferred unless subsequently registered
under the Securities Act or an exemption from such registration is available;
and (iii) even if such sale and delivery to the Principal Stockholder of shares
of ENSCO Common Stock is registered under the Securities Act, to the extent the
Principal Stockholder is considered an "affiliate" of DUAL at the time the
Merger Agreement is submitted for a vote of the stockholders of DUAL, any public
offering or sale by the Principal Stockholder of its shares of ENSCO Common
Stock will, under current law, require (a) the further registration under the
Securities Act of such shares, which ENSCO is obligated to use commercially
reasonable efforts to effect, (b) compliance with Rule 145 promulgated by the
Commission under the Securities Act, or (c) the availability of another
exemption from such registration under the Securities Act. Furthermore, the
Principal Stockholder also has agreed that it understands that stop transfer
instructions will be given to ENSCO's transfer agent with respect to the shares
of ENSCO Common Stock receivable by the Principal Stockholder and that a legend
will be placed on the certificates for such shares issued to the Principal
Stockholder, to the extent the Principal Stockholder is considered an
"affiliate" of DUAL at the time the Merger Agreement is submitted for a vote of
the stockholders of DUAL. See "Principal Stockholder Agreement -- Covenants and
Representations."
REGISTRATION OF MERGER SHARES. Pursuant to the Principal Stockholder
Agreement, ENSCO has agreed to use all commercially reasonable efforts to effect
the registration under the Securities Act of the transfer to the stockholders of
the Principal Stockholder of certain of the shares of ENSCO Common Stock to be
received by the Principal Stockholder in exchange for the Principal Stockholder
10
<PAGE>
Shares and the resale of shares of ENSCO Common Stock by the Principal
Stockholder or one of its significant stockholders, subject to certain
restrictions. See "Principal Stockholder Agreement -- Registration of Merger
Shares."
NO SOLICITATION. Pursuant to the Principal Stockholder Agreement, the
Principal Stockholder has agreed that until July 31, 1996, it will not negotiate
with any person other than ENSCO with respect to the acquisition of DUAL or the
DUAL Common Stock owned by the Principal Stockholder and it will not, and will
not permit any of its officers, directors, employees, agents or representatives
(including without limitation, investment bankers, attorneys and accountants) to
(i) initiate contact with, (ii) make, solicit or encourage any inquiries or
proposals, (iii) enter into or participate in any discussions or negotiations
with, (iv) disclose, directly or indirectly, any information not customarily
disclosed concerning the business and properties of DUAL or the Principal
Stockholder's interest in DUAL under the control of the Principal Stockholder
to, or (v) afford any access to DUAL's properties, books and records in its
possession or under its control to any person in connection with any possible
proposal relating to (a) the disposition of DUAL's or the Principal
Stockholder's businesses or substantially all of their respective assets, (b)
the acquisition of equity or debt securities of DUAL or the Principal
Stockholder, including equity or debt securities in DUAL owned by the Principal
Stockholder, or (c) the merger, share exchange or business combination, or
similar acquisition transaction of or involving DUAL or the Principal
Stockholder with any person other than ENSCO. In addition, until July 31, 1996,
the Principal Stockholder has agreed to immediately notify ENSCO orally, and
subsequently confirm in writing, all the relevant details relating to all
inquiries and proposals which it may receive relating to any such matters.
Furthermore, until July 31, 1996, the Principal Stockholder has agreed that it
will not, and will not permit any of its representatives, at any time, to enter
into or participate in any discussions or negotiations regarding, or accept, any
proposal for such a transaction received by them from a third party or that a
third party expresses a desire to communicate to it. See "Principal Stockholder
Agreement -- No Solicitation."
COMPARISONS OF STOCKHOLDERS' RIGHTS.
Upon consummation of the Merger, stockholders of DUAL will become
stockholders of ENSCO. Various differences exist between their rights as
stockholders of DUAL and as stockholders of ENSCO. See "Comparisons of
Stockholders' Rights."
COMPARATIVE MARKET PRICES AND DIVIDENDS
The following table sets forth, for the quarters indicated, the high and low
sales prices per share of ENSCO Common Stock and share of DUAL Common Stock.
ENSCO Common Stock was listed on the American Stock Exchange prior to December
20, 1995, and subsequent to such date on the NYSE under the symbol "ESV." DUAL
Common Stock is quoted on the Nasdaq National Market under the symbol "DUAL."
Each of ENSCO's and DUAL's fiscal year ends on December 31. On January 24, 1996,
the last full trading day preceding the public announcement of the execution of
the letter of intent between ENSCO and DUAL, the last reported sale price per
share of ENSCO Common Stock was $22 3/4 and the last reported sale price per
share of DUAL Common Stock was $13 1/16. Based on such DUAL and ENSCO market
prices, the market value of 0.625 of a share of ENSCO Common Stock was $14.22,
calculated as of that date. On May 8, 1996, the last reported sale price per
share of ENSCO
11
<PAGE>
Common Stock was $26, and the last reported sale price per share of DUAL Common
Stock was $15 3/4. Based on such DUAL and ENSCO market prices, the market value
of 0.625 of a share of ENSCO Common Stock was $16.25, calculated as of that
date.
<TABLE>
<CAPTION>
ENSCO DUAL
COMMON STOCK (1) COMMON STOCK
------------------ ------------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
CALENDAR YEAR 1994
1st Quarter.................................................... $17 $12 1/2 $11 3/4 $ 8 1/2
2nd Quarter.................................................... 18 5/8 13 1/2 11 3/8 8 3/8
3rd Quarter.................................................... 19 1/4 14 5/8 12 5/8 10 1/2
4th Quarter.................................................... 15 1/2 10 3/4 13 5/8 8 1/4
CALENDAR YEAR 1995
1st Quarter.................................................... 14 3/8 11 1/4 9 1/8 7
2nd Quarter.................................................... 17 3/8 14 11 1/4 7 7/8
3rd Quarter.................................................... 19 1/2 14 1/4 10 3/4 9
4th Quarter.................................................... 23 16 11 5/8 9 1/4
CALENDAR YEAR 1996
1st Quarter.................................................... 29 1/8 20 18 1/4 11 1/4
2nd Quarter (through May 8, 1996).............................. 31 3/8 25 3/8 19 3/4 14 1/4
</TABLE>
- ------------------------
(1) Prices for shares of ENSCO Common Stock prior to June 1, 1994 have been
adjusted to reflect a one share for four shares reverse stock split
effective on that date.
ENSCO has never paid dividends to holders of shares of ENSCO Common Stock.
DUAL has not paid dividends to holders of DUAL Common Stock since its initial
public offering in August 1993. ENSCO intends to retain all of its earnings for
use in its business and, therefore, does not anticipate paying cash dividends on
ENSCO Common Stock in the foreseeable future.
HOLDERS OF DUAL COMMON STOCK ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR
SHARES OF ENSCO COMMON STOCK AND SHARES OF DUAL COMMON STOCK.
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical consolidated financial
data of ENSCO and DUAL. The selected consolidated financial data for the five
years ended December 31, 1995 for ENSCO and DUAL has been obtained from the
consolidated financial statements of each of ENSCO and DUAL, respectively. The
consolidated financial statements for ENSCO were audited by Deloitte & Touche
LLP, independent accountants, for the years 1991-1992, and Price Waterhouse LLP,
independent accountants, for the years 1993-1995. The financial statements for
ENSCO's Venezuela operations were audited by Krygier, Montilla & Asociados,
independent accountants, for 1993. The consolidated financial statements for
DUAL were audited by Price Waterhouse LLP, independent accountants, for the
years 1991-1995. This data should be read in conjunction with the separate
Consolidated Financial Statements and Notes thereto of each of ENSCO and DUAL,
included in the ENSCO 1995 Form 10-K and in the DUAL 1995 Form 10-K,
respectively, both of which are incorporated by reference in this
Prospectus/Proxy Statement.
12
<PAGE>
ENSCO INTERNATIONAL INCORPORATED
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 (1) 1991 (1)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (2)
Operating revenues.............................. $ 84,546 $ 61,130 $ 279,114 $ 245,451 $ 227,410 $ 84,271 $ 76,221
Operating expenses, excluding D&A............... 45,739 38,238 165,529 144,581 151,182 81,999 66,301
Depreciation and amortization (D&A)............. 16,374 13,546 58,390 51,798 41,181 12,539 13,030
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)......................... 22,433 9,346 55,195 49,072 35,047 (10,267) (3,110)
Other expense................................... (2,549) (1,299) (7,856) (8,751) (6,696) (8,028) (2,025)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations before
income taxes, minority interest and cumulative
effect of accounting change.................... 19,884 8,047 47,339 40,321 28,351 (18,295) (5,135)
Provision for income taxes...................... (4,767) (39) (3,397) (3,759) (5,942) (2,007) (4,109)
Minority interest............................... (427) (602) (2,179) (2,984) (6,932) -- --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations........ 14,690 7,406 41,763 33,578 15,477 (20,302) (9,244)
Income (loss) from discontinued operations
(2)............................................ -- 216 6,296 3,593 3,556 (9,062) (3,543)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before cumulative effect of
accounting change.............................. 14,690 7,622 48,059 37,171 19,033 (29,364) (12,787)
Cumulative effect of accounting change, net of
minority interest (3).......................... -- -- -- -- (2,542) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............................... 14,690 7,622 48,059 37,171 16,491 (29,364) (12,787)
Preferred stock dividend requirements........... -- -- -- (2,135) (4,260) (4,260) (4,607)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) applicable to common stock........ $ 14,690 $ 7,622 $ 48,059 $ 35,036 $ 12,231 $ (33,624) $ (17,394)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income (loss) per common share:
Continuing operations......................... $ .24 $ .12 $ .69 $ .55 $ .28 $ (.82) $ (.57)
Discontinued operations....................... -- .01 .10 .06 .09 (.30) (.14)
Cumulative effect of accounting change........ -- -- -- -- (.07) -- --
--------- --------- --------- --------- --------- --------- ---------
Income (loss) per common share................ $ .24 $ .13 $ .79 $ .61 $ .30 $ (1.12) $ (.71)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average common shares outstanding...... 60,651 60,648 60,527 57,843 40,325 30,003 24,407
BALANCE SHEET DATA
Working capital................................. $ 83,890 $ 86,368 $ 78,945 $ 129,172 $ 124,587 $ 33,771 $ 22,947
Total assets.................................... 824,620 776,469 821,451 773,090 689,254 272,397 295,722
Long-term debt, net of current portion.......... 150,518 148,967 159,201 162,466 125,983 23,628 31,437
$1.50 preferred stock........................... -- -- -- -- 70,977 70,977 70,977
Stockholders' equity (4)........................ 546,837 488,803 531,249 487,950 383,925 142,512 163,990
</TABLE>
- ------------------------
(1) Amounts have been restated for adoption of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." For further
discussion of this matter, see Notes 1 and 11 to ENSCO's Consolidated
Financial Statements, contained in the ENSCO 1995 Form 10-K, which is
incorporated herein by reference.
(2) In 1995 ENSCO sold its technical services segment and in 1993 ENSCO sold
its supply segment. Prior years' results of the technical services segment
and the supply segment have been reclassified as discontinued operations
for comparative purposes. The 1995 results include a gain of $5.2 million
in connection with the sale of the technical services segment and the 1993
results include a gain of $2.1 million in connection with the sale of the
supply segment. For further discussion of this matter see Note 16 to
ENSCO's Consolidated Financial Statements, contained in the ENSCO 1995 Form
10-K, which is incorporated herein by reference.
(3) Effective January 1, 1993, Penrod Holding Company, the outstanding capital
stock of which was fully acquired by ENSCO in August 1993, adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions." For further discussion of
this matter, see Note 10 to ENSCO's Consolidated Financial Statements,
contained in the ENSCO 1995 Form 10-K, which is incorporated herein by
reference.
(4) ENSCO has never paid cash dividends on its common stock. ENSCO intends to
retain all of its earnings for use in its business and, therefore, does not
anticipate paying cash dividends on ENSCO Common Stock in the foreseeable
future.
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DUAL DRILLING COMPANY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 (1) 1991 (1)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Drilling contract revenues...................... $ 29,461 $ 18,858 $ 85,889 $ 104,265 $ 116,152 $ 95,577 $ 88,179
Drilling contract expenses...................... 18,589 14,605 60,229 78,571 77,671 74,540 64,525
Depreciation and amortization................... 4,813 5,158 19,608 24,943 20,411 19,280 19,844
General and administrative...................... 2,040 1,914 7,563 8,979 7,481 5,854 9,184
Interest expense, net........................... 3,107 3,116 12,305 11,083 8,482 8,831 11,197
Gain on sale of assets, net..................... -- 21 5,127 994 3,951 6,947 3,524
Income (loss) before income taxes and cumulative
effect of accounting change.................... 1,004 (5,967) (8,353) (17,153) 6,183 (6,134) (12,126)
Cumulative effect of accounting change (1)...... -- -- -- -- (4,865) -- --
Net income (loss)............................... 974 (6,023) (9,238) (17,196) (1,786) (62) (8,327)
Weighted average common shares outstanding (2).. 15,766 15,765 15,766 15,780 -- -- --
Net income (loss) per common share(3)........... 0.06 (0.38) (0.59) (1.09) -- -- --
BALANCE SHEET DATA
Working capital (deficit)....................... $ 55,423 $ 21,333 $ 55,612 $ 26,748 $ 36,552 $ (4,568) $ (30,380)
Total assets.................................... 303,760 311,808 303,762 322,621 283,607 233,729 240,384
Long term debt, net of current portion.......... 135,249 142,427 138,163 144,702 86,550 86,550 85,000
Stockholders' equity (3)........................ 141,121 143,361 140,146 149,384 165,691 83,090 65,867
</TABLE>
- ------------------------
(1) DUAL adopted SFAS No. 109, "Accounting for Income Taxes" effective January
1, 1993. Prior to the adoption of SFAS 109, DUAL followed SFAS No. 96,
"Accounting for Income Taxes."
(2) Weighted average common shares outstanding and earnings per share data have
not been presented for the periods ending prior to December 31, 1994, since
the results of operations of DUAL are not indicative of future operations
due to DUAL's restructuring resulting from the initial public offering of
DUAL Common Stock. For further discussion of this matter, see Note 2 to the
Consolidated Financial Statements contained in the DUAL 1995 Form 10-K,
which is incorporated herein by reference.
(3) DUAL has not paid dividends to holders of DUAL Common Stock since its
initial public offering in August 1993.
SELECTED UNAUDITED COMBINED CONDENSED PRO FORMA FINANCIAL DATA
The following selected unaudited combined condensed pro forma financial data
is presented for illustrative purposes only and is not necessarily indicative of
the financial position or results of operation that would actually have been
reported had the Merger been in effect during the periods presented or that may
be reported in the future. The selected unaudited combined condensed pro forma
financial data should be read in conjunction with the unaudited combined
condensed pro forma financial statements, including the notes thereto, appearing
elsewhere in this Prospectus/Proxy Statement. See "Unaudited Combined Condensed
Pro Forma Financial Information."
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ENSCO INTERNATIONAL INCORPORATED AND DUAL DRILLING COMPANY
SELECTED UNAUDITED COMBINED
CONDENSED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ENSCO DUAL PRO FORMA
HISTORICAL HISTORICAL COMBINED
----------- ----------- -------------
<S> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1996
STATEMENT OF OPERATIONS DATA
Operating revenues..................................................... $ 84,546 $ 29,461 $ 114,007
Income from continuing operations...................................... 14,690 974 14,663
Income from continuing operations per share of common stock............ 0.24 0.06 0.21
Current assets......................................................... 161,812 78,823 223,904
Current liabilities.................................................... 77,922 23,400 109,642
Working capital........................................................ 83,890 55,423 114,262
Total assets........................................................... 824,620 303,760 1,243,918
Long-term obligations.................................................. 199,861 139,239 365,683
Stockholders' equity................................................... 546,837 141,121 768,593
Weighted average common shares outstanding............................. 60,651 15,766 70,789
COMPARATIVE PER SHARE DATA (1)
Book value per common share as of March 31, 1996....................... 9.02 8.95 10.86
Income per common share from continuing operations..................... 0.24 0.06 0.21
DUAL EQUIVALENT PER SHARE DATA (1)(2)
Book value per common share as of March 31, 1996....................... 6.79
Income per common share from continuing operations..................... 0.13
YEAR ENDED DECEMBER 31, 1995
STATEMENT OF OPERATIONS DATA
Operating revenues..................................................... $ 279,114 $ 85,889 $ 370,130
Income (loss) from continuing operations............................... 41,763 (9,238) 28,960
Income (loss) from continuing operations per share of common stock..... 0.69 (0.59) 0.41
Weighted average common shares outstanding............................. 60,527 15,766 70,665
COMPARATIVE PER SHARE DATA (1)
Book value per common share as of December 31, 1995.................... 8.78 8.89 10.66
Income (loss) per common share from continuing operations.............. 0.69 (0.59) 0.41
DUAL EQUIVALENT PER SHARE DATA (1)(2)
Book value per common share as of December 31, 1995.................... 6.66
Income (loss) per common share from continuing operations.............. 0.26
</TABLE>
- ------------------------
(1) ENSCO has never paid dividends to holders of shares of ENSCO Common Stock.
DUAL has not paid dividends to holders of DUAL Common Stock since its
initial public offering in August 1993. ENSCO intends to retain all of its
earnings for use in its business and, therefore, does not anticipate paying
cash dividends on ENSCO Common Stock in the foreseeable future.
(2) Based upon conversion of each share of ENSCO Common Stock into 1.6 shares of
DUAL Common Stock.
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PROPOSAL TO APPROVE THE DUAL SPECIAL PERFORMANCE UNIT PLAN
Effective August 21, 1995, DUAL's Board of Directors, upon a recommendation
of its Compensation Committee, adopted the Unit Plan and the performance goals
set forth therein, subject to approval by the stockholders of DUAL. The Unit
Plan is designed to retain and reward key executives of DUAL by granting them
special cash bonuses in the event of a Sale Transaction (as defined below)
involving DUAL during the term of the Unit Plan. The Unit Plan is intended to
provide the participants in the Unit Plan with an incentive to increase the
value of DUAL's business by allowing them to participate in a cash bonus pool
that is commensurate with the sale price of DUAL.
The following summary does not purport to be complete and is subject in all
respects to, and qualified by, the provisions of the Unit Plan, which appears as
Appendix C to this Prospectus/Proxy Statement, and the description of the Unit
Plan contained at "Proposal to Approve the Adoption of the DUAL Special
Performance Unit Plan." The Unit Plan is intended to allow the award of benefits
that qualify as performance-based compensation within the meaning of Section
162(m) of the Code.
The Unit Plan will be administered by a committee appointed by the Board of
Directors of DUAL. Receipt of benefits pursuant to the Unit Plan is conditioned
upon occurrence of a merger, consolidation, or other reorganization of DUAL in
which the outstanding DUAL Common Stock is converted into or exchanged for
securities of another issuer, cash, or other property, or upon occurrence of a
sale, lease, or exchange of all or substantially all of the assets of DUAL
(collectively, "Sale Transactions"). The bonus pool to be distributed pursuant
to the Unit Plan is a cash amount based on the consideration to be received in
such Sale Transaction per share of DUAL Common Stock (the "Equivalent Share
Price").
Pursuant to the Merger Agreement, DUAL has agreed to set the bonus pool
associated with the Merger, together with certain payments due to Mr. David W.
Skarke, Chairman of the Board of DUAL, under his employment agreement with DUAL,
at $2,000,000. See "The Merger -- Interests of Certain Persons; Possible
Conflicts of Interest -- Skarke Agreement."
Unless the Unit Plan is required by applicable law to be extended, it will
terminate on August 20, 1997, and payments under it will only be made with
respect to a Sale Transaction which is effective, or as to which a definitive
binding agreement is in effect, on or before that date. The Unit Plan may be
amended by the Board of Directors of DUAL, subject to any stockholder approval
required by Section 162(m) of the Code or other applicable law.
Approval of the Unit Plan is not a condition to consummation of the Merger,
and approval of the Merger is not a condition to effectiveness of the Unit Plan.
The proposal to approve the adoption of the Unit Plan must receive the
favorable vote of a majority of the total number of shares of DUAL Common Stock
represented and entitled to vote at the Special Meeting or any adjournment
thereof for approval. An affirmative vote by a stockholder shall also be deemed
to be approval of the performance goals under the Unit Plan for purposes of
Section 162(m) of the Code. Pursuant to the Principal Stockholder Agreement, the
Principal Stockholder Shares (representing approximately 59.6% of the
outstanding shares of DUAL Common Stock) will be voted at the Special Meeting in
favor of the Unit Plan. Therefore, no additional stockholder votes are required
to approve the Unit Plan. THE BOARD OF DIRECTORS OF DUAL HAS ADOPTED THE UNIT
PLAN AND RECOMMENDS THAT DUAL STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE
ADOPTION OF THE UNIT PLAN. See "Proposal to Approve the Adoption of the DUAL
Special Performance Unit Plan."
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<PAGE>
RISK FACTORS
DUAL STOCKHOLDERS SHOULD CAREFULLY EVALUATE ALL OF THE INFORMATION CONTAINED
AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS/PROXY STATEMENT AND, IN
PARTICULAR, THE FOLLOWING:
INDUSTRY CONDITIONS AND COMPETITION
Historically, the offshore contract drilling industry has been highly
competitive and cyclical, with periods of high demand, short rig supply and high
day rates followed by periods of low demand, excess rig supply and low day
rates. The industry is characterized by high capital costs, long lead times for
construction of new rigs and numerous competitors.
ENSCO conducts its business in the U.S. Gulf of Mexico, the North Sea and
Venezuela. Business activity levels for ENSCO, and its corresponding operating
results, are significantly affected by worldwide expenditures for oil and gas
drilling, particularly in the U.S. Gulf of Mexico where ENSCO has a large
concentration of its rigs and vessels. Expenditures for oil and gas drilling
activity fluctuate based upon many factors including world economic conditions,
the legislative environment in the U.S. and other major countries, the
availability of drilling units, production levels, and other activities of OPEC
and other oil and gas producers and the impact that these and other events have
on the current and expected future pricing of oil and natural gas.
For a number of years, depressed oil and gas prices and an oversupply of
drilling rigs have adversely affected the offshore drilling market. In addition,
ENSCO has significant competition from many other offshore drilling contractors
in all of the areas in which it operates. Activity levels for most areas in
which ENSCO operates, including the U.S. Gulf of Mexico, increased in the second
half of 1995 and the first part of 1996 due, in part, to increased domestic
natural gas prices. During this time ENSCO has experienced a corresponding
increase in day rates. ENSCO cannot predict the extent to which current market
conditions will continue.
There can be no assurance that the rig count or drilling activity in the
areas in which ENSCO operates will not decline in 1996 or in other periods, nor
can there be any assurance concerning any adverse effect resulting from such
decrease in activity.
ENVIRONMENTAL MATTERS
ENSCO and DUAL are subject to numerous domestic and foreign governmental
regulations controlling the discharge of materials into the environment or
otherwise relating to the protection of the environment. Laws and regulations
specifically applicable to ENSCO's and DUAL's business activities could impose
significant liability on them for damages, cleaning costs, and penalties in the
event of oil spills or similar discharges of pollutants into the environment in
the course of the companies' operations, although, to date, such laws and
regulations have not had a materially adverse effect on the results of the
companies' operations, nor have they experienced an accident that has exposed
them to material liability for discharges of pollutants into the environment.
Under certain circumstances, environmental laws and regulations may impose
"strict liability" and render a company liable for environmental damage without
regard to negligence or fault; such laws and regulations could expose ENSCO or
DUAL to liability for the conduct of or conditions caused by others. In
addition, events of recent years have heightened environmental concerns about
the oil and gas industry generally. From time to time legislative proposals have
been introduced that would materially limit or prohibit offshore drilling in
certain areas. To date, no proposals that would materially limit or prohibit
drilling in certain areas have been enacted into law. If laws are enacted or
other governmental action is taken that restrict or prohibit offshore drilling
in ENSCO's or DUAL's areas of operation or impose environmental protection
requirements that materially increase the costs of offshore exploration,
development or production of oil and gas, they could be materially adversely
affected.
The United States Oil Pollution Act of 1990 ("OPA'90") and similar
legislation enacted in Texas, Louisiana and other coastal states address oil
spill prevention and control and significantly expand liability exposure across
all segments of the oil and gas industry. OPA'90, such similar legislation and
17
<PAGE>
related regulations impose a variety of obligations on ENSCO and DUAL related to
the prevention of oil spills and liability for damages resulting from such
spills. OPA'90 imposes strict and, with limited exceptions, joint and several
liability upon each responsible party for oil removal costs and a variety of
public and private damages. OPA'90 also imposes ongoing financial responsibility
requirements on a responsible party. A failure to comply with ongoing
requirements or inadequate cooperation in a spill may subject a responsible
party, including in some cases ENSCO or DUAL, to civil or criminal enforcement
action. Also, the U.S. Minerals Management Service is required to promulgate
regulations to implement the financial responsibility requirements for offshore
facilities. If implemented as written, the financial responsibility requirements
of OPA'90 could have the effect of significantly increasing the amount of
financial responsibility that oil and gas operators must demonstrate to comply
with OPA'90. While industry groups and marine insurance carriers are seeking
modification of these requirements, implementation of these requirements in
their current form could adversely affect the ability of some customers of ENSCO
or DUAL to operate in U.S. waters, which could have a material adverse effect on
either ENSCO or DUAL.
LIMITATIONS ON OWNERSHIP BY NON-U.S. CITIZENS
ENSCO, as the owner of United States flag vessels, is subject to the
Shipping Act, 1916, as amended, which provides that a controlling interest in
ENSCO may not be acquired by a non-U.S. citizen without the consent of the U.S.
Secretary of Transportation, acting through the United States Maritime
Administration ("MARAD"). If a non-U.S. citizen were to acquire a controlling
interest in ENSCO without MARAD's consent, MARAD would have the right to
exercise various remedies under the Shipping Act, 1916, as amended, including
seizure of vessels, civil penalties and certain misdemeanor criminal penalties.
Therefore, ownership and control of ENSCO Common Stock by non-U.S. citizens
is limited by the terms of the ENSCO Certificate of Incorporation. Under certain
circumstances, transfers of ENSCO Common Stock to non-U.S. citizens may be void
and certain ENSCO Common Stock owned by non-U.S. citizens may not be permitted
to vote or receive dividends. See "Comparisons of Stockholders' Rights --
Restrictions on Alien Ownership."
OPERATIONAL RISKS AND INSURANCE
ENSCO's and DUAL's operations are subject to the many hazards inherent in
the drilling business, including blowouts, cratering, fires, reservoir damage,
loss of production, loss of well control, collisions or groundings of drilling
equipment, and damage or loss from adverse weather and seas, which could cause
substantial damage to the environment. These hazards could also cause personal
injury and loss of life, suspend drilling operations or seriously damage or
destroy the property and equipment involved and, in addition to environmental
damage, could cause substantial damage to producing formations and surrounding
areas. Their offshore drilling equipment also is subject to hazards inherent in
marine operations, such as capsizing, grounding, collision, damage from weather
or sea conditions or unsound location. In addition, they may be subject to
liability for oil spills, reservoir damage and other accidents that could cause
substantial damages.
ENSCO and DUAL generally insure their drilling rigs for amounts not less
than the estimated fair market value thereof. ENSCO also maintains liability
insurance coverage in amounts and scope which ENSCO's management believes are
comparable to the levels of coverage carried by other energy service companies.
To date, ENSCO has not experienced difficulty in obtaining insurance coverage.
While ENSCO and DUAL believe that their insurance coverages are customary for
the energy service industry, the occurrence of a significant event not fully
insured against could have a material adverse effect on ENSCO's or DUAL's
financial position.
GOVERNMENT REGULATION
ENSCO's and DUAL's business is affected by political developments and by
federal, state, local and foreign laws and regulations that relate directly to
the oil and gas industry. Statutory provisions generally include requirements as
to well spacing, waste prevention, production limitation, well and dredging
permits and similar matters. The drilling industry is also affected by changing
tax laws, price
18
<PAGE>
controls and other laws affecting the energy business. Drilling rigs and
operations are subject to federal, state, local and foreign laws and regulations
relating to engineering, design, structural, safety, operational and inspection
standards. The adoption of laws and regulations curtailing exploration and
development and drilling for oil and gas for economic, environmental or other
policy reasons would and have adversely affected ENSCO's and DUAL's operations
by limiting available drilling opportunities for their customers and/or
increasing the costs of such activities to ENSCO, DUAL, and their customers.
INTERNATIONAL OPERATIONS
ENSCO's and DUAL's international operations are subject to political,
economic, and other uncertainties, such as the risks of expropriation of their
equipment, expropriation of a customer's property or drilling rights,
repudiation of contracts, adverse tax policies, general hazards associated with
international sovereignty over certain areas in which ENSCO and DUAL operate,
and fluctuations in international economies. To lessen the risk of possible
future adverse developments outside the United States, ENSCO, in some instances,
enters into contracts for indemnification from operators for whom drilling
services are being performed.
ENSCO's and DUAL's international operations face the additional risk of
fluctuating currency values and exchange controls. Occasionally, the countries
in which ENSCO or DUAL operates have enacted exchange controls to regulate
international currency exchange. Historically, ENSCO has been able to limit
these risks by obtaining compensation in United States dollars or freely
convertible international currency and, to the extent possible, by limiting
acceptance of blocked currency to amounts which match its expenditure
requirements in local currencies.
ENSCO has significant operations in Venezuela. Venezuela has recently
encountered certain political and economic crises. To date, such crises have not
adversely affected ENSCO's business operations in that country.
CERTAIN ANTI-TAKEOVER EFFECTS
ENSCO has adopted a stockholder rights plan, which may make an unsolicited
acquisition of ENSCO more difficult or expensive. See "Comparisons of
Stockholders' Rights -- Anti-takeover Provisions."
INTERESTS OF CERTAIN PERSONS; POSSIBLE CONFLICTS OF INTERESTS OF CERTAIN PERSONS
IN THE MERGER
Certain members of the management of DUAL and the Board of Directors of DUAL
have interests in the Merger in addition to their interests as stockholders of
DUAL. For instance, certain such persons will receive severance and/or other
employment benefits under their employment agreements or applicable plans as a
result of the Merger. See "The Merger -- Interests of Certain Persons; Possible
Conflicts of Interest." Similarly, certain such persons hold options for the
purchase of DUAL Common Stock which will be extinguished in return for shares of
ENSCO Common Stock. See "Certain Provisions of the Merger Agreement -- Effect of
the Merger on Stock Options."
NO DIVIDENDS
ENSCO has never paid dividends to holders of shares of ENSCO Common Stock.
DUAL has not paid dividends to holders of DUAL Common Stock since its initial
public offering in August 1993. ENSCO intends to retain all of its earnings for
use in its business and, therefore, does not anticipate paying cash dividends on
ENSCO Common Stock in the foreseeable future.
THE SPECIAL MEETING
GENERAL
This Prospectus/Proxy Statement is being furnished to stockholders of DUAL
in connection with the solicitation of proxies by the Board of Directors of DUAL
for use at the Special Meeting of stockholders to be held on June 12, 1996, at
10:00 a.m., Central time, at Park City Club, 5956 Sherry Lane, Suite 1700,
Dallas, Texas 75225 and at any adjournments or postponements thereof.
19
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This Prospectus/Proxy Statement also constitutes the Prospectus with respect
to the shares of ENSCO Common Stock issuable in connection with the Merger.
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, holders of shares of DUAL Common Stock will consider
and vote upon a proposal to approve and adopt the Merger Agreement. DUAL
stockholders will also vote on a proposal to approve the Unit Plan and transact
such other business as may properly be brought before the Special Meeting or any
adjournments or postponements thereof. THE BOARD OF DIRECTORS OF DUAL HAS
APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT DUAL STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
VOTE REQUIRED
The affirmative vote of the holders of a majority of all outstanding shares
of DUAL Common Stock is required to approve and adopt the Merger Agreement. As a
result, abstentions, failures to vote and broker non-votes will have the same
effect as votes against the Merger Agreement since they are not votes for
approval. The affirmative vote of the holders of a majority of the shares of
DUAL Common Stock present and voting at the Special Meeting is required to
approve the Unit Plan. Abstentions from voting on the Unit Plan will be included
in the voting tally and will have the same effect as a vote against that
proposal. Because broker non-votes are not considered "shares present" with
respect to a matter requiring the affirmative vote of a majority of shares
present in person or by proxy at the Special Meeting, broker non-votes will not
affect the outcome with respect to the proposal to approve the Unit Plan.
Pursuant to the Principal Stockholder Agreement, the Principal Stockholder
Shares (representing approximately 59.6% of the outstanding shares of DUAL
Common Stock) will be present and voted at the Special Meeting in favor of the
Merger Agreement and the Unit Plan. Therefore, no additional votes from the
stockholders of DUAL are necessary to approve the Merger Agreement or the Unit
Plan. See "Principal Stockholder Agreement."
VOTING OF PROXIES
Shares of DUAL Common Stock represented by properly executed proxies
received at or prior to the Special Meeting, and which have not thereafter been
properly revoked as described below, will be voted in accordance with the
instructions indicated therein. If no instructions are indicated, such proxies
will be voted FOR approval and adoption of the Merger Agreement, FOR approval of
the Unit Plan, and in the discretion of the proxy holder as to any other matter
that may properly come before the Special Meeting.
REVOCABILITY OF PROXIES
A DUAL stockholder who has given a proxy may revoke such proxy at any time
prior to its exercise at the Special Meeting by any manner permitted by law,
including (i) giving written notice of revocation by mail or facsimile to DUAL
prior to the Special Meeting or (ii) properly submitting to DUAL by mail or
facsimile a duly executed proxy bearing a later date. Submissions to DUAL should
be made to DUAL DRILLING COMPANY, Attn: Corporate Secretary, at 5956 Sherry
Lane, Suite 1500, Dallas, Texas 75225, facsimile (214) 373-0533. Any beneficial
owner whose shares of DUAL Common Stock are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to change
such stockholder's vote should contact such registered holder promptly and
instruct such registered holder on such beneficial owner's behalf. There is no
guarantee that there will be sufficient time prior to the Special Meeting for
the registered holder to deliver a revocation upon instruction by the beneficial
owner.
SOLICITATION OF PROXIES
DUAL will bear the cost of the solicitation of proxies from its
stockholders, except that ENSCO and DUAL will share equally the cost of
printing, filing, and certain other fees and expenses associated with this
Prospectus/Proxy Statement. In addition to the solicitation of proxies by mail,
directors, officers and employees of DUAL may solicit proxies from stockholders
personally or by telephone, telegraph or facsimile transmissions. Such
directors, officers and employees will not be additionally
20
<PAGE>
compensated for such solicitation but may be reimbursed for their out-of-pocket
expenses incurred in connection therewith. Arrangements may also be made with
banks, brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of DUAL Common
Stock held of record by such persons, and, upon request, DUAL will reimburse
such custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses in connection therewith. The Company also has employed D.F. King & Co.,
a proxy solicitation firm, to solicit proxies from brokers and banks at a cost
of approximately $3,000.
RECORD DATE; SHARES ENTITLED TO VOTE
The close of business on May 1, 1996 has been fixed as the Record Date for
determining holders of DUAL Common Stock entitled to notice of and to vote at
the Special Meeting. As of the Record Date, 15,765,713 shares of DUAL Common
Stock were outstanding and held of record by 28 holders. The DUAL Common Stock
is the only class of capital stock of DUAL issued and outstanding. Each
stockholder of record as of the close of business on the Record Date is entitled
at the Special Meeting to one vote for each share of the DUAL Common Stock held.
QUORUM
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of DUAL Common Stock entitled to vote at the Special Meeting
is necessary to constitute a quorum for the transaction of business at the
Special Meeting. Pursuant to the Principal Stockholder Agreement, the Principal
Stockholder Shares will be present and voted at the Special Meeting in favor of
the Merger Agreement and the Unit Plan. Therefore, no additional stockholders
are necessary to be present at the Special Meeting to constitute a quorum. See
"Principal Stockholder Agreement."
THE MERGER
GENERAL
The Merger Agreement provides for a business combination between ENSCO and
DUAL in which a wholly-owned subsidiary of ENSCO would be merged with and into
DUAL and the holders of DUAL Common Stock would be issued shares of ENSCO Common
Stock. As a result of the Merger, DUAL would become a wholly-owned subsidiary of
ENSCO. A copy of the Merger Agreement is attached to this Prospectus/Proxy
Statement as Appendix A and is incorporated herein by reference.
BACKGROUND OF THE MERGER
In July 1995, the Board of Directors of DUAL instructed Mr. David W. Skarke,
the Chairman of the Board of DUAL, and Simmons to prepare an analysis of DUAL's
operating and financial history and future outlook, asset base and matters
relating to DUAL Common Stock, including trading volume, liquidity, float and
value relative to comparable companies in the offshore drilling industry, and
other factors relevant to determining how to enhance stockholder value and
improve the liquidity of DUAL's Common Stock, and to distribute the analysis to
the Board prior to their next meeting on September 14, 1995.
On September 6, 1995, each member of the Board of Directors of DUAL received
a copy of the analysis prepared by Mr. Skarke and Simmons. The analysis
discussed DUAL's current focus and form and DUAL's related strengths and
weaknesses, including, among other things, (i) a review of DUAL's performance
and value relative to DUAL's competitors, (ii) the activity of DUAL Common
Stock, including trading volume, liquidity and float, and (iii) the performance
of DUAL Common Stock relative to comparable companies in the drilling industry.
The analysis also addressed the positive and negative implications, and the
expected effect on stockholder value, if DUAL were to (i) maintain its
independence, (ii) pursue a sale or merger strategy, or (iii) pursue a
divestiture strategy. In reviewing the implications arising out of remaining
independent, the analysis indicated the need to acquire additional rigs and the
potential need to recapitalize DUAL through a securities offering. The analysis
also considered the possibility of selling DUAL to, or merging DUAL with,
another party (a "Potential Sale or Merger Transaction"), and addressed, among
other things, the effect such Potential Sale or
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Merger Transaction would have on DUAL stockholder value arising from a (i) sale
of platform rigs or jackup rigs as separate fleets, (ii) Potential Sale or
Merger Transaction pursuant to which DUAL would remain intact as a going concern
and potentially realize a premium for synergistic value, (iii) cash transaction,
(iv) stock transaction, or (v) transaction involving a combination of stock and
cash.
On September 14, 1995, the Board of Directors of DUAL held a meeting at
which it addressed the matters presented in the analysis prepared by Mr. Skarke
and Simmons. In reviewing the various strategic alternatives for pursuing
enhanced stockholder value, the Board of Directors of DUAL noted the issues
which it felt would be associated with remaining independent. These issues would
include the desirability of acquiring additional quality rigs, very few of which
were then available for purchase. The Board also discussed the issues DUAL might
face in pursuing a recapitalization due to DUAL's leverage position relative to
other companies in the industry. In its discussion of a Potential Sale or Merger
Transaction, the Board of Directors of DUAL noted the importance of considering
all potential candidates including, among others, foreign companies and
companies operating outside the drilling industry ("Potential Candidates"). The
Board of Directors of DUAL also addressed the importance of carefully assessing
the value of securities that might be received in a Potential Sale or Merger
Transaction. In the case of a Potential Sale or Merger Transaction involving the
exchange of DUAL Common Stock, the Board expressed the need to be sensitive to
possible restrictions on the sale of the securities to be received by DUAL
stockholders. Based on the Board's discussion and the analysis prepared by Mr.
Skarke and Simmons, the Board of Directors of DUAL concluded that there was an
opportunity to enhance DUAL stockholder value by implementing a sale or merger
strategy.
The Board of Directors of DUAL then discussed the issue of engaging an
investment banker to assist in the development of Potential Sale or Merger
Transaction scenarios. The Board of Directors of DUAL was of the opinion that an
investment banker would add credibility, facilitate a merger or sale transaction
and assure that DUAL stockholders would receive the best price for their DUAL
Common Stock in connection with such merger or sale transaction. Following a
discussion relating to the relative strengths and weaknesses of several
investment banking firms, the Board of Directors of DUAL agreed to engage
Simmons to (i) identify Potential Candidates, (ii) evaluate various Potential
Sale or Merger Transaction structures, (iii) assist in structuring a Potential
Sale or Merger Transaction, and (iv) provide a fairness opinion. As a result of
this meeting, Simmons presented a draft engagement letter to the Board of
Directors of DUAL (the "Simmons Engagement Letter"), which was circulated among,
and reviewed by, the members of the Board of Directors of DUAL and Akin, Gump,
Strauss, Hauer & Feld, L.L.P., DUAL's counsel, prior to its execution.
A telephonic meeting of the Board of Directors of DUAL was held on October
12, 1995, at which it addressed the Simmons Engagement Letter. The Board of
Directors of DUAL discussed, among other things, the likelihood that Simmons
would prepare a fairness opinion if a Potential Sale or Merger Transaction
materialized, and the potential additional cost to DUAL if another firm were
asked to provide the fairness opinion. Based upon these discussions, the Board
of Directors of DUAL confirmed the engagement of Simmons and also confirmed that
the fee arrangement with Simmons (the "Simmons Transaction Fee") was inclusive
of (i) the fairness opinion, and (ii) the $50,000 fee previously paid to Simmons
for their strategic analysis. The Board of Directors of DUAL requested that the
draft of the Simmons Engagement Letter be modified to confirm these
understandings.
During the October 12, 1995 telephonic meeting, Mr. Skarke updated the Board
of Directors of DUAL on the status of the Potential Sale or Merger Transaction
and his interaction with Simmons. The Board of Directors of DUAL discussed the
information document being prepared for the Potential Candidates and the need
for strategic reassurance and careful consideration of the type and amount of
information related to DUAL to be included in such document.
The Board of Directors of DUAL then asked a representative of Simmons to
join it at the meeting. This representative commented on the types of Potential
Candidates, foreign buyer potential, market conditions and certain other issues
related to the Potential Sale or Merger Transaction.
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On November 2, 1995, the Board of Directors of DUAL held a telephonic
meeting pursuant to which it authorized Simmons to begin contacting selected
Potential Candidates for a Potential Sale or Merger Transaction (the "Selected
Candidates"). The Selected Candidates included many domestic and international
offshore drilling companies, including ENSCO, and certain companies outside the
offshore drilling industry.
A regularly scheduled meeting of the Board of Directors of DUAL held on
December 1, 1995, began with a presentation from Simmons on the status of the
Potential Sale or Merger Transaction and expressions of interest therein
received from various Potential Candidates. Certain representatives of Simmons
and Mr. Tharald Brovig, a director of the Principal Stockholder, were asked to
join the meeting. The Simmons representatives informed the Board of Directors of
DUAL that preliminary expressions of interest in a Potential Sale or Merger
Transaction had been received from six major offshore drilling companies,
including ENSCO (the "Final Candidates"). Some of these expressions of interest
were based upon a stock-for stock exchange with the potential for some cash to
be paid to DUAL stockholders. The preliminary values for DUAL's common stock
arising out of the expressions of interest by the Final Candidates ranged
between $10 1/8 per share to approximately $12 per share. The Board discussed
the Final Candidates' expressions of interest in detail, which discussion
included, among other things, the potential transactional structures relating to
each Final Candidate, and a comparison of the strengths and weaknesses of a sale
or merger with each Final Candidate.
The Board of Directors of DUAL and Simmons representatives next discussed
the strategy to be implemented to generally increase levels of interest in a
Potential Sale or Merger Transaction and improve DUAL stockholder value. The
Board of Directors of DUAL concluded that Simmons should continue discussions
with all Potential Candidates. The Board of Directors of DUAL also agreed that
DUAL would prepare a data room and management presentations for each Potential
Candidate, anticipating that the presentations and data room visits would begin
during the week of December 11, 1995.
A special meeting of the Board of Directors of DUAL was held on January 17,
1996, which meeting began with a review of the indications of interest received
from Potential Candidates. The Board of Directors of DUAL identified the
proposals submitted by three of the Potential Candidates, including ENSCO
(collectively, the "Final Three Candidates") as having the potential to offer
the best value reasonably available to DUAL's stockholders. The Board of
Directors of DUAL then reviewed the presentations made by each of the Final
Three Candidates on January 16, 1996, to the Board of Directors of DUAL, and
discussed their impressions relating to the question and answer sessions with
each of the Final Three Candidates which followed such presentations. The Board
of Directors of DUAL noted and discussed alternatives to a merger transaction,
and concluded that a merger with any of the Final Three Candidates offered
enhanced value to DUAL's stockholders. The Board of Directors of DUAL then again
reviewed the proposals submitted by each of the Final Three Candidates, which
review included, among other things, a review of the potential structure for a
merger with each of the Three Candidates, the strengths and weaknesses of a sale
to or merger with each of the Final Three Candidates, and the projected effect
on stockholder value arising from a merger with each of the Final Three
Candidates. The Board discussed that the values offered for DUAL by the Final
Three Candidates were substantially the same, and that the determination of the
preferred merger candidate would likely be dependent on other factors. The Board
noted that each of the Final Three Candidates had discussed the improved
operating results that would likely occur as a result of the combination of DUAL
with such company due to operating efficiencies and the elimination of
duplicative functions. ENSCO, however, also identified an additional significant
strategic benefit of a merger with it. ENSCO noted that a merger of DUAL with it
would not only result in a larger, more efficient company, but would have the
additional strategic benefit of significantly increasing the number of premium
jackup rigs in ENSCO's total fleet and immediately expanding its presence in
attractive international markets such as the Middle East and Southeast Asia
where DUAL was currently operating but ENSCO was not. The Board of Directors of
DUAL discussed that these
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additional strategic factors were particularly compelling and felt they might
contribute to a greater improvement in the stock value of the combined company
than would a merger with either of the other two candidates.
L.H. Dick Robertson, the President and Chief Executive Officer of DUAL, was
then asked to render his opinion relating to each of the Final Three Candidates.
Mr. Robertson discussed his views on the relative strengths and weaknesses of a
sale of DUAL to, or merger of DUAL with, each of the Final Three Candidates. At
the conclusion of this discussion, Mr. Robertson informed the Board of Directors
of DUAL that because of his position as a senior executive of DUAL, he deemed it
advisable that he abstain from the vote on which of the Final Three Candidates
DUAL should pursue in connection with a Potential Sale or Merger Transaction.
With Mr. Robertson abstaining, the remaining five members of the Board of
Directors of DUAL voted in favor of further exploration of, and the beginning of
negotiations with respect to, a sale or merger with ENSCO, which they believed
offered the best opportunity to maximize stockholder value for the holders of
DUAL Common Stock based on the stock value of the combined companies. Mr. Skarke
and Simmons were directed to engage in further discussions with ENSCO with the
objectives of (i) improving ENSCO's offer within certain specified parameters
and (ii) entering into a letter of intent as soon as practicable. The Board of
Directors of DUAL also discussed that ENSCO had indicated that it would require
a fee of $5,000,000, and Mr. Skarke and Simmons were authorized to pursue a
letter of intent on that basis. The Board of Directors of DUAL noted that it had
been impressed with the presentations of each of the other Final Three
Candidates and recognized that if ENSCO were to be unwilling to pursue a
transaction with DUAL, a sale of DUAL to, or merger of DUAL with, either of the
other Final Three Candidates would constitute attractive alternatives.
Following the January 17, 1996 meeting of the Board of Directors of DUAL and
prior to January 25, 1996, there were several telephone conversations between
Simmons and representatives of ENSCO discussing the structure of a proposed
transaction involving DUAL and ENSCO, including the share exchange ratio. ENSCO
and Simmons each made several proposals in respect of the share exchange ratio
during such period. The final share exchange ratio was offered by ENSCO and
after negotiations between ENSCO and Simmons such share exchange ratio was
submitted to, and accepted by, the Board of Directors of DUAL at a telephonic
Board of Directors' meeting on January 24, 1996. On January 25, 1996, DUAL and
ENSCO entered into a letter of intent setting forth the framework governing the
terms of the proposed merger. Pursuant to the letter of intent DUAL and ENSCO
agreed, among other things, (i) that each of the holders of DUAL Common Stock
would receive for each share of DUAL Common Stock .625 shares of ENSCO Common
Stock, (ii) that all outstanding stock options or other rights to acquire DUAL
Common Stock would terminate immediately prior to the proposed merger, and the
holders thereof would be entitled to receive from DUAL an amount in cash equal
to the difference between the fair market value of the DUAL Common Stock on the
date of termination and the exercise price of the option or other right, (iii)
that the form of the proposed merger would be structured and agreed to by ENSCO
and DUAL after review of tax, regulatory, contract consent and other appropriate
issues, (iv) to submit a definitive merger agreement for approval by their
respective boards of directors not later than March 31, 1996 and (v) to certain
conditions precedent to the proposed merger.
A special meeting of the Board of Directors of DUAL was held on February 21,
1996. At this meeting, the Board of Directors of DUAL discussed the proposed
merger, including certain remaining outstanding business issues regarding the
proposed merger and the status of the ongoing due diligence review by ENSCO. In
addition, at this meeting, representatives of Simmons presented to the Board of
Directors of DUAL an oral summary of the analysis Simmons undertook to form its
fairness opinion regarding the proposed merger and rendered the oral opinion of
Simmons that, as of that date, the consideration to be received by the holders
of DUAL Common Stock in the proposed merger was fair from a financial point of
view to those holders. See "-- Fairness Opinion."
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A telephonic meeting of the Board of Directors of DUAL was held on March 12,
1996, at which the Board of Directors of DUAL unanimously approved the Merger
and the execution of the Merger Agreement.
DUAL'S REASONS FOR THE MERGER; RECOMMENDATION OF DUAL'S BOARD OF DIRECTORS
The Board of Directors of DUAL has unanimously determined that the terms of
the Merger Agreement and the transactions contemplated thereby offer the best
opportunity to maximize stockholder value for the holders of DUAL Common Stock
based on the stock value of the combined companies. Accordingly, the Board of
Directors of DUAL has unanimously approved the Merger Agreement and recommends
approval thereof by the stockholders of DUAL. In reaching its determination, the
Board of Directors of DUAL consulted with DUAL management, as well as its legal
counsel and its financial advisors, and considered a number of factors,
including, without limitation, the following:
(i) the common business strategies and complementary nature of the rig
fleets of DUAL and ENSCO;
(ii) the strong performance of the ENSCO Common Stock, and the opportunity
for future liquidity associated with the ENSCO Common Stock due to its
high average trading volume as compared to the trading volume of the
DUAL Common Stock;
(iii) the opportunity afforded DUAL stockholders to maintain a
publicly-traded equity investment in a larger combined enterprise in
the offshore drilling industry and to participate in the growth and
appreciation of the business of the combined company;
(iv) the opportunity afforded DUAL stockholders to share in the potential
cost savings achieved through consolidation;
(v) its belief that the future business prospects of the combined company
were strong due to the large size of the rig fleet and geographic
diversity of operations;
(vi) the balance sheet strength of the combined company relative to DUAL's
stand-alone balance sheet;
(vii) the exchange ratio between ENSCO Common Stock and DUAL Common Stock
which the Board believed would result in enhanced value for the DUAL
stockholders;
(viii) the expected tax-free nature of the Merger;
(ix) enhanced growth opportunities for the combined company from expanded
geographic presence and greater resources; and
(x) recent consolidation in and the outlook for the offshore drilling
industry.
Based on the opinion of Simmons to the effect that, from a financial point
of view, the consideration to be received by DUAL's stockholders upon
consummation of the Merger is fair to such stockholders, and on the foregoing
matters and such other matters as were deemed relevant, the Board of Directors
of DUAL unanimously approved the Merger as being in the best interests of DUAL's
stockholders.
The foregoing discussion of the information and factors considered and given
weight by the Board of Directors of DUAL is not intended to be exhaustive but is
believed to include the material factors the Board of Directors of DUAL
considered. In addition, in reaching the determination to approve and recommend
the Merger, considering the wide variety of factors considered in connection
with its evaluation of the proposed Merger, the Board of Directors of DUAL did
not find it practical to, and did not, quantify or otherwise attempt to assign
any relative or specific weights to the foregoing factors, and individual
directors may have given different weights to different factors.
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THE BOARD OF DIRECTORS OF DUAL UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
OF DUAL VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND, AS
CONTEMPLATED THEREBY, APPROVAL OF THE MERGER.
ENSCO'S REASONS FOR THE MERGER
The Board of Directors of ENSCO has determined that the Merger is in the
best interests of the stockholders of ENSCO because it is the best option for
achieving the strategic goals of ENSCO, offering the ENSCO/DUAL combination a
broadened geographic presence, an increased fleet of offshore drilling rigs, and
potential economies of scale. Accordingly, the Board of Directors believes that
the Merger could allow ENSCO to compete more effectively for contracts and
relationships internationally. In reaching its determination, the Board of
Directors considered certain factors, including the following:
(i) the business and financial prospects of an ENSCO/DUAL combination,
including the size of the combined rig fleet, the potential operational
benefits, and the outlook for the respective fleets;
(ii) the economies of scale which could be afforded to an ENSCO/DUAL
combination;
(iii) the geographic diversification of a combined ENSCO/DUAL drilling rig
fleet, in accordance with ENSCO's objective of geographic expansion of
its offshore drilling rig fleet;
(iv) the balance sheet strength of an ENSCO/DUAL combination and the debt
levels relative to equity of the two companies;
(v) the outlook of the offshore drilling industry internationally and in the
geographic markets serviced by ENSCO and DUAL, including the market
trends and prospects for premium jackup rigs and self-contained platform
rigs;
(vi) the structure of the Merger, the terms of the Merger Agreement and the
exchange ratio between ENSCO Common Stock and DUAL Common Stock, which
were the result of arms'-length negotiations between ENSCO and DUAL; and
(vii) recent and historical market prices of the ENSCO Common Stock and the
DUAL Common Stock.
In determining whether the Merger was fair to and in the best interest of
stockholders of ENSCO, the Board of Directors of ENSCO considered the factors
above as a whole and did not assign specific or relative weights to such
factors.
EFFECTIVE TIME
If the Merger Agreement is approved and adopted by the requisite vote of the
stockholders of DUAL and the other conditions to the Merger are satisfied or
waived (if permissible), the Merger will be consummated and effected at the time
a Certificate of Merger is filed with the Secretary of State of the State of
Delaware or at such later time as the parties to the Merger Agreement agree to
in writing and specify in such Certificate of Merger. The Merger Agreement
provides that ENSCO and DUAL will cause the Effective Time to occur as promptly
as practicable, but in no event later than the first business day (unless such
other date is agreed to in writing by the parties to the Merger Agreement)
following the satisfaction or, if permissible, waiver of all the conditions set
forth in the Merger Agreement. The Merger Agreement may be terminated prior to
the Effective Time by either ENSCO or DUAL in certain circumstances, whether
before or after approval and adoption of the Merger Agreement by the
stockholders of DUAL. See "Certain Provisions of the Merger Agreement --
Termination."
TERMS OF THE MERGER
If all required stockholder approvals are obtained and all other conditions
to the Merger are satisfied or waived, if permissible, then at the Effective
Time Merger Subsidiary will be merged with and into DUAL, which will be the
Surviving Corporation and automatically renamed DUAL Holding
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Company, and the Certificate of Incorporation and Bylaws of DUAL will be amended
automatically to conform with those of Merger Subsidiary. In the Merger, each
share of DUAL Common Stock outstanding immediately prior to the Effective Time
(other than Cancelable Shares) will be converted into the right to receive 0.625
of a share of ENSCO Common Stock. The Merger is structured as a tax-free
reorganization to the extent DUAL stockholders receive shares of ENSCO Common
Stock. Depending upon uncertain factual developments, it is possible that the
Merger might not be treated as a reorganization within the meaning of Section
368(a) of the Code, as a result of which each holder of shares of DUAL Common
Stock would recognize gain in the amount of the difference between the fair
market value of the shares of ENSCO Common Stock and/or cash in lieu of
fractional shares, and such holder's tax basis in the DUAL Common Stock
exchanged therefor. See "The Merger -- Certain United States Federal Income Tax
Consequences."
FAIRNESS OPINION
DUAL retained Simmons to act as its financial advisor and to render a
fairness opinion in connection with the Merger. At a meeting of the Board of
Directors of DUAL on February 21, 1996, Simmons rendered an oral opinion that
the consideration to be received by the holders of DUAL Common Stock in the
Merger was fair from a financial point of view to such holders. Subsequently,
Simmons confirmed this opinion in writing as of March 21, 1996.
The full text of Simmons' fairness opinion, dated March 21, 1996, which sets
forth the assumptions made, general procedures followed, matters considered and
limits on review undertaken, is attached as Appendix B to this Prospectus/Proxy
Statement. Simmons' opinion is directed only to the fairness, from a financial
point of view, of the consideration to be received by the holders of DUAL Common
Stock and does not constitute a recommendation to any holder of DUAL Common
Stock as to how such stockholder should vote on the Merger Agreement.
STOCKHOLDERS OF DUAL ARE URGED TO READ THE OPINION IN ITS ENTIRETY.
In connection with rendering its opinion, Simmons has reviewed and analyzed,
among other things, the following: (i) the Letter of Intent between ENSCO and
DUAL dated January 25, 1996, (ii) the Merger Agreement, (iii) the financial
statements and other information concerning DUAL, including the Annual Reports
on Form 10-K of DUAL for the three years ended December 31, 1995, DUAL's
prospectus dated August 5, 1993 relating to the initial public offering of
6,250,000 shares of DUAL Common Stock, DUAL's prospectus dated January 20, 1994
relating to the offering of $100,000,000 principal amount of the 9 7/8% Senior
Subordinated Notes due 2004, and the Current Reports on Form 8-K of DUAL dated
January 25, 1996, August 5, 1995 and June 5, 1995, (iv) certain other internal
information, primarily financial in nature, concerning the business and
operations of DUAL furnished by DUAL for purposes of Simmons' analysis, (v)
certain publicly available information concerning ENSCO, including the Annual
Reports on Form 10-K of ENSCO for the three years ended December 31, 1995 and
the Current Reports on Form 8-K dated January 25, 1996, September 11, 1995, May
23, 1995 and March 23, 1995, (vii) certain other internal information, primarily
financial in nature, concerning the business and operations of ENSCO furnished
by ENSCO for purposes of Simmons' analysis, (viii) certain publicly available
information concerning the trading of, and trading market for, ENSCO Common
Stock, (ix) certain publicly available information with respect to certain other
companies that Simmons believes to be comparable to DUAL or ENSCO and the
trading markets for certain of such other companies' securities, (x) certain
publicly available information concerning the estimates of the future operating
and financial performance of DUAL, ENSCO and the comparable companies prepared
by industry analysts unaffiliated with either DUAL or ENSCO, and (xi) certain
publicly available information concerning the nature and terms of certain other
transactions considered relevant to the inquiry. Simmons also met with certain
officers and employees of DUAL and ENSCO to discuss the foregoing as well as
other matters believed relevant to the inquiry. In addition, Simmons made such
other analyses and examinations as it considered appropriate in expressing its
opinion.
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In arriving at its opinion, Simmons has assumed and relied upon the accuracy
and completeness of all of the financial and other information provided by DUAL
and ENSCO, or publicly available, including, without limitation, information
with respect to asset conditions, tax positions, liability reserves and
insurance coverages, and has not attempted independently to verify any of such
information. Simmons has not conducted a physical inspection of any of the
assets, properties or facilities of DUAL or ENSCO, nor has Simmons made or
obtained any independent evaluations or appraisal of any of such assets,
properties or facilities. In addition, Simmons has discussed the prospects of
DUAL with certain representatives of DUAL and has been provided with certain
financial projections of DUAL. Simmons has also discussed the prospects of ENSCO
with certain representatives of ENSCO.
In conducting its analysis and arriving at its opinion, Simmons considered
such financial and other factors as it deemed appropriate under the
circumstances, including, among others, the following: (i) the historical and
current financial position and results of operations of DUAL and ENSCO, (ii) the
business prospects of DUAL and ENSCO, (iii) the historical and current market
for DUAL Common Stock, for ENSCO Common Stock and for the equity securities of
certain other companies believed to be comparable to DUAL or ENSCO, (iv) the
respective contributions in terms of various financial measures of DUAL and
ENSCO to the combined company, and the relative pro forma ownership of ENSCO
after the Merger by the current holders of DUAL Common Stock and ENSCO Common
Stock, and (v) the nature and terms of 18 other acquisition transactions that
Simmons believed to be relevant. Simmons also took into account its assessment
of general economic, market and financial conditions and its experience in
connection with similar transactions and securities' valuation generally.
Simmons' opinion necessarily was based upon conditions as they existed and could
be evaluated, and on the information made available, at the date thereof. The
opinion rendered by Simmons does not constitute an opinion as to the future
value of ENSCO Common Stock upon consummation of the Merger or the price at
which ENSCO Common Stock will trade at any time.
IN CONNECTION WITH A PRESENTATION TO THE BOARD OF DIRECTORS OF DUAL ON
FEBRUARY 21, 1996, SIMMONS ADVISED THE BOARD OF DIRECTORS OF DUAL THAT, IN
EVALUATING THE CONVERSION RATE TO BE USED IN THE MERGER, SIMMONS HAD PERFORMED A
VARIETY OF FINANCIAL ANALYSES WITH RESPECT TO DUAL AND ENSCO.
CONVERSION RATE PROFILE. Simmons performed an analysis of the ratio of the
market price of DUAL Common Stock to the market price of ENSCO Common Stock
during the period from August 1993 through January 1996. Simmons calculated the
ratio of the DUAL Common Stock closing price for each trading day during that
period to the ENSCO Common Stock closing price for each day. This analysis
implied a conversion rate ranging from a high of 1.39 shares of ENSCO Common
Stock for each share of DUAL Common Stock to a low of 0.49 shares of ENSCO
Common Stock for each share of DUAL Common Stock, with an average during the
period of 0.73 shares of ENSCO Common Stock for each share of DUAL Common Stock.
Simmons also calculated the average ratio during the past 3, 6 and 12 months,
respectively, of the DUAL Common Stock closing price for each trading day to the
ENSCO Common Stock closing price for such day. This analysis implied a
conversion rate of 0.57, 0.58 and 0.59 of a share of ENSCO Common Stock for each
share of DUAL Common Stock, based on the last 3, 6 and 12 months, respectively.
Simmons also calculated the ratio of the DUAL Common Stock closing price on
January 24, 1996 ($13 1/16 per share) to the ENSCO Common Stock closing price on
such day ($22 3/4 per share). This implied a conversion rate of 0.57 shares of
ENSCO Common Stock for each share of DUAL Common Stock.
PREMIUM ANALYSIS. Simmons calculated the premium to holders of DUAL Common
Stock of the "Implied Consideration" (obtained by multiplying the closing price
for ENSCO Common Stock on February 20, 1996 by the Merger exchange ratio of
0.625) to the closing price for DUAL Common Stock on January 24, 1996, on the
dates one month, three months and six months prior, as well as to the daily
average closing prices for DUAL Common Stock for the 10 days, 20 days, 30 days,
and 60 days prior, and to the daily average closing price for DUAL Common Stock
the 52 weeks prior and to each of the 52-week high and low closing prices for
DUAL Common Stock. Based upon the closing price for ENSCO Common Stock of
$26 3/8 on February 20, 1996, Simmons calculated premiums to holders of DUAL
Common Stock equal to 26.2% of the closing price for DUAL Common Stock of
$13 1/16 on
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January 24, 1996; 49.9% of the closing price for DUAL Common Stock of $11 one
month earlier; 73.5% of the closing price for DUAL Common Stock of $9 1/2 three
months earlier; 69.1% of the closing price for DUAL Common Stock of $9 3/4 six
months earlier; 29.2% of the 10-day average price for DUAL Common Stock of
$12.76; 34.1% of the 20-day average price for DUAL Common Stock of $12.29; 39.5%
of the 30-day average price for DUAL Common Stock of $11.82; 50.9% of the 60-day
average price for DUAL Common Stock of $10.92; 71.6% of the 52-week average
price for DUAL Common Stock of $9.61 and 26.2% and 125.4% of the 52-week high
and low closing prices, respectively, for DUAL Common Stock of $13 1/16 and
$7 5/16.
Simmons also analyzed average acquisition premiums for acquisitions of 721
public companies in the years 1990 through 1995, focusing on completed
transactions in the $50 to $500 million range. The average premium to last
closing price prior to announcement of such transactions during any year ranged
from a low of 25.7% to a high of 32.4%, with the weighted average for 721
transactions being 29.7% compared to the premium for the Merger of 26.2%, based
on a closing price of $13 1/16 for DUAL Common Stock on January 24, 1996 and
$26 3/8 for ENSCO Common Stock on February 20, 1996.
RELATIVE CONTRIBUTION ANALYSIS. Simmons analyzed the relative equity
contributions of DUAL and ENSCO to, among other things, the combined last 12
months' ("LTM") earnings before depreciation, interest, and taxes ("EBDIT"), LTM
net income, LTM cash flow (defined as net income plus depreciation and
amortization), projected 1996 EBDIT, projected 1996 net income, projected 1996
cash flow and market equity value (based on January 24, 1996 share prices) of
the two companies, assuming consummation of the Merger (without giving effect to
any transaction adjustments). Simmons calculated contributions to equity by DUAL
of approximately 9% of combined LTM EBDIT; a not meaningful percent of combined
reported LTM net income; 4% of combined LTM cash flow; 18% of projected 1996
EBDIT; 13% of projected 1996 net income; 18% of projected 1996 cash flow and 13%
of market equity value. Simmons also calculated the percentage of the combined
company's equity that would be held by former DUAL stockholders assuming
consummation of the Merger as 14% (using the conversion rate to be used in the
Merger) and compared such percentage with the foregoing contribution
percentages.
DISCOUNTED CASH FLOW ANALYSES. Simmons used DUAL management's projections
to calculate projected future cash flows for DUAL through the year 2000. Simmons
discounted to present value the future free cash flows of DUAL and the terminal
value of six times year 2000 EBDIT by applying discount rates ranging from 12%
to 15%. Based on these calculations, Simmons then derived present values per
share ranging from $13.36 to $15.79 for the DUAL Common Stock.
PRO FORMA MERGER ANALYSIS. Simmons performed an analysis of the effect of
the Merger on the earnings per share and cash flow per share of the ENSCO Common
Stock, which would be the surviving stock after the Merger, for the projected
results for the year ended December 31, 1996, which assumed that the Merger was
consummated on January 1, 1996. Such analysis was based on DUAL management's
projections and estimates for ENSCO prepared by industry analysts unaffiliated
with either DUAL or ENSCO. In performing this analysis, Simmons also assumed
that estimated annual consolidation cost savings of $8 million were fully
realized as of January 1, 1996. Simmons also excluded one-time costs associated
with the Merger for the purposes of this analysis. This analysis indicated that
the pro forma impact of the Merger was non-dilutive to the earnings and
accretive to the cash flow per share of ENSCO Common Stock in 1996. Simmons'
conclusion that the Merger would be non-dilutive to earnings and cash flow per
share of ENSCO Common Stock was based on a financial model of the combined
company developed by Simmons and using assumptions, including the following:
projected consolidation cost reductions, write-up of asset values, increasing
day rates, continued high utilization of offshore drilling rigs, increasing
daily operating costs, interest rates on debt and cash balances and income tax
rates.
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Simmons also analyzed the balance sheet impact of the Merger. At December
31, 1995, the total debt-to-total book capitalization ratio of DUAL and ENSCO
combined (after estimated one-time costs and other adjustments) was 30%. DUAL's
stand-alone total debt-to-total book capitalization ratio was 51% at December
31, 1995.
In evaluating the fairness of the conversion rate to be used in the Merger,
Simmons also considered certain other analyses which are set forth below.
ANALYSIS OF SELECTED PUBLICLY-TRADED COMPARABLE COMPANIES. Simmons reviewed
certain financial information for the 12 months ended December 31, 1995 and
stock market information as of January 24, 1996 and February 20, 1996 for DUAL
and certain publicly available financial information as of the most recently
reported period and stock market information as of February 20, 1996 for certain
selected publicly traded companies. For the purposes of this analysis the group
of similar companies was comprised of Arethusa (Off-shore) Limited, Atwood
Oceanics, Inc., Cliffs Drilling Company, Diamond Offshore Drilling, Inc., Falcon
Drilling Company, Inc., Global Marine, Inc., Marine Drilling Companies, Inc.,
Noble Drilling Corporation, Reading & Bates Corporation, Rowan Companies, Inc.,
Sonat Offshore Drilling Inc., and ENSCO (collectively, the "DUAL Comparable
Companies").
For DUAL and each of the DUAL Comparable Companies, Simmons calculated
multiples of market stock price to LTM earnings and cash flow per share, and
projected earnings and cash flow per share (derived from publicly available
information concerning the estimates of the future operating and financial
performance of DUAL and the DUAL Comparable Companies prepared by industry
analysts unaffiliated with either DUAL or ENSCO) for 1996 and 1997, and
multiples of adjusted market capitalization to LTM EBDIT and projected 1996
EBDIT (derived from publicly available information concerning the estimates of
the future operating and financial performance of DUAL and the DUAL Comparable
Companies prepared by industry analysts unaffiliated with either DUAL or ENSCO).
An analysis of market stock price to LTM earnings per share, to projected 1996
earnings per share and to projected 1997 earnings per share yielded for DUAL a
not meaningful result, 25.6x and 14.7x, respectively, (a not meaningful result,
32.3x and 18.5x, respectively, at the Implied Consideration) with a mean value
(excluding the highest and lowest value) of 39.7x, 22.6x and 14.1x,
respectively, for the DUAL Comparable Companies. An analysis of market stock
price to LTM cash flow per share, to projected 1996 cash flow per share and to
projected 1997 cash flow per share yielded for DUAL 48.5x, 7.7x and 6.3x,
respectively, (61.2x, 9.7x and 7.9x, respectively, at the Implied Consideration)
with a mean value (excluding the highest and lowest value) of 24.3x, 12.5x and
9.8x, respectively, for the DUAL Comparable Companies. An analysis of adjusted
market capitalization to LTM EBDIT and to projected 1996 EBDIT yielded for DUAL
18.9x and 7.2x, respectively, (22.1x and 8.4x, respectively, at the Implied
Consideration) with a mean value (excluding the highest and lowest value) of
18.7x and 10.3x, respectively, for the DUAL Comparable Companies.
Simmons performed a similar analysis with respect to ENSCO and certain
selected publicly traded companies (collectively, the "ENSCO Comparable
Companies"). For ENSCO and each of the ENSCO Comparable Companies, Simmons
calculated multiples of market stock price to LTM earnings and cash flow per
share, and projected earnings and cash flow per share (derived from publicly
available information concerning the estimates of the future operating and
financial performance of ENSCO and the ENSCO Comparable Companies prepared by
industry analysts unaffiliated with either DUAL or ENSCO) for 1996 and 1997, and
multiples of adjusted market capitalization to LTM EBDIT and projected 1996
EBDIT (derived from publicly available information concerning the estimates of
the future operating and financial performance of ENSCO and the ENSCO Comparable
Companies prepared by industry analysts unaffiliated with either DUAL or ENSCO).
An analysis of market stock price to LTM earnings per share, to projected 1996
earnings per share and to projected 1997 earnings per share yielded for ENSCO
38.3x, 22.7x and 17.7x, respectively, with a mean value of 42.6x, 23.1x and
13.9x, respectively, for the ENSCO Comparable Companies. An analysis of market
stock price to LTM cash flow per share, to projected 1996 cash flow per share
and to projected 1997 cash flow per share yielded for ENSCO 16.0x, 12.4x and
10.7x, respectively, with a mean value of
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29.1x, 13.5x and 9.7x, respectively, for the ENSCO Comparable Companies. An
analysis of adjusted market capitalization to LTM EBDIT and to projected 1996
EBDIT yielded for ENSCO 15.4x and 9.9x, respectively, with a mean value of 23.0x
and 11.2x, respectively, for the ENSCO Comparable Companies.
Because of the inherent differences between the operations of DUAL and the
DUAL Comparable Companies and ENSCO and the ENSCO Comparable Companies, Simmons
believed that a purely quantitative comparable company analysis would not be
exclusively dispositive in the context of the Merger. Simmons further believed
than an appropriate use of a comparable company analysis in this instance would
involve qualitative judgments concerning differences between the financial and
operating characteristics of DUAL and the DUAL Comparable Companies and ENSCO
and the ENSCO Comparable Companies, which judgments are reflected in Simmons'
opinion.
ANALYSIS OF SELECTED COMPARABLE ACQUISITION TRANSACTIONS. Simmons reviewed
transactions involving the acquisition of all or part of certain offshore
drilling companies (seven transactions) and certain oil field service companies
(eleven transactions). Simmons calculated the multiples of acquisition price to
LTM revenues, LTM EBDIT and Adjusted Book Value of such companies.
For offshore drilling companies, these calculations yielded a range of
acquisition price to LTM revenues of 1.6x to 5.1x with a mean (excluding high
and low) of 2.8x, a range of acquisition price to LTM EBDIT of 7.7x to 26.6x
with a mean (excluding high and low) of 11.8x, and a range of acquisition price
to Adjusted Book Value of 1.2x to 2.1x with a mean (excluding high and low) of
1.9x. Simmons then compared the results of these calculations to multiples
calculated using the closing price of DUAL Common Stock on January 24, 1996 ,
which was $13 1/16, and the Implied Consideration. The calculations yielded
multiples of acquisition price to LTM revenues of 3.8x and 4.5x, respectively,
of acquisition price to LTM EBDIT of 18.9x and 22.1x, respectively, and of
acquisition price to Adjusted Book Value of 1.3x and 1.5x, respectively.
For oil field service companies, these calculations yielded a range of
acquisition price to LTM revenues of 0.5x to 4.8x with a mean (excluding high
and low) of 1.5x, a range of acquisition price to LTM EBDIT of 6.7x to 13.8x
with a mean (excluding high and low) of 8.8x, and a range of acquisition price
to Adjusted Book Value of 1.3x to 5.0x with a mean (excluding high and low) of
2.4x. Simmons then compared the results of these calculations to multiples
calculated using the closing price of DUAL Common Stock on January 24, 1996 and
the Implied Consideration listed above.
Because the reasons for, and circumstances surrounding, each of the
transactions analyzed were so diverse and due to the inherent differences
between the operations of DUAL and the selected companies, Simmons believed that
a purely quantitative comparable transaction analysis would not be exclusively
dispositive in the context of the Merger. Simmons further believed that an
appropriate use of a comparable transaction analysis in this instance would
involve qualitative judgments concerning differences between the characteristics
of these transactions and the Merger that would affect the acquisition value of
the acquired companies and businesses and DUAL, which judgments are reflected in
Simmons' opinion.
The foregoing summary does not purport to be a complete description of the
analyses performed by Simmons or of its presentations to the Board of Directors
of DUAL. The preparation of financial analyses and fairness opinions is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Simmons believes that its analyses (and the summary set
forth above) must be considered as a whole, and that selecting portions of such
analyses and of the factors considered by Simmons, without considering all of
such analyses and factors, could create an incomplete view of the processes
underlying the analyses conducted by Simmons and its opinion. Simmons made no
attempt to assign specific weights to particular analyses. Any estimates
contained in Simmons' analyses are not necessarily indicative of actual values,
which may be significantly more or less favorable than as set forth therein.
Estimates of values of companies do not purport to be appraisals or necessarily
reflect the prices at which companies may actually be sold. Because such
estimates are inherently subject to uncertainty, Simmons does not assume
responsibility for their accuracy.
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Simmons is a specialized energy-related investment banking firm engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, private placements of debt and equity and the management and
underwriting of sales of equity and debt to the public. Simmons has previously
rendered investment banking services to DUAL and ENSCO in connection with a
number of transactions for which Simmons received customary compensation. In
addition, in the ordinary course of business, Simmons may actively trade the
securities of DUAL and ENSCO for its own account and for the accounts of
customers, and, accordingly, may at any time hold a long or short position in
such securities. Simmons acted as financial advisor to DUAL in connection with
the transactions contemplated by the Merger Agreement and will receive a fee for
its services that is contingent upon the consummation of the Merger.
DUAL has agreed to pay Simmons a contingent fee totaling $3 million upon
consummation of the Merger, which fee is inclusive of certain expenses incurred
in connection with Simmons' engagement by DUAL. DUAL has also agreed to
indemnify Simmons and certain related persons against certain liabilities and
expenses relating to or arising out of its engagement, including certain
liabilities under Federal securities laws.
During the past five years, DUAL and ENSCO have each paid Simmons fees
totaling $50,000 in connection with previously rendered investment banking
services.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION IS A SUMMARY OF THE MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS NOT INTENDED TO BE A COMPLETE
DISCUSSION OF ALL POTENTIAL TAX EFFECTS THAT MIGHT BE RELEVANT TO THE MERGER.
SUCH DISCUSSION DEALS ONLY WITH A CITIZEN OR RESIDENT OF THE UNITED STATES OR A
DOMESTIC CORPORATION (A "U.S. HOLDER"). THIS SUMMARY ASSUMES THAT THE DUAL
COMMON STOCK HAS BEEN HELD AS A CAPITAL ASSET. IT MAY NOT BE APPLICABLE TO
CERTAIN CLASSES OF TAXPAYERS, INCLUDING, WITHOUT LIMITATION, INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS, SECURITIES DEALERS,
BROKER-DEALERS, FOREIGN PERSONS, PERSONS WHO HOLD DUAL COMMON STOCK AS PART OF A
CONVERSION TRANSACTION, AND PERSONS WHO ACQUIRED DUAL COMMON STOCK PURSUANT TO
THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR RIGHTS OR OTHERWISE AS COMPENSATION.
MOREOVER, THE STATE, LOCAL, FOREIGN, AND ESTATE TAX CONSEQUENCES TO DUAL
STOCKHOLDERS OF THE MERGER ARE NOT DISCUSSED.
THIS SUMMARY IS BASED ON LAWS, REGULATIONS, RULINGS, PRACTICE, AND JUDICIAL
DECISIONS IN EFFECT AT THE DATE OF THIS PROSPECTUS/PROXY STATEMENT AND ON THE
OPINION OF AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P., COUNSEL TO DUAL. HOWEVER,
LEGISLATIVE, JUDICIAL, OR ADMINISTRATIVE CHANGES OR INTERPRETATIONS MAY BE
FORTHCOMING THAT COULD ALTER OR MODIFY THE STATEMENTS AND CONCLUSIONS SET FORTH
HEREIN. ANY SUCH CHANGES OR INTERPRETATIONS MAY OR MAY NOT BE RETROACTIVE AND
COULD AFFECT THE TAX CONSEQUENCES DESCRIBED HEREIN TO STOCKHOLDERS. EACH
STOCKHOLDER IS URGED TO CONSULT WITH SUCH STOCKHOLDER'S OWN TAX ADVISER AS TO
THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE TRANSACTIONS DESCRIBED
HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN
TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
It is intended that the Merger qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code by reason of the application of
Section 368(a)(2)(E) of the Code, and that, for federal income tax purposes, no
gain or loss will be recognized by ENSCO or DUAL as a result of the Merger.
DUAL has received the Tax Opinion dated as of the date of this
Prospectus/Proxy Statement, that the Merger should be treated as a
reorganization within the meaning of Section 368(a) of the Code and that DUAL
and ENSCO will each be a party to the reorganization pursuant to Section 368(b)
of the Code. Such an opinion is not binding on the Internal Revenue Service or
the courts, and, therefore, the delivery of the Tax Opinion cannot assure that
the Internal Revenue Service or the courts will treat the Merger as a
reorganization within the meaning of Section 368(a) of the Code. The Tax Opinion
is based, among other things, on assumptions relating to certain facts and
circumstances of, and the intentions of the parties to, the Merger, which
assumptions have been made with the consent of DUAL
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and ENSCO. The Tax Opinion is based on the assumption that the amount of ENSCO
Common Stock (determined by value as of the Effective Time) which will be
received by those stockholders of DUAL (including the stockholders of the
Principal Stockholder who will receive ENSCO Common Stock pursuant to
distributions by, and the liquidation of, the Principal Stockholder after the
Merger, and who owned less than 5% of the value of the Principal Stockholder as
of the Effective Time) who each owned, at the Effective Time, less than 5% of
the value of DUAL (taking into account such stockholder's direct and indirect
stockholding in DUAL) plus the amount of ENSCO Common Stock received by B.
Skaugen Shipping ASA, will be greater than or equal to 40% of the total value of
all of the formerly outstanding shares of DUAL Common Stock as of the Effective
Time. In addition, the Tax Opinion is based on a representation from DUAL (and a
similar representation from B. Skaugen Shipping ASA) to the effect that to its
knowledge there is no plan or intention on the part of DUAL stockholders
described in the immediately preceding sentence (or on the part of B. Skaugen
Shipping ASA) to sell, exchange, or otherwise dispose of a number of shares
received in the Merger that would reduce such stockholders' ownership of ENSCO
Common Stock received in the Merger to a number of shares of ENSCO Common Stock
having a value, as of the Effective Time, of less than 40% of the value of all
the formerly outstanding shares of DUAL Common Stock as of the same time. The
Principal Stockholder has indicated that it intends to sell, for cash, a portion
of the ENSCO Common Stock received in the Merger. Because the number of shares
sold will vary with changes in value of the ENSCO Common Stock after the closing
of the Merger and fluctuations in the exchange rate for U.S. and Norwegian
currency, there is no assurance that the assumption upon which the Tax Opinion
is in part based will be correct, in which event (i) the Tax Opinion would be
rendered inapplicable and (ii) the Merger may or may not be treated as a
tax-free "reorganization" depending on all the facts and circumstances.
The Tax Opinion provides, assuming the Merger is a reorganization with the
meaning of Section 368(a) of the Code, that (i) a U.S. Holder of DUAL Common
Stock who, pursuant to the Merger, exchanges such U.S. Holder's DUAL Common
Stock solely for ENSCO Common Stock will not recognize gain or loss on the
exchange, (ii) the holding period of ENSCO Common Stock received by each U.S.
Holder of DUAL Common Stock in the Merger will include the holding period of the
DUAL Common Stock surrendered therefor, (iii) the aggregate adjusted tax basis
of such ENSCO Common Stock will equal the U.S. Holder's adjusted tax basis in
the DUAL Common Stock surrendered plus the amount of any gain or loss
recognized, less the amount of cash received, and (iv) that a U.S. Holder of
DUAL Common Stock who, pursuant to the Merger, receives cash in lieu of a
fractional share of ENSCO Common Stock will be treated as having received such
fractional share of ENSCO Common Stock pursuant to the Merger and then as having
received such cash in a redemption of such fractional share of ENSCO Common
Stock. Such a U.S. Holder of DUAL Common Stock generally will recognize capital
gain or loss on such deemed redemption equal to the difference between the
amount of cash received and the U.S. Holder's adjusted tax basis in the
fractional share of ENSCO Common Stock.
The Merger is not contingent on the updating of the Tax Opinion as of the
Effective Time. Further, whether the assumptions counsel was directed to make in
rendering the Tax Opinion are accurate, will not be known until after the
Effective Time. In the event that the 40% continuity representation described
above cannot be satisfied as of the Effective Time, it is possible that the
Merger might not be treated as a reorganization within the meaning of Section
368(a) of the Code. The Tax Opinion does not address the tax consequences to the
DUAL stockholders in the event the Merger is not treated as a reorganization
within the meaning of Section 368(a) of the Code. Generally in such event, each
stockholder of DUAL would recognize gain in the amount of the difference between
(i) the fair market value of the ENSCO Common Stock and the amount of cash
received in lieu of a fractional share of ENSCO Common Stock and (ii) such
holder's adjusted tax basis in the DUAL Common Stock surrendered therefor. Any
such recognized gain generally would be characterized as capital gain or loss.
If the Merger is not considered a reorganization, the holding period of ENSCO
Common Stock received by each U.S. Holder of DUAL Common Stock in the Merger
would not include the holding period of the DUAL Common Stock surrendered
therefor and the aggregate adjusted tax basis of such ENSCO Common Stock would
equal the fair market value of ENSCO Common Stock received.
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REGULATORY APPROVALS
ENSCO and DUAL are aware of no government regulatory approvals still
required for consummation of the Merger, other than compliance with notification
requirements of environmental agencies, with federal securities laws, with state
securities or "Blue Sky" laws, and with the requirements of the U.S. Maritime
Administration. The Merger was subject to the pre-merger notification provisions
of the HSR Act. Filings were made under the HSR Act by ENSCO and DUAL with the
Federal Trade Commission and the Department of Justice Antitrust Division. On
February 28, 1996, early termination of the waiting period under the HSR Act was
granted, thus permitting the Merger to proceed pursuant to the HSR Act, subject
to stockholder approval and the other conditions described herein.
Under the Merger Agreement, DUAL, ENSCO and Merger Subsidiary have agreed to
use their best efforts to (i) take, or cause to be taken, all appropriate
action, and do, or cause to be done, all things necessary, proper or advisable
under applicable law or required to be taken by any governmental authority or
otherwise to consummate and make effective the transactions contemplated by the
Merger Agreement as promptly as practicable, (ii) obtain from any governmental
authorities any consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by ENSCO or DUAL or any of their
subsidiaries in connection with the authorization, execution and delivery of the
Merger Agreement and the consummation of the transactions contemplated
thereunder, including, without limitation, the Merger, and (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to the Merger Agreement and the Merger required under
(a) the Securities Act and the Exchange Act, and any other applicable federal or
state securities laws, (b) the rules and regulations of the NYSE, (c) Delaware
law, (d) the HSR Act and any related governmental request thereunder, and (e)
any other applicable law; provided that ENSCO and DUAL shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, accepting all reasonable additions, deletions or
changes suggested in connection therewith. DUAL and ENSCO have agreed to use
reasonable best efforts to furnish to each other all information required for
any application or other filing to be made pursuant to the rules and regulations
of any applicable law (including all information required to be included in this
Prospectus/ Proxy Statement and the Registration Statement) in connection with
the transactions contemplated by the Merger Agreement.
ACCOUNTING TREATMENT
It is intended that ENSCO will account for the Merger as a purchase under
GAAP. The effect of purchase accounting treatment is that the assets,
liabilities, and stockholders' equity accounts will be recorded at their fair
values at the Effective Time. Any excess of consideration paid by ENSCO over the
fair value of DUAL's assets will be recorded as goodwill.
NYSE LISTING
The shares of ENSCO Common Stock to be issued in connection with the Merger
will be listed on the NYSE. Evidence from the NYSE that the shares of ENSCO
Common Stock to be issued in connection with the Merger will be listed on the
NYSE immediately following the Effective Time is a condition to the consummation
of the Merger. See "Certain Provisions of the Merger Agreement -- Conditions to
the Consummation of the Merger."
INTERESTS OF CERTAIN PERSONS; POSSIBLE CONFLICTS OF INTEREST
INTERESTS OF CERTAIN PERSONS IN THE MERGER. In considering the
recommendation of the Board of Directors of DUAL with respect to the Merger
Agreement and the transactions contemplated thereby, stockholders should be
aware that certain members of the management of DUAL and of its Board of
Directors have certain interests in the Merger that are in addition to the
interests of the stockholders of DUAL generally (including, without limitation,
the potential receipt of severance and/or other employment benefits and
compensation for stock options).
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EMPLOYMENT AGREEMENTS. Each of DUAL's executive officers named below is
currently employed by DUAL pursuant to an employment agreement. Each of these
agreements provides for a payment to the employee in the event of a change of
control of DUAL. Pursuant to the Merger and the DUAL Executive Agreements (as
discussed and defined below), the following persons will receive the following
payments under their respective employment agreements at the Effective Time, in
addition to the other amounts described below: L.H. Dick Robertson ($1,080,000);
Robert F. Chrone ($200,000); William R. Dudark ($290,000); Dudley M. Haralson
($600,000); Lewis W. Kreps ($300,000); Robert C. McCoy ($320,000); and W. Allen
Parks ($738,750).
STOCK OPTIONS. Certain officers and directors of DUAL hold options to
purchase shares of DUAL Common Stock pursuant to the Non-Employee Director Plan
and the 1993 Plan. Under the Merger Agreement, these options will be
extinguished in return for shares of ENSCO Common Stock. See "Certain Provisions
of the Merger Agreement -- Effect of the Merger on Stock Options." The stock
options granted under the 1993 Plan were granted during 1995 and vest over a
five-year period. Under the terms of the option agreements granted under the
1993 Plan and the DUAL Executive Agreements (as discussed and defined below),
all of the stock options will vest as of May 15, 1996. Each non-employee
director of DUAL is granted an option to acquire 2,000 shares of DUAL Common
Stock on the day of the annual meeting of stockholders of DUAL under the
Non-Employee Director Plan. These options vest over a one-year period. Under the
terms of the option agreements granted under the 1993 Plan, all of the stock
options will vest as a result of the Merger. See "Certain Provisions of the
Merger Agreement -- Effect of the Merger on Stock Options."
RESTRICTED STOCK. Certain executives of DUAL have been granted awards of
restricted stock which vest on August 12, 1996. Under the terms of the
restricted stock awards, all such awards will vest as a result of the Merger.
The following persons have the aggregate number of restricted stock awards which
will vest on the Effective Time: L.H. Dick Robertson (9,000); William R. Dudark
(3,900); Dudley M. Haralson (3,900); Lewis W. Kreps (3,900); Robert C. McCoy
(4,500); and W. Allen Parks (4,800).
CERTAIN BENEFIT PLANS. DUAL has agreed to amend the provisions of the DUAL
DRILLING COMPANY Supplemental Executive Retirement Plan (the "SERP") to freeze
all benefits under the SERP as of the day before the Effective Time and to
permit ENSCO or the Surviving Corporation, as successor to DUAL's rights under
the SERP, to distribute the determined benefit under the SERP payable to each
participant covered by the SERP in one lump sum payment in ENSCO's sole
discretion as soon as practicable after January 1, 1997, to determine the
benefits payable thereunder to each participant, and to terminate the SERP
effective as of the day before the Effective Time. The benefits so payable have
been established by DUAL and ENSCO under the DUAL Executive Agreements as
follows: L.H. Dick Robertson ($1,527,227); William R. Dudark ($94,683); Dudley
M. Haralson ($153,671); Lewis W. Kreps ($88,270); Robert C. McCoy ($202,309);
and W. Allen Parks ($197,623).
DUAL has agreed to amend the provisions of the DUAL DRILLING COMPANY Benefit
Restoration Plan (the "Benefit Restoration Plan") to freeze all benefits under
the Benefit Restoration Plan, to determine the benefits payable thereunder to
each participant, and to terminate the Benefit Restoration Plan effective as of
the day before the Effective Time. The Benefit Restoration Plan currently
permits certain officers and other employees of DUAL to defer current
compensation which cannot be redirected into the DUAL DRILLING COMPANY Employees
Tax Deferred/Thrift Savings Plan and Trust due to contribution and funding
limitations imposed by the Code. The payments shall be made on or before ninety
(90) days from and after the Effective Time. The benefits so payable, calculated
through December 31, 1995, have been established by DUAL and ENSCO under the
DUAL Executive Agreements (as discussed and defined below) as follows: L.H. Dick
Robertson ($152,067); William R. Dudark ($13,335); Lewis W. Kreps ($4,976);
Robert C. McCoy ($2,475); and W. Allen Parks ($61,091). The above benefit
amounts do not include the earnings retained on the balance of each employee's
account which will accrue between January 1, 1996 and the Effective Time, DUAL's
matching contributions, if any, for 1996, or the employee's contributions
subsequent to December 31, 1995.
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DUAL has agreed to freeze all benefits under the Discontinued Executive and
Manager Team Incentive Program ("Team Incentive Program") maintained by DUAL,
and ENSCO has agreed to assume the benefit payment obligations of DUAL under the
Team Incentive Program. After all such benefit payments have been made, the Team
Incentive Program will be terminated. An obligation to make payments to certain
officers of DUAL aggregating $359,792 will be triggered by the Merger under the
Team Incentive Program pursuant to deferred bonuses earned thereunder. Pursuant
to the Merger and the DUAL Executive Agreements (as discussed and defined
below), the following persons will receive the following payments under the Team
Incentive Program at the Effective Time: L.H. Dick Robertson ($181,428); William
R. Dudark ($19,926); Dudley M. Haralson ($14,064); Lewis W. Kreps ($31,854); and
W. Allen Parks ($112,520).
DUAL has agreed to terminate its Annual Incentive Plan as of the date of the
commencement of such plan and accordingly no benefits shall accrue thereunder.
The executive officers of DUAL which participated in this plan agreed to the
termination thereof in their respective DUAL Executive Agreements (as discussed
and defined below).
DUAL SPECIAL PERFORMANCE UNIT PLAN. Pursuant to the Unit Plan, effective
August 21, 1995, maintained by DUAL, L.H. Dick Robertson, W. Allen Parks, Dudley
M. Haralson, Robert C. McCoy, Lewis W. Kreps, William R. Dudark, and Robert F.
Chrone will receive payments upon occurrence of the Merger. The Unit Plan is
subject to approval by the stockholders of DUAL. Pursuant to the Merger
Agreement, DUAL has agreed that the aggregate of these payments and the cash
bonus amount payable to David W. Skarke pursuant to his employment agreement
will not exceed a total of $2 million. See "Skarke Agreement" below. The amounts
payable under the Unit Plan, as set forth in the DUAL Executive Agreements
(defined below) will be paid at the Effective Time as follows: L.H. Dick
Robertson ($469,972); Robert F. Chrone ($78,329); William R. Dudark ($208,877);
Dudley M. Haralson ($271,540); Lewis W. Kreps ($208,877); Robert C. McCoy
($229,765); and W. Allen Parks ($271,540). ENSCO has agreed to assume the
benefit payment obligations of DUAL under the Unit Plan and to cause such
payments to be made. After all such payments have been made, the Unit Plan will
be deemed terminated. See "Proposal to Approve the Adoption of the DUAL Special
Performance Unit Plan."
DUAL EXECUTIVE AGREEMENTS. Each of DUAL's executive officers named below
and DUAL entered into an Agreement and Consent and Compromise and Settlement
each dated March 21, 1996, and amended on May 9, 1996 ("DUAL Executive
Agreements"). Under the terms of the DUAL Executive Agreements each of the
executive officers of DUAL have agreed to accept the payments and shares of
ENSCO Common Stock discussed above in consideration of the executive officers'
agreement to terminate their respective rights under the employment agreements
and make amendments to certain benefit plans of DUAL. The executive officers of
DUAL which entered into the DUAL Executive Agreements are as follows: L.H. Dick
Robertson, Robert F. Chrone, William R. Dudark, Dudley M. Haralson, Lewis W.
Kreps, Robert C. McCoy and W. Allen Parks.
INDEMNIFICATION. Under the Merger Agreement, ENSCO has agreed that the
Surviving Corporation's Certificate of Incorporation and By-laws following the
Merger will be no less favorable with respect to indemnification of officers,
directors, employees and agents than DUAL's current Bylaws. In addition, ENSCO
has agreed not to amend or repeal for a period of six years after the Merger the
provisions of the Surviving Corporation's Certificate of Incorporation and
Bylaws providing for indemnification of individuals who were directors, officers
or employees of DUAL or any of its subsidiaries (each a "Subsidiary" and,
collectively, the "Subsidiaries") in any manner that would affect such
individuals' rights thereunder, except as required by Delaware law and to
indemnify such directors and officers for six years after the Effective Time.
Pursuant to the Merger Agreement, the Surviving Corporation will maintain in
effect for six years the current policies of directors' and officers' insurance
maintained by DUAL and the Subsidiaries with respect to claims arising from
facts and events which occurred before the Effective Time.
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SKARKE AGREEMENT. Pursuant to an employment agreement between DUAL and
David W. Skarke, Chairman of the Board of DUAL, dated October 2, 1995, DUAL
agreed to pay Mr. Skarke a cash bonus equal to 15.02% of the Performance Bonus
Pool upon consummation of the Merger in exchange for his services as Chairman of
the Board of Directors of DUAL. Mr. Skarke's cash bonus, along with the
Performance Bonus Pool of the Unit Plan, has been limited by the Merger
Agreement. As so limited, Mr. Skarke will receive a cash bonus equal to $261,100
upon consummation of the Merger. See "Proposal to Approve the Adoption of the
DUAL Special Performance Unit Plan." Pursuant to the employment agreement, Mr.
Skarke was also granted 100,000 options under the 1993 Plan at an exercise price
of $10 3/8 per share, vesting at a rate of 20% per year, beginning on September
14, 1996. Upon consummation of the Merger, Mr. Skarke will receive shares of
ENSCO Common Stock, as described in "Certain Provisions of the Merger Agreement
- -- Effect of the Merger on Stock Options."
EXECUTIVE OFFICERS; BOARD OF DIRECTORS. The officers and directors of
Merger Subsidiary immediately prior to the Effective Time will be the initial
officers of the Surviving Corporation. The respective terms and responsibilities
of each officer and director of the Surviving Corporation will be as set forth
in the Certificate of Incorporation and Bylaws of the Surviving Corporation.
DUAL has agreed to terminate the employment of any of its executive officers
identified by ENSCO at least one day prior to the Effective Time. This
termination will not adversely affect any Long-Term Options (as defined in
"Certain Provisions of the Merger Agreement -- Effect of the Merger on Stock
Options"). ENSCO intends to terminate all of DUAL's current executive officers.
RESTRICTIONS ON RESALES BY AFFILIATES
ENSCO has registered the shares of ENSCO Common Stock that the holders of
DUAL Common Stock will be entitled to receive upon consummation of the Merger
under the Securities Act. DUAL stockholders who are not deemed to be
"affiliates" of DUAL may freely sell the shares of ENSCO Common Stock they
receive in the Merger. Stockholders of DUAL who are deemed to be "affiliates" of
DUAL may resell the shares of ENSCO Common Stock received in the Merger (i) in
transactions in compliance with Rule 145 under the Securities Act, (ii) pursuant
to an effective registration statement under the Securities Act, or (iii)
pursuant to any other exemption from registration which may be available to such
stockholder. Such stockholders may not use this Prospectus/Proxy Statement to
effect resales of the shares of ENSCO Common Stock they receive.
Rule 145, as currently in effect, imposes restrictions on the manner in
which such affiliates may make resales and also on the volume of resales that
such affiliates, and others with whom they may act in concert, may make in any
three-month period. The term "affiliates" is defined in the Securities Act to
include any person who, directly or indirectly, controls, is controlled by, or
is under common control with, DUAL at the time the Merger is submitted to a vote
of the stockholders of DUAL. ENSCO has been advised by DUAL that David W.
Skarke, L.H. Dick Robertson, W. Allen Parks, Dudley M. Haralson, Robert C.
McCoy, Lewis W. Kreps and William R. Dudark (each a DUAL executive officer),
Aage Figenschou, Magne Kristiansen, Frank Jungers and Edward O. Vetter (each a
director of DUAL), the Principal Stockholder, and B. Skaugen Shipping ASA
("Skaugen") may be deemed "affiliates" of DUAL for purposes of the Securities
Act. Pursuant to the Merger Agreement, DUAL has agreed to use all commercially
reasonable efforts to cause each such person other than the Principal
Stockholder and Skaugen to deliver an affiliates' agreement to ENSCO on or prior
to the Effective Time in substantially the form attached as an exhibit to the
Merger Agreement.
Pursuant to the Principal Stockholder Agreement, ENSCO has agreed to use all
commercially reasonable efforts to effect the registration under the Securities
Act of the transfer to the stockholders of the Principal Stockholder of certain
of the shares of ENSCO Common Stock to be received by the Principal Stockholder
in exchange for the Principal Stockholder Shares and the resale of shares of
ENSCO Common Stock by the Principal Stockholder or Skaugen, subject to certain
restrictions. See "Principal Stockholder Agreement -- Registration of Merger
Shares."
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MANAGEMENT
Pursuant to the Merger Agreement, upon the consummation of the Merger, the
officers and directors of Merger Subsidiary immediately prior to the Effective
Time will be the initial officers and directors of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified, or as otherwise provided in the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
EFFECT OF MERGER ON CERTAIN DEBT OF DUAL
DUAL currently has outstanding $100,000,000 in principal amount of 9 7/8%
Senior Subordinated Notes due 2004 (the "Senior Notes"). Upon the occurrence of
a Change of Control as defined in the indenture (the "Indenture") providing for
the Senior Debt, DUAL will be obligated to make an offer to purchase (a "Change
of Control Offer") and shall, subject to the provisions described below,
purchase, on a business day (the "Change of Control Purchase Date") not more
than 90 or less than 30 days following the occurrence of the Change of Control,
all of the then outstanding Senior Notes at a purchase price (the "Change of
Control Purchase Price") equal to 101% of the aggregate principal amount of the
Senior Notes, plus accrued and unpaid interest, if any, to the Change of Control
Purchase Date. DUAL shall, subject to the provisions described below, be
required to purchase all Senior Notes properly tendered into the Change of
Control Offer and not withdrawn. The Change of Control Offer is required to
remain open for at least 20 business days and until the close of business on the
fifth business day prior to the Change of Control Purchase Date.
In order to effect such Change of Control Offer, DUAL will, not later than
the 30th day after the Change of Control, mail to the trustee under the
Indenture and to each holder of Senior Notes notice of the Change of Control
Offer, which notice shall govern the terms of the Change of Control Offer and
shall state, among other things, the procedures that holders of Senior Notes
must follow to accept the Change of Control Offer.
The Merger will constitute a Change of Control and therefore DUAL will be
required to make a Change of Control Offer after the Effective Time. The Merger
is not conditioned on ENSCO receiving any waiver of the Change in Control
provisions of the Indenture. ENSCO believes it is not likely that holders of the
Senior Notes will tender for purchase any significant portion of the Senior
Notes since such Senior Notes currently have a value in excess of 101% of the
aggregate principal amount of the Senior Notes. In the event all or any portion
of the Senior Notes are tendered by the holders thereof, ENSCO believes it has
adequate liquidity from existing financial resources to pay the purchase price
of such Senior Notes so tendered.
DUAL has entered into a $32.0 million term loan with a group of banks led by
Citibank, N.A. (the "Citibank Facility"). The Citibank Facility includes a
revolving credit facility, a term loan and a $15 million guarantee facility for
the issuance of bonds and letters of credit. The revolving credit facility and
the term loan under the Citibank Facility bears interest at LIBOR plus a margin
of 2%. As of April 30, 1996, the aggregate outstanding principal balance under
the revolving credit facility and the term loan under the Citibank Facility was
approximately $28.8 million. In addition, at April 30, 1996 there were
outstanding letters of credit for approximately $7.9 million under the guarantee
facility of the Citibank Facility. DUAL has also entered into a $17.0 million
term loan with Christiania Bank og Kreditkasse (the "CBK Loan"). The CBK Loan
bears interest at LIBOR plus 2%. As of April 30, 1996, the outstanding principal
balance under the CBK Loan was approximately $12.9 million.
Both the Citibank Facility and the CBK Loan contain customary provisions
restricting changes in control of DUAL. Pursuant to the Merger Agreement, DUAL
has covenanted to use commercially reasonable efforts to obtain waivers from
certain third parties, including the parties to the Citibank Facility and the
CBK Loan, regarding any change in control resulting from the Merger. In the
event that DUAL is unable to obtain these waivers, ENSCO believes it has
adequate liquidity from existing financial resources to pay any amounts due
under the Citibank Facility and the CBK Loan upon consummation of the Merger.
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CERTAIN PROVISIONS OF THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT NOT SUMMARIZED ELSEWHERE IN THIS PROSPECTUS/PROXY STATEMENT. THE
MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS PROSPECTUS/PROXY STATEMENT
AND IS INCORPORATED HEREIN BY REFERENCE.
EXCHANGE PROCEDURES
The Merger Agreement provides that, as of or before the Effective Time,
ENSCO will deposit with a bank or trust company organized under the laws of, and
having an office in, the United States or any state thereof and designated by
ENSCO (the "Exchange Agent"), for the benefit of the holders of DUAL Common
Stock, for exchange in accordance with the Merger Agreement, through the
Exchange Agent, (i) certificates evidencing the number of whole shares of ENSCO
Common Stock issuable in exchange for DUAL Common Stock and (ii) cash in an
amount sufficient to permit payment of cash payable in lieu of fractional shares
(such certificates and cash, the "Exchange Fund"). The Exchange Agent will,
pursuant to irrevocable instructions from ENSCO, deliver the shares of ENSCO
Common Stock and cash contemplated to be issued out of the Exchange Fund.
As soon as reasonably practicable after the Effective Time, ENSCO will
instruct the Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time evidenced outstanding
shares of DUAL Common Stock (other than Cancelable Shares) (the "Certificates")
(i) a letter of transmittal and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates evidencing shares of
ENSCO Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate will be entitled to receive in exchange therefor a
certificate representing the number of whole shares of ENSCO Common Stock which
such holder has the right to receive in respect of the shares of DUAL Common
Stock formerly represented by such Certificate (after taking into account all
shares of DUAL Common Stock then held by such holder), together with cash in
lieu of fractional shares of ENSCO Common Stock to which such holder is entitled
and any dividends or distributions to which such holder is entitled, and the
Certificate so surrendered shall forthwith be canceled. Under no circumstances
will any holder of a Certificate (except for certain lost, stolen, or destroyed
Certificates) be entitled to receive any part of the shares of ENSCO Common
Stock into which the shares of DUAL Common Stock were converted in the Merger
until such holder shall have surrendered such Certificate. In the event of a
transfer of ownership of shares of DUAL Common Stock which is not registered in
the transfer records of DUAL, the shares of ENSCO Common Stock into which the
DUAL Common Stock were converted in the Merger may be issued to the transferee
if the Certificate evidencing such shares of DUAL Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until so surrendered, each Certificate will be deemed at any time after
the Effective Time to evidence only the right to receive upon such surrender the
certificate representing the number of whole shares of ENSCO Common Stock which
such holder has the right to receive in respect of the shares of DUAL Common
Stock formerly represented by such Certificate (after taking into account all
shares of DUAL Common Stock then held by such holder), together with cash in
lieu of fractional shares of ENSCO Common Stock to which such holder is entitled
and any dividends or distributions to which such holder is entitled. ENSCO has
agreed, from and after the Effective Time, to treat the holders of certificates
formerly representing shares of DUAL Common Stock as holding of record the whole
number of shares of ENSCO Common Stock for purposes of voting and determinations
of quorums for voting.
No dividends or other distributions declared or made after the Effective
Time with respect to shares of ENSCO Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of ENSCO Common Stock into which such shares of DUAL
Common Stock were converted in the Merger, until the holder of such Certificate
shall surrender such Certificate for exchange as provided in the Merger
Agreement. Subject to the effect of
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applicable laws, following surrender of any such Certificate, there will be paid
to the holder of such Certificate, in addition to the whole shares of ENSCO
Common Stock to which such holder is entitled, without interest, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to the whole shares of ENSCO Common Stock
evidenced by such Certificate.
All shares of ENSCO Common Stock issued upon conversion of the shares of
DUAL Common Stock in accordance with the terms of the Merger Agreement
(including any cash paid or other distributions) will be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of DUAL
Common Stock.
Neither ENSCO nor the Surviving Corporation will be liable to any holder of
shares of DUAL Common Stock for any shares of ENSCO Common Stock or cash (or
dividends or distributions with respect thereto) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
If any Certificate has 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 Corporation, the posting
by such person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the shares of ENSCO Common Stock, cash in
lieu of fractional shares of ENSCO Common Stock and unpaid dividends and
distributions on shares of ENSCO Common Stock deliverable in respect thereof
pursuant to the Merger Agreement.
At the Effective Time, the stock transfer books of DUAL will be closed and
there will be no further registration of transfers of shares of DUAL Common
Stock thereafter on the records of DUAL. At or after the Effective Time, any
Certificates presented to the Exchange Agent or ENSCO for any reason will be
converted into the shares of ENSCO Common Stock, cash in lieu of fractional
shares of ENSCO Common Stock and any dividends or other distributions to which
they are entitled.
No certificates or scrip evidencing fractional shares of ENSCO Common Stock
will be issued, but in lieu thereof each holder of shares of DUAL Common Stock
who would otherwise be entitled to receive a fraction of a share of ENSCO Common
Stock, after aggregating all shares of ENSCO Common Stock which such holder
would be otherwise entitled to receive, will receive an amount equal to the
Average Trading Price (as defined below) multiplied by the fraction of a share
of ENSCO Common Stock to which such holder would otherwise be entitled, without
interest. The "Average Trading Price" will be the average of the closing sale
prices of the shares of ENSCO Common Stock on the NYSE or, if not listed on the
NYSE, any exchange on which the shares of ENSCO Common Stock may then be
principally listed (as reported by THE WALL STREET JOURNAL or, if not reported
thereby, by another authoritative source) over the ten business days immediately
preceding the Effective Date.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
ENSCO, the Merger Subsidiary and DUAL relating to, among other things, the
following matters (which representations and warranties are subject, in certain
cases, to specified exceptions and generally apply only to facts and
circumstances existing as of the date of the Merger Agreement): (i) the due
organization, valid existence, good standing, power, and authority of, and
necessary governmental approvals secured by, and similar corporate matters with
respect to, each of ENSCO, DUAL, Merger Subsidiary, and the Subsidiaries; (ii)
the delivery of, and absence of violation of, the Certificate of Incorporation
and Bylaws or equivalent organizational documents (collectively, "Organizational
Documents") of each of ENSCO, DUAL, Merger Subsidiary, and the Subsidiaries;
(iii) the capital structure of each of ENSCO, DUAL, Merger Subsidiary, and the
Subsidiaries; (iv) the power and authority of each of the parties to the Merger
Agreement to execute the Merger Agreement and to perform its obligations
thereunder, and its due authorization, execution, delivery, and validity; (v)
the absence of conflict with the Organizational Documents, with domestic or
foreign laws, rules, regulations, orders, judgments, or
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decrees, and with notes, bonds, indentures, mortgages, contracts, agreements,
permits, leases, licenses, franchises, and other instruments or obligations;
(vi) the absence of certain governmental consent, approval, authorization,
permit, notification, and filing requirements; (vii) the possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals, and orders of any governmental
authority necessary to carry on the business of DUAL and the Subsidiaries;
(viii) reports and other documents filed with the Commission and the accuracy of
the information contained therein; (ix) the absence of certain changes or events
prior to the date of the Merger Agreement having a material adverse effect on
DUAL, the Subsidiaries, ENSCO, or Merger Subsidiary; (x) the absence of certain
pending or threatened litigation against DUAL or the Subsidiaries; (xi) the
existence and content of employee benefit plans, employment contracts, and
severance agreements of DUAL and the Subsidiaries; (xii) the absence of any
collective bargaining agreement or other labor union contract applicable to DUAL
or the Subsidiaries; (xiii) the intellectual property rights used, employed,
exploited, or licensed by DUAL or any Subsidiary; (xiv) currency and
completeness of tax filings, payments, and accruals by ENSCO, ENSCO's
subsidiaries, DUAL, and the Subsidiaries; (xv) the absence of actions by DUAL or
any Subsidiary preventing the Merger from qualifying as a reorganization under
Section 368(a) of the Code; (xvi) certain environmental matters; (xvii) the
engagement and opinion of Simmons; (xviii) the vote required by stockholders of
DUAL; (xix) the absence of brokers', finders', or investment bankers' fees
incurred by DUAL, the Subsidiaries, ENSCO, and the Merger Subsidiary; (xx) the
validity of DUAL's and the Subsidiaries' title and interest in properties and
assets; (xxi) the material contracts to which DUAL or any Subsidiary is a party;
(xxii) the absence of "parachute payments" by DUAL or any Subsidiary; (xxiii)
the absence of certain unlawful business practices by DUAL, the Subsidiaries,
and their officers, directors, agents, and employees; (xxiv) real property
leased by DUAL and the Subsidiaries; (xxv) insurance policies to which DUAL or
any Subsidiary has been a party, named insured, or other beneficiary; (xxvi)
certain accounting and tax matters; (xxvii) the recommendation of the Merger by
the Board of Directors of DUAL; (xxviii) contractual or other provisions
relating to "changes in control" or similar occurrences; (xxix) the description
and documentation of all drilling rigs owned, leased, or chartered by DUAL or
any Subsidiary, and (xxx) certain matters concerning DUAL's contractual
relationships with various parties, including Sime-Dual Drilling Sdn Bhd, a
Malaysian company.
CONDUCT OF BUSINESS PENDING THE MERGER
DUAL has agreed that, between the date of the Merger Agreement and the
Effective Time, except for certain transactions previously disclosed to ENSCO or
as contemplated by the Merger Agreement, unless ENSCO otherwise agrees in
writing (which agreement may not be unreasonably withheld), (i) the businesses
of DUAL and the Subsidiaries will be conducted only in, and DUAL and the
Subsidiaries will not take any action except in, the ordinary course of business
consistent with past practice and in accordance with all applicable laws, (ii)
DUAL will use all reasonable efforts to preserve substantially intact its
business organization, to keep available the services of the current officers,
employees and consultants of DUAL and the Subsidiaries and to preserve the
current relationships of DUAL and the Subsidiaries with customers, suppliers and
other persons with which DUAL or any Subsidiary has significant business
relations, (iii) DUAL will not, and will not permit any Subsidiary to, engage in
any practice, take any action, or enter into any of a number of enumerated
transactions relating to changes or events having a material adverse effect on
DUAL or the Subsidiaries, and (iv) DUAL and each Subsidiary will cause to be
maintained in full force and effect, and without modification or amendment, or
any lapse of coverage under, all insurance policies contained in a list
previously provided to ENSCO.
ENSCO has agreed that, between the date of the Merger Agreement and the
Effective Time, except as previously disclosed to DUAL or as contemplated by the
Merger Agreement, unless DUAL otherwise agrees in writing (which agreement may
not be unreasonably withheld), (i) the businesses of ENSCO and Merger Subsidiary
will be conducted only in, and ENSCO shall not, and shall cause the Merger
Subsidiary not to, take any action except in the ordinary course of business
consistent with past practice and in accordance with all applicable laws, and
(ii) ENSCO will not (a) amend other
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otherwise change its Certificate of Incorporation or Bylaws, (b) declare, set
aside, make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock, or (c)
reclassify, combine, split or divide its capital stock or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock or
securities or obligations convertible into or exchangeable for such capital
stock.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that DUAL will not, directly or indirectly,
negotiate with any person other than ENSCO with respect to the acquisition of
DUAL or the shares of DUAL Common Stock owned by the Principal Stockholder and
it will not, and will not permit any of its officers, directors, employees,
agents or representatives (including, without limitation, investment bankers,
attorneys and accountants) to (i) initiate contact with, (ii) make, solicit or
encourage any inquiries or proposals, (iii) enter into, or participate in, any
discussions or negotiations with, (iv) disclose, directly or indirectly, any
information not customarily disclosed concerning the business and properties of
DUAL or any Subsidiary to or (v) afford any access to any of DUAL's or any
Subsidiary's properties, books and records to any person in connection with any
possible proposal relating to (a) the disposition of their respective businesses
or substantially all or their assets, (b) the acquisition of equity or debt
securities of DUAL including equity or debt securities owned by the Principal
Stockholder, or (c) the merger, share exchange or business combination, or
similar acquisition transaction of or involving DUAL or any Subsidiary with any
person other than ENSCO. However, the Merger Agreement allows the Board of
Directors of DUAL to take and disclose to stockholders of DUAL certain positions
regarding a tender offer or an exchange offer. DUAL agrees to notify ENSCO
promptly if any proposal or offer, or any inquiry or contact with any person
with respect thereto, is made and must, in any such notice to ENSCO, indicate in
reasonable detail the identity of the person making such proposal, offer,
inquiry or contact and the terms and conditions of such proposal, offer, inquiry
or contact. DUAL agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which DUAL is a
party. DUAL also agrees to cease and cause to be terminated all existing
discussions or negotiations with any parties conducted up to and including the
date of the Merger Agreement with respect to any of the foregoing.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The Merger Agreement provides that the obligations of DUAL, ENSCO and Merger
Subsidiary to consummate the Merger are subject to the satisfaction of the
following conditions: (i) the Merger Agreement and the transactions contemplated
thereunder must have been approved and adopted by the affirmative vote of the
stockholders of DUAL in accordance with Delaware Law and DUAL's Certificate of
Incorporation and Bylaws and the rules of the National Association of Securities
Dealers; (ii) no governmental authority, regulatory authority, or court may have
enacted, issued, promulgated, enforced or entered any order, executive order,
stay, decree, judgment, injunction, statute, rule or regulation which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; (iii) the Registration Statement must
have been declared effective, and no stop order suspending the effectiveness of
the Registration Statement shall be in effect; (iv) ENSCO and DUAL must have
received from the NYSE evidence that the shares of ENSCO Common Stock to be
issued to the stockholders of DUAL in the Merger shall be listed on the NYSE
immediately following the Effective Time; and (v) any applicable waiting period
under the HSR Act relating to the Merger must have expired or been terminated.
Under the Merger Agreement, the obligations of ENSCO and Merger Subsidiary
to consummate the Merger are subject to the satisfaction of the following
further conditions: (i) DUAL must have performed or complied in all material
respects with all agreements and covenants required by the Merger Agreement and
each of the representations and warranties of DUAL contained in the Merger
Agreement must be true and correct in all material respects; (ii) ENSCO must
have received from each affiliate of DUAL and any other person who may be deemed
to have become an affiliate of DUAL (under Rule 145 under the Securities Act)
after the date of the Agreement and at or prior to the Effective Time a signed
Affiliate Agreement (a form of which is attached to the Merger Agreement as
Exhibit B); (iii) since the date of the Merger Agreement, no material adverse
change in the financial
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condition, results of operations or business of DUAL and the Subsidiaries, taken
as a whole, may have occurred, and neither DUAL nor any Subsidiary may have
suffered any damage, destruction or loss materially affecting the business or
properties of DUAL and the Subsidiaries, taken as a whole; (iv) DUAL and each
Subsidiary must have delivered to ENSCO, each dated as of a date not earlier
than 30 days prior to the Effective Time, certain documents; and (v) ENSCO must
have received from Akin, Gump, Strauss, Hauer & Feld, L.L.P. a written opinion
dated as of the date of the closing to be held immediately prior to the filing
of the Certificate of Merger covering the matters set forth on Exhibit C to the
Merger Agreement.
Under the Merger Agreement, the obligations of DUAL to consummate the Merger
are subject to the satisfaction of the following further conditions: (i) ENSCO
and Merger Subsidiary must have performed or complied in all material respects
with all agreements and covenants required by the Merger Agreement and each of
the representations and warranties of ENSCO and Merger Subsidiary contained in
the Merger Agreement must be true and correct in all material respects; (ii)
since the date of the Merger Agreement, no material adverse change in the
financial condition, results of operations or business of ENSCO and its
subsidiaries, taken as a whole, may have occurred, and ENSCO and its
subsidiaries may not have suffered any damage, destruction or loss materially
affecting the business or properties of ENSCO and its subsidiaries, taken as a
whole; and (iii) DUAL must have received from Baker & McKenzie a written opinion
dated as of the date of the closing to be held immediately prior to the filing
of the Certificate of Merger covering the matters set forth on Exhibit D to the
Merger Agreement.
TERMINATION
The Merger Agreement provides that it may be terminated and the Merger and
the other transactions contemplated by the Merger Agreement may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the transactions contemplated thereby, as
follows: (i) by mutual written consent duly authorized by the Board of Directors
of DUAL and the Boards of Directors of ENSCO and Merger Subsidiary; (ii) by
either ENSCO or DUAL, if either the Effective Time has not occurred on or before
July 31, 1996 (provided, however, that the right to terminate the Merger
Agreement described in this clause (ii) will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date) or there is any Order which is final and nonappealable preventing the
consummation of the Merger, except if the party relying on such Order has not
complied with its obligations relating to obtaining any consents, licenses,
permits, waivers, approvals, authorizations, or orders required to be obtained
from governmental authorities in connection with the Merger Agreement (see "The
Merger -- Regulatory Approvals"); (iii) by ENSCO, if a tender offer or exchange
offer for 50% or more of the outstanding shares of capital stock of DUAL is
commenced, and the Board of Directors of DUAL has failed to recommend against
the stockholders of DUAL tendering their shares into such tender offer or
exchange offer; (iv) by ENSCO, if the stockholders of DUAL fail to approve and
adopt the Merger Agreement, the Merger and the transactions contemplated by the
Merger Agreement at a meeting duly convened therefor; (v) by ENSCO, upon a
breach of any representation, warranty, covenant or agreement on the part of
DUAL set forth in the Merger Agreement, or if any representation or warranty of
DUAL has become untrue, in either case such that the conditions to the
consummation of the Merger would not be satisfied (a "Terminating DUAL Breach")
(provided, however, that, if such Terminating DUAL Breach is curable by DUAL
through the exercise of its best efforts and for so long as DUAL continues to
exercise such best efforts, ENSCO may not terminate the Merger Agreement as
provided in this clause (v)); or (vi) by DUAL, upon breach of any
representation, warranty, covenant or agreement on the part of ENSCO set forth
in the Merger Agreement, or if any representation or warranty of ENSCO has
become untrue, in either case such that the conditions to the consummation of
the Merger would not be satisfied (a "Terminating ENSCO Breach") (provided,
however, that, if such Terminating ENSCO Breach is curable by ENSCO through best
efforts and for so long as ENSCO continues to exercise such best efforts, DUAL
may not terminate the Merger Agreement as provided in this clause (vi)).
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ALTERNATIVE PROPOSAL FEE; EXPENSES; DAMAGES
The Merger Agreement provides that DUAL will pay ENSCO a fee (an
"Alternative Proposal Fee") of $5 million, which amount is inclusive of all of
ENSCO's expenses related to the Merger Agreement, if the Merger Agreement is
terminated as described in clause (iii) in the immediately preceding paragraph,
or if the Merger Agreement is terminated as described in clause (iv) in the
immediately preceding paragraph as a result of the failure of the stockholders
of DUAL to approve the Merger and a proposal concerning certain business
combination transactions has been made prior to such termination, and any such
business combination is thereafter consummated within 12 months of such
termination.
Under the Merger Agreement, ENSCO will be entitled to receive its expenses
(but not the Alternative Proposal Fee) in the event that the Merger Agreement is
terminated by ENSCO as described in clause (ii) in the second preceding
paragraph (subject to the proviso thereof) or terminated by DUAL as described in
clause (v) in the second preceding paragraph. Similarly, DUAL will be entitled
to receive its expenses if the Merger Agreement is terminated by DUAL as
described in clause (vi) in the second preceding paragraph.
The Merger Agreement provides that no termination of the Merger Agreement as
a result of the matters as described in clauses (v) or (vi) in the third
preceding paragraph, shall prejudice the ability of a non-breaching party from
seeking damages from any other party for any breach of this Agreement,
including, without limitation, attorneys' fees and the right to pursue any
remedy at law or in equity.
The Merger Agreement provides that, except as set forth above and in the
sections of the Merger Agreement relating to the preparation of the Registration
Statement, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such expenses, whether or not any such transaction is consummated,
except that from and after the Effective Time DUAL will reimburse ENSCO for all
out-of-pocket expenses and fees incurred or accrued by ENSCO in connection with
the transactions contemplated by the Merger Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto by action taken
by or on behalf of their respective Boards of Directors at any time prior to the
Effective Time. However, after the approval and adoption of the Merger Agreement
and the transactions contemplated thereby by the stockholders of DUAL, no
amendment may be made which would reduce the amount or change the type of
consideration into which each share of DUAL Common Stock is to be converted upon
consummation of the Merger.
The Merger Agreement also provides that, at any time prior to the Effective
Time, any party thereto may (i) extend the time for the performance of any
obligation or other act of any other party thereto, (ii) waive any inaccuracy in
the representations and warranties contained therein or in any document
delivered pursuant thereto and (iii) waive compliance with any agreement or
condition contained therein.
EFFECT OF THE MERGER ON STOCK OPTIONS
Under the Merger Agreement, all outstanding options (the "Long-Term
Options") issued pursuant to the 1993 Plan must be surrendered as of the
Effective Time and the Surviving Corporation must, within three business days
following the Effective Time, deliver to each holder of a Long-Term Option a
number of whole shares of ENSCO Common Stock equal to the excess, if any, of
0.625 over a fraction, the numerator of which is the exercise price under such
Long-Term Option, and the denominator of which is the average of the closing
prices of ENSCO Common Stock on the NYSE for the five business days preceding
the Effective Time, multiplied by the number of shares covered by such Long-Term
Option.
44
<PAGE>
Under the Merger Agreement, on or before the Effective Time, DUAL will
endeavor to enter into one or more agreements with the holders of all
outstanding options under the Non-Employee Director Plan (the "Non-Employee
Options"), pursuant to which such holders must surrender all such Non-Employee
Options to DUAL no later than three business days prior to the Effective Time.
Pursuant to each such agreement and as consideration for such surrender, the
Surviving Corporation will, within two business days after the Effective Time,
deliver to the holder of any Non-Employee Option a number of whole shares of
ENSCO Common Stock equal to the excess, if any, of 0.625 over a fraction, the
numerator of which is the exercise price under such Non-Employee Option, and the
denominator of which is the average of the closing prices of ENSCO Common Stock
on the NYSE for the five business days preceding the Effective Time, multiplied
by the number of shares covered by such Non-Employee Option.
In performing its obligations in respect of the Long-Term Options and
Non-Employee Options pursuant to the Merger Agreement, DUAL must fully comply
with the terms and conditions of the 1993 Plan and the Non-Employee Director
Plan.
The following table sets forth, as of March 31, 1996, with respect to the
executive officers and directors of DUAL, (i) the number of shares of DUAL
Common Stock subject to Long-Term Options and Non-Employee Options that are held
by such officer or director and (ii) the estimated number of shares of ENSCO
Common Stock deliverable to such officer or director in respect of such options
pursuant to the Merger Agreement, assuming that the average of the closing
prices of ENSCO Common Stock for the five business days preceding the Effective
Time is $26.00, which was the closing sale price of ENSCO Common Stock on May 8,
1996 as reported by the NYSE:
<TABLE>
<CAPTION>
NUMBER OF ESTIMATED
SHARES SUBJECT NUMBER OF SHARES
NAME TO OPTIONS DELIVERABLE (1)
- --------------------------------------------------------------------- -------------- -----------------
<S> <C> <C>
David W. Skarke...................................................... 100,000 22,596
L.H. Dick Robertson.................................................. 180,000 43,269
William R. Dudark.................................................... 80,000 19,230
Dudley M. Haralson................................................... 104,000 25,000
Lewis W. Kreps....................................................... 80,000 19,230
Robert C. McCoy...................................................... 88,000 21,153
W. Allen Parks....................................................... 104,000 25,000
Aage Figenschou...................................................... 2,000 500
Frank Jungers........................................................ 2,000 538
Magne Kristiansen.................................................... 2,000 500
Edward O. Vetter..................................................... 2,000 538
</TABLE>
- ------------------------
(1) Based on the closing sale price of ENSCO Common Stock on May 8, 1996 of
$26.00 as reported by the NYSE.
EFFECT OF THE MERGER ON CERTAIN BENEFIT PLANS
Pursuant to the Merger Agreement, ENSCO has agreed to assume or to cause the
Surviving Corporation to assume the DUAL DRILLING COMPANY Employee Health
Benefit Plan (the "DUAL Medical Plan"), the DUAL DRILLING COMPANY Group Life
Insurance Plan, the DUAL DRILLING COMPANY Long-Term Disability Plan and the DUAL
DRILLING COMPANY Group Travel Accident Insurance Plan, Voluntary Personal
Accident Insurance Plan, Long-Term Disability Plan for Third Country Nationals,
and Premium Conversion Cafeteria Plan unless any such plan is terminated by DUAL
as directed by ENSCO prior to the Effective Time (collectively, the "Group
Insurance Plans"). ENSCO has also agreed to provide to former employees of DUAL
and its subsidiaries certain group health coverage under Section 4980B of the
Code and Sections 601 to 608 of the Employee Retirement Income Security Act of
1974 ("COBRA Coverage") for any individuals receiving COBRA Coverage under the
DUAL Medical Plan as of the Effective Time and for any employees of DUAL and its
subsidiaries and their dependents who become eligible for and elect COBRA
Coverage as a result of
45
<PAGE>
the transactions contemplated by the Merger Agreement; however, nothing
contained in the Merger Agreement obligates ENSCO to extend COBRA Coverage
beyond its normal expiration period. ENSCO and DUAL have agreed that ENSCO may
direct DUAL to terminate any Group Insurance Plan as of the Effective Time,
liquidate the assets of any trust or funding arrangement for any such plan and
settle all claims for benefits under any such plan.
DUAL has agreed to amend the DUAL DRILLING COMPANY Employees Tax
Deferred/Thrift Savings Plan and Trust (the "401(k) Plan") to comply with
certain provisions of the Code. Subject to certain conditions, ENSCO has agreed
to sponsor the 401(k) Plan as of the Effective Time and to take certain steps to
merge the 401(k) Plan into the ENSCO Savings Plan. Amounts payable under the
401(k) Plan to employees whose employment is terminated for any reason prior to
December 31, 1996 shall be paid promptly after any such termination and not
after the end of the 1996 plan year, if requested by the employee and such
payment is permitted by the terms of the 401(k) Plan.
DUAL has agreed to amend the terms of the post-retirement medical coverage
provided by DUAL under the DUAL Medical Plan (the "Retiree Medical Plan") to
provide that no employee of DUAL or any of its subsidiaries, or any beneficiary
or dependent of such an employee, may become entitled to post-retirement medical
coverage under the Retiree Medical Plan due to a retirement or other termination
of employment after the Effective Time. Similarly, DUAL has agreed to terminate
the Retiree Medical Plan. Effective as of the Effective Time, ENSCO has agreed
to provide post-retirement medical coverage under the ENSCO Medical Plan to any
former employee of DUAL or any Subsidiary who as of the Effective Time is
receiving post-retirement medical coverage under the Retiree Medical Plan,
provided that such coverage under the ENSCO Medical Plan shall be on the same
terms and conditions and shall provide the same benefits as currently available
to retired former employees of ENSCO under the ENSCO Medical Plan, but without
regard to the age and service provisions of the ENSCO Medical Plan that
determine initial eligibility for post-retirement medical coverage and without
regard to any pre-existing condition limitations contained in the ENSCO Medical
Plan. Any employee of DUAL or any Subsidiary who is not entitled to
post-retirement medical coverage under the Retiree Medical Plan as of the
Effective Time will be eligible for post-retirement medical coverage under the
ENSCO Medical Plan only if the terms and conditions for such coverage under the
ENSCO Medical Plan are satisfied.
Effective as of the Effective Time, ENSCO has agreed to assume the DUAL
DRILLING COMPANY Severance Pay Plan for Office Employees, the DUAL DRILLING
COMPANY Severance Pay Plan for Key Operating and Support Staff Employees and the
DUAL DRILLING COMPANY Severance Pay Plan for Key Operating and Engineering
Managers, provided that ENSCO shall not be obligated to continue these plans for
any specified period of time.
Effective as of the day before the Effective Time, DUAL has agreed to take
all such action necessary to freeze all benefits under the Employee Incentive
Plan, the Safety Bonus Plan, and the Pro-Performance Bonus Plan for Toolpushers
maintained by DUAL, and ENSCO has agreed to assume the benefit payment
obligations of DUAL under such plans and cause such payments to be made after
the Effective Time, and after all such payments have been made, the plans shall
be deemed terminated and ENSCO shall take such other action as it deems
appropriate to accomplish such termination.
Prior to the Effective Time, DUAL has agreed to file with the Internal
Revenue Service certain documents with respect to the Premium Conversion
Cafeteria Plan for each plan year since the inception of the Premium Conversion
Cafeteria Plan. DUAL has also agreed to file certain documents pursuant to the
requirements established by the U.S. Department of Labor ("DOL") and to make
certain payments in respect of certain employment contracts maintained by DUAL
with its officers.
Pursuant to the Merger Agreement, certain employment agreements listed by
DUAL will be terminated by DUAL as of the Effective Time. Notwithstanding the
foregoing, ENSCO may offer
46
<PAGE>
employment prior to the Effective Time to persons who have such employment
agreements and the terms of such employment, if accepted by such employee of
DUAL, may affect DUAL's obligations to the affected employee.
PRINCIPAL STOCKHOLDER AGREEMENT
VOTING AND PROXY
ENSCO has entered into the Principal Stockholder Agreement with the
Principal Stockholder, which owns approximately 59.6% of the outstanding shares
of DUAL Common Stock, a copy of which is attached to this Prospectus/Proxy
Statement as Appendix D. Pursuant to the terms of the Principal Stockholder
Agreement, the Principal Stockholder has agreed to vote, and has granted a proxy
to allow ENSCO to vote, the Principal Stockholder Shares (i) in favor of the
Merger and the Merger Agreement, (ii) in favor of adoption and approval of the
Unit Plan, and (iii) against any proposal for any recapitalization, merger
(other than the Merger), sale of assets or other business combination between
DUAL and any person or entity (other than ENSCO or Merger Subsidiary) or any
other action or agreement that ENSCO notifies the Principal Stockholder in
writing before any vote would result in a breach of any covenant, representation
or warranty or any other obligation or agreement of DUAL under the Merger
Agreement or which could result in any of the conditions to the Merger Agreement
not being fulfilled. ENSCO and Merger Subsidiary intend that the Principal
Stockholder Shares be so voted. The Principal Stockholder has agreed that it
shall not, and shall not offer or agree to, sell, transfer, tender, assign,
hypothecate or otherwise dispose of, or create or permit to exist any pledge,
lien, security interest, mortgage, charge, claim, option, proxy, voting
restriction, right of first refusal, limitation on disposition, or encumbrance
of any kind on or with respect to the Principal Stockholder Shares or other
voting securities of DUAL, whether issued heretofore or hereafter, which are
held of record or beneficially by the Principal Stockholder.
ABSTENTION FROM VOTING
Pursuant to the Principal Stockholder Agreement, the Principal Stockholder
has agreed that until July 31, 1996 it will not vote any of the Principal
Stockholder Shares at any annual, special or adjourned meeting of the
stockholders of DUAL, including the right to sign its name (as stockholder) to
any consent, certificate or other document relating to DUAL that the law of the
State of Delaware may permit or require, (i) to approve of the adoption and
approval of the Unit Plan, effective August 21, 1995 in any manner except as
contemplated by the Merger Agreement, or (ii) in any manner that is intended, or
could reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the transactions contemplated by the Merger
Agreement.
COVENANTS AND REPRESENTATIONS
Pursuant to the Principal Stockholder Agreement, the Principal Stockholder
has agreed that it has been advised that (i) the offer, sale and delivery of the
ENSCO Common Stock to the Principal Stockholder pursuant to the Merger may not
be registered under the Securities Act, despite ENSCO's obligations to use
commercially reasonable efforts to effect such registration; (ii) if the offer,
sale and delivery of the ENSCO Common Stock to the Principal Stockholder
pursuant to the Merger has not been registered under the Securities Act, then
such shares may not be offered, sold, pledged, hypothecated or otherwise
transferred unless subsequently registered under the Securities Act or an
exemption from such registration is available; and (iii) even if such sale and
delivery to the Principal Stockholder of shares of ENSCO Common Stock is
registered under the Securities Act, to the extent the Principal Stockholder is
considered an "affiliate" of DUAL at the time the Merger Agreement is submitted
for a vote of the stockholders of DUAL, any public offering or sale by the
Principal Stockholder of its shares of ENSCO Common Stock will, under current
law, require (a) the further registration under the Securities Act of such
shares, which ENSCO is obligated to use commercially reasonable efforts to
effect, (b) compliance with Rule 145 promulgated by the Commission under the
Securities Act, or (c) the availability of another exemption from such
registration under the Securities Act. Furthermore, the Principal Stockholder
also has agreed that it understands that stop transfer instructions will be
given to ENSCO's transfer agent with respect to the shares of ENSCO Common
47
<PAGE>
Stock receivable by the Principal Stockholder and that a legend will be placed
on the certificates for such shares issued to the Principal Stockholder, to the
extent the Principal Stockholder is considered an "affiliate" of DUAL at the
time the Merger Agreement is submitted for a vote of the stockholders of DUAL.
REGISTRATION OF MERGER SHARES
Pursuant to the Principal Stockholder Agreement, ENSCO has agreed to use all
commercially reasonable efforts to effect the registration under the Securities
Act of the transfer to the stockholders of the Principal Stockholder of certain
of the shares of ENSCO Common Stock to be received by the Principal Stockholder
in exchange for the Principal Stockholder Shares and the resale of shares of
ENSCO Common Stock by the Principal Stockholder or one of its significant
stockholders, subject to certain restrictions. ENSCO has agreed to keep
continuously effective the registration statement in respect of the Principal
Stockholder Shares for the period of time necessary for the Principal
Stockholder to complete the intended method or methods of distribution for the
Principal Stockholder Shares.
NO SOLICITATION
Pursuant to the Principal Stockholder Agreement, the Principal Stockholder
has agreed that until July 31, 1996, it will not negotiate with any person other
than ENSCO with respect to the acquisition of DUAL or the DUAL Common Stock
owned by the Principal Stockholder and it will not, and will not permit any of
its officers, directors, employees, agents or representatives (including without
limitation, investment bankers, attorneys and accountants) to (i) initiate
contact with, (ii) make, solicit or encourage any inquiries or proposals, (iii)
enter into or participate in any discussions or negotiations with, (iv)
disclose, directly or indirectly, any information not customarily disclosed
concerning the business and properties of DUAL or the Principal Stockholder's
interest in DUAL under the control of the Principal Stockholder, or (v) afford
any access to DUAL's properties, books and records in its possession or under
its control to any person in connection with any possible proposal relating to
(a) the disposition of DUAL's or the Principal Stockholder's businesses or
substantially all of their respective assets, (b) the acquisition of equity or
debt securities of DUAL or the Principal Stockholder, including equity or debt
securities in DUAL owned by the Principal Stockholder, or (c) the merger, share
exchange or business combination, or similar acquisition transaction of or
involving DUAL or the Principal Stockholder with any person other than ENSCO. In
addition, until July 31, 1996, the Principal Stockholder has agreed to
immediately notify ENSCO orally, and subsequently confirm in writing, all the
relevant details relating to all inquiries and proposals which it may receive
relating to any such matters. Furthermore, until July 31, 1996, the Principal
Stockholder has agreed that it will not, and will not permit any of its
representatives, at any time, to enter into or participate in any discussions or
negotiations regarding, or accept, any proposal for such a transaction received
by them from a third party or that a third party expresses a desire to
communicate to it.
THE COMPANIES
ENSCO INTERNATIONAL INCORPORATED
ENSCO is an international offshore contract drilling company that also
provides marine transportation services in the U.S. Gulf of Mexico. ENSCO's
complement of offshore drilling rigs includes 24 jackup rigs and 10 barge
drilling rigs, and ENSCO's marine transportation fleet consists of 37 vessels.
ENSCO's operations are integral to the exploration, development and production
of oil and gas.
Since 1987, ENSCO has pursued a strategy of building its fleet of offshore
drilling rigs. This strategy was exemplified by ENSCO's acquisition of the
remainder of Penrod Holding Corporation ("Penrod") in August 1993 and the
expansion of ENSCO's Venezuelan rig fleet during 1993 and 1994 with the delivery
of four new barge drilling rigs in each year. ENSCO also added three harsh-
environment jackup rigs to its North Sea fleet, two in 1994 and one in 1995.
48
<PAGE>
With ENSCO's increasing emphasis on offshore markets, it has disposed of
businesses that are not offshore-oriented or that management believed would not
meet its standards for financial performance. Accordingly, in 1995 ENSCO sold
its technical services business, in 1994 ENSCO sold substantially all of its
land rigs and in 1993 ENSCO's supply business was sold.
ENSCO was formed as a Texas corporation in 1975 and was reincorporated in
Delaware in 1987. At ENSCO's Annual Meeting of Stockholders held on May 23,
1995, the stockholders approved the change in the name of ENSCO from Energy
Service Company, Inc. to ENSCO International Incorporated. ENSCO's principal
executive office is located at 2700 Fountain Place, 1445 Ross Avenue, Dallas,
Texas 75202-2792, and its telephone number is (214) 922-1500.
DUAL DRILLING COMPANY
DUAL is a domestic and international offshore drilling contractor. DUAL was
formed in 1951 as a domestic onshore drilling contractor. In 1975, DUAL entered
the offshore contract drilling business and built a fleet of deep drilling,
self-contained platform rigs. During 1981, DUAL entered the international sector
of the offshore drilling business when it began to acquire a fleet of premium
independent-leg cantilever jackup rigs. Since that time, DUAL has expanded its
offshore fleet by purchasing additional platform and jackup rigs, and by
bareboat chartering jackup rigs. DUAL now operates a fleet of 20 premium
offshore rigs, consisting of 10 self-contained platform rigs and 10
independent-leg cantilever jackup rigs.
The Principal Stockholder acquired DUAL in 1990 through a wholly-owned
subsidiary, and operated DUAL as an independent business focused exclusively on
offshore operations. Historically, the Principal Stockholder had conducted its
offshore drilling operations through three independent, indirect wholly-owned
subsidiaries, and through direct ownership of a limited number of offshore
drilling rigs. In August 1993, DUAL completed an initial public offering of 6.25
million shares of DUAL Common Stock, which reduced the Principal Stockholder's
ownership interest in DUAL to approximately 59.6% of the outstanding DUAL Common
Stock. With the consummation of the initial public offering, the Principal
Stockholder restructured its offshore drilling operations so that (i) the
subsidiaries became a consolidated group which combined the drilling operations
of the Principal Stockholder, which were distinct from DUAL, with those of DUAL,
(ii) ownership of certain rigs, along with related debt, was transferred to
DUAL, and (iii) substantially all of the intercompany indebtedness payable to
the Principal Stockholder was satisfied as a contribution to the capital of
DUAL. DUAL's principal executive office is located at 5956 Sherry Lane, Suite
1500, Dallas, Texas 75225, and its telephone number is (214) 373-6200.
MERGER SUBSIDIARY
Merger Subsidiary was formed by ENSCO on March 5, 1996, solely for the
purpose of effecting the Merger. It has no material assets and has not engaged
in any activities except in connection with the Merger. All of its outstanding
capital stock is owned by ENSCO. Merger Subsidiary's principal executive office
is located at 2700 Fountain Place, 1445 Ross Avenue, Dallas, Texas 75202-2792,
and its telephone number is (214) 922-1500.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of April 30, 1996,
regarding beneficial ownership and percentage of total voting power of the DUAL
Common Stock by each stockholder who is known by DUAL to own more than 5% of the
outstanding DUAL Common Stock, each director, each executive officer and all
directors and executive officers as a group. Each stockholder has sole voting
and investment power with respect to such stockholder's shares of DUAL Common
Stock, except to the extent that authority is shared by spouses under applicable
law and as set forth in footnotes below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED (4) CLASS
- ------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Dual Invest ASA (1)............................................................ 9,382,354 59.6%
David W. Skarke................................................................ 100,000 *
Aage Figenschou................................................................ -- *
Magne Kristiansen.............................................................. 2,000 *
Frank Jungers.................................................................. 3,000 *
Edward O. Vetter............................................................... 3,000 *
L.H. Dick Robertson (2)........................................................ 223,920 1.4%
W. Allen Parks (2)(3).......................................................... 125,972 *
Dudley M. Haralson (2)......................................................... 113,502 *
Robert C. McCoy (2)............................................................ 105,772 *
Lewis W. Kreps (2)............................................................. 93,424 *
William R. Dudark (2).......................................................... 93,424 *
All directors and executive officers as a group (10 persons)................... 864,014 5.2%
</TABLE>
- ------------------------
* Less than 1%
(1) The address of Dual Invest ASA is P.O. Box 1611, Vika 0119, Oslo, Norway.
Dual Invest ASA is publicly traded on the Oslo Stock Exchange.
<TABLE>
<CAPTION>
% OF CAPITAL
STOCK OWNED OF
NUMBER OF RECORD OF DUAL
NAME OF STOCKHOLDER ADDRESS SHARES OWNED INVEST ASA
- --------------------------------- ------------------------------------- ------------- ---------------
<S> <C> <C> <C>
B. Skaugen Shipping ASA Dronning Maudsgt. 1 3,295,597 22.22
P.O. Box 1611, Vika
0119 Oslo, Norway
Morgan Guaranty Trust Securities Reconsiliation Dept. 1,972,000 13.30
Co. of N.Y. Boulevard Emile Jacqmain 151
1210 Brussels, Belgium
</TABLE>
(2) Includes remaining unvested shares of restricted stock granted directly to
the officers of DUAL in 1993, or an aggregate of 30,000 shares of a total of
172,857 shares granted to DUAL's executive officers under the Dual Invest
ASA Stock Option Compensation Plan 1991 and the 1993 Plan. The holders have
the right to vote and receive dividends of such shares, but do not have the
power to dispose of, or direct the disposition of, such shares until the
shares are vested pursuant to the terms of such plan. The remaining 30,000
shares vest in August 1996.
(3) Includes 100 shares owned by his parents as to which Mr. Parks disclaims
beneficial ownership, and 300 shares owned by his children.
50
<PAGE>
(4) Includes outstanding options issued under the 1993 Plan (the "Options"), and
that vest within 60 days giving each Option holder the right to purchase
shares of DUAL Common Stock equal to the number of shares listed in the
table below:
<TABLE>
<S> <C>
David W. Skarke 100,000
Magne Kristiansen 2,000
Frank Jungers 2,000
Edward O. Vetter 2,000
L. H. Dick Robertson 180,000
W. Allen Parks 104,000
Dudley M. Haralson 104,000
Robert C. McCoy 88,000
Lewis W. Kreps 80,000
William R. Dudark 80,000
</TABLE>
Mr. Aage Figenschou has an Option to purchase 2,000 shares of DUAL Common
Stock that vests fully on July 23, 1996. In the event of a Change of Control
(as defined in the Plan) the Options vest fully on the Change-of-Control
date.
51
<PAGE>
UNAUDITED COMBINED CONDENSED PRO FORMA
FINANCIAL INFORMATION
The following unaudited combined condensed pro forma statements of
operations for the three months ended March 31, 1996 and for the year ended
December 31, 1995, and the following unaudited combined condensed pro forma
balance sheet at March 31, 1996, present, for informational purposes only,
certain unaudited combined condensed pro forma financial information for ENSCO
giving effect to the Merger and related purchase accounting adjustments. The
unaudited combined condensed pro forma statements of operations give pro forma
effect to the Merger as if it had been completed on January 1, 1995. The
unaudited combined condensed pro forma balance sheet gives pro forma effect to
the Merger as if it had been completed on March 31, 1996.
The unaudited combined condensed pro forma financial information has been
prepared in accordance with GAAP and gives effect to the Merger, as a result of
which DUAL would become a wholly-owned subsidiary of ENSCO, using the purchase
method of accounting.
The unaudited combined condensed pro forma financial information should be
read in conjunction with, and is qualified in its entirety by reference to, the
unaudited Consolidated Financial Statements of ENSCO and Notes thereto included
in the ENSCO Form 10-Q for the three months ended March 31, 1996 and the audited
Consolidated Financial Statements of ENSCO and Notes thereto included in the
ENSCO 1995 Form 10-K, which are incorporated by reference in this
Prospectus/Proxy Statement, and to the unaudited Consolidated Financial
Statements of DUAL and Notes thereto included in the DUAL Form 10-Q for the
three months ended March 31, 1996 and the audited Consolidated Financial
Statements of DUAL and Notes thereto included in the DUAL 1995 Form 10-K, which
are incorporated by reference in this Prospectus/Proxy Statement.
The unaudited combined condensed pro forma financial information does not
purport to present what ENSCO's financial position or results of operations
would actually have been had the Merger occurred as of the date or at the
beginning of the periods indicated, nor does such financial information purport
to project ENSCO's financial position or results of operations for any future
date or period.
52
<PAGE>
ENSCO INTERNATIONAL INCORPORATED
COMBINED CONDENSED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
ENSCO DUAL
INTERNATIONAL DRILLING PRO FORMA
INCORPORATED COMPANY ADJUSTMENTS PRO FORMA
------------ ----------- --------------- -------------
<S> <C> <C> <C> <C>
Current assets
Cash and short-term investments..................... $ 75,154 $ 45,217 $ (13,023)(b) $ 107,348
Accounts and notes receivable, net.................. 65,071 20,884 85,955
Prepaid expenses and other.......................... 21,587 12,722 (3,708)(a) 30,601
------------ ----------- --------------- -------------
Total current assets.............................. 161,812 78,823 (16,731) 223,904
------------ ----------- --------------- -------------
Property and equipment, net........................... 642,493 193,480 85,820(a) 921,793
Goodwill.............................................. 7,140 24,600 28,178(a) 81,754
13,843(b)
7,993(c)
Other assets.......................................... 13,175 6,857 (3,565)(a) 16,467
------------ ----------- --------------- -------------
$ 824,620 $ 303,760 $ 115,538 $ 1,243,918
------------ ----------- --------------- -------------
------------ ----------- --------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities............ $ 45,071 $ 16,222 $ 7,500(a) $ 69,613
820(b)
Current maturities of long-term debt................ 32,851 7,178 40,029
------------ ----------- --------------- -------------
Total current liabilities......................... 77,922 23,400 8,320 109,642
------------ ----------- --------------- -------------
Long-term debt........................................ 150,518 135,249 5,106(a) 290,873
Deferred income taxes................................. 29,251 1,562 18,477(a) 49,290
Other liabilities..................................... 20,092 2,428 3,000(a) 25,520
Stockholders' equity
Common stock........................................ 6,695 158 827(a) 7,709
29(c)
Additional paid-in capital.......................... 616,300 173,793 38,985(a) 837,042
7,964(c)
Accumulated deficit................................. (8,908) (32,411) 32,411(a) (8,908)
Other............................................... (6,113) -- (6,113)
Treasury stock...................................... (61,137) (419) 419(a) (61,137)
------------ ----------- --------------- -------------
Total stockholders' equity........................ 546,837 141,121 80,635 768,593
------------ ----------- --------------- -------------
$ 824,620 $ 303,760 $ 115,538 $ 1,243,918
------------ ----------- --------------- -------------
------------ ----------- --------------- -------------
</TABLE>
See accompanying notes
53
<PAGE>
ENSCO INTERNATIONAL INCORPORATED
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
ENSCO DUAL
INTERNATIONAL DRILLING PRO FORMA
INCORPORATED COMPANY ADJUSTMENTS PRO FORMA
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues
Contract drilling........................................ $ 72,883 $ 29,461 $ $ 102,344
Marine transportation.................................... 11,663 -- 11,663
------------ ----------- -----------
84,546 29,461 114,007
------------ ----------- -----------
Operating expenses
Contract drilling........................................ 37,337 18,589 55,926
Marine transportation.................................... 6,187 -- 6,187
Depreciation and amortization............................ 16,374 4,813 1,234(b) 22,455
34(c)
General and administrative............................... 2,215 2,040 4,255
------------ ----------- ------------ -----------
62,113 25,442 1,268 88,823
------------ ----------- ------------ -----------
Operating income........................................... 22,433 4,019 (1,268) 25,184
------------ ----------- ------------ -----------
Other income (expense)
Interest income.......................................... 1,236 527 146(d) 1,909
Interest expense......................................... (4,049) (3,634) 99(e) (7,584)
Other, net............................................... 264 92 356
------------ ----------- ------------ -----------
(2,549) (3,015) 245 (5,319)
------------ ----------- ------------ -----------
Income from continuing operations before income taxes and
minority interest......................................... 19,884 1,004 (1,023) 19,865
Provision for income taxes................................. 4,767 30 (22)(f) 4,775
Minority interest.......................................... 427 -- 427
------------ ----------- ------------ -----------
Net income................................................. $ 14,690 $ 974 $ (1,001) $ 14,663
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Earnings per share from continuing operations.............. $ 0.24 $ 0.21
------------ -----------
------------ -----------
Average common shares outstanding.......................... 60,651 10,138(g) 70,789
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See accompanying notes
54
<PAGE>
ENSCO INTERNATIONAL INCORPORATED
COMBINED CONDENSED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------
ENSCO DUAL
INTERNATIONAL DRILLING PRO FORMA
INCORPORATED COMPANY ADJUSTMENTS PRO FORMA
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues
Contract drilling........................................ $ 240,775 $ 85,889 $ $ 326,664
Marine transportation.................................... 38,339 -- 38,339
Gain on disposition of assets............................ -- -- 5,127(a) 5,127
------------ ----------- ------------- -----------
279,114 85,889 5,127 370,130
------------ ----------- ------------- -----------
Operating expenses
Contract drilling........................................ 132,558 60,229 192,787
Marine transportation.................................... 23,402 -- 23,402
Depreciation and amortization............................ 58,390 19,608 6,302(b) 84,537
237(c)
General and administrative............................... 9,569 7,563 17,132
------------ ----------- ------------- -----------
223,919 87,400 6,539 317,858
------------ ----------- ------------- -----------
Operating income (loss).................................... 55,195 (1,511) (1,412) 52,272
------------ ----------- ------------- -----------
Other income (expense)
Interest income.......................................... 6,310 2,400 567(d) 9,277
Interest expense......................................... (16,564) (14,705) 615(e) (30,654)
Gain on disposition of assets............................ -- 5,127 (5,127)(a)
Other, net............................................... 2,398 336 2,734
------------ ----------- ------------- -----------
(7,856) (6,842) (3,945) (18,643)
------------ ----------- ------------- -----------
Income (loss) from continuing operations before income
taxes and minority interest............................... 47,339 (8,353) (5,357) 33,629
Provision for income taxes................................. 3,397 885 (1,792)(f) 2,490
Minority interest.......................................... 2,179 -- 2,179
------------ ----------- ------------- -----------
Income (loss) from continuing operations................... $ 41,763 $ (9,238) $ (3,565) $ 28,960
------------ ----------- ------------- -----------
------------ ----------- ------------- -----------
Earnings per share from continuing operations.............. $ 0.69 $ 0.41
------------ -----------
------------ -----------
Average common shares outstanding.......................... 60,527 10,138(g) 70,665
------------ ------------- -----------
------------ ------------- -----------
</TABLE>
See accompanying notes
55
<PAGE>
NOTES TO UNAUDITED COMBINED CONDENSED PRO FORMA FINANCIAL STATEMENTS
The accompanying unaudited combined condensed pro forma financial statements
are based upon adjustments to the historical consolidated financial statements
of ENSCO and DUAL to give effect to the Merger.
The unaudited combined condensed pro forma balance sheet assumes the Merger
was consummated on March 31, 1996, and the unaudited combined condensed pro
forma statements of operations assume the Merger was consummated as of January
1, 1995. The unaudited combined condensed proforma statements of operations are
not necessarily indicative of the results that would have been obtained had the
Merger been consummated on January 1, 1995 or that may be obtained in the
future.
Certain information and notes normally included in financial statements
prepared in accordance with GAAP have been omitted pursuant to the rules and
regulations of the Commission. The unaudited combined condensed pro forma
financial statements should be read in conjunction with the consolidated
financial statements of ENSCO and DUAL for the three months ended March 31, 1996
previously filed separately with the Commission under Form 10-Q and incorporated
by reference in this Prospectus/Proxy Statement and the consolidated financial
statements of ENSCO and DUAL for the year ended December 31, 1995 previously
filed separately with the Commission under Form 10-K and incorporated by
reference in this Prospectus/Proxy Statement.
PRO FORMA ADJUSTMENTS TO HISTORICAL COMBINED CONDENSED BALANCE SHEET
The following pro forma adjustments have been made to reflect the Merger as
if it had been consummated as of March 31, 1996:
(a) To reflect the issuance of 9,853,571 shares of ENSCO Common Stock to be
issued in the Merger based upon an estimated average price for shares of
ENSCO Common Stock of $21.694 per share. The adjustments allocate the
purchase price to the fair value of assets acquired and liabilities
assumed and eliminate the historical equity of DUAL.
(b) To reflect other direct costs of the Merger, including severance and
other employee-related costs, professional services, and fees and
commissions. The majority of the costs are assumed to be paid prior to or
at closing.
(c) To reflect the issuance of 284,186 shares of ENSCO Common Stock to be
issued in the Merger related to outstanding options to purchase shares of
DUAL Common Stock. The above number of shares of ENSCO Common Stock to be
issued is based upon the excess of 0.625 over a fraction, the numerator
of which is the exercise price under the DUAL Options and the denominator
of which is the approximate current price of ENSCO Common Stock,
multiplied by the number of shares covered by the DUAL Options.
PRO FORMA ADJUSTMENTS TO HISTORICAL COMBINED CONDENSED STATEMENTS OF OPERATIONS
The following pro forma adjustments have been made to reflect the Merger as
if it had been consummated as of January 1, 1995:
(a) To conform DUAL's accounting policy with ENSCO's with respect to the
reporting of gains on disposition of assets.
(b) To adjust depreciation and amortization for the effects of the increase
in accounting basis of the property and equipment acquired and adjustment
of remaining useful lives.
56
<PAGE>
(c) To reflect the amortization of the amount of purchase price in excess of
the fair value of the net assets acquired over 40 years, as follows:
<TABLE>
<S> <C>
Total pro forma goodwill at December 31, 1995..................... $ 85,730
Less: Original ENSCO goodwill at December 31, 1995................ (7,252)
---------
Goodwill attributable to Dual acquisition..................... 78,478
Amortization period (in years).................................... 40
---------
Annual amortization of new goodwill........................... 1,962
Less: Amortization of goodwill per Dual historical books.......... (1,725)
---------
Increase in goodwill amortization............................. $ 237
---------
---------
</TABLE>
(d) To reflect the amortization of the premium associated with the
subordinated debt.
(e) To eliminate the amortization of loan origination costs which were
assigned no value in the purchase price allocation.
(f) To adjust deferred tax expense as a result of the change in book basis
of various assets and liabilities.
(g) To reflect the issuance of 10,137,757 shares of ENSCO Common Stock.
COMPARISONS OF STOCKHOLDERS' RIGHTS
Upon consummation of the Merger, stockholders of DUAL will become
stockholders of ENSCO. The rights of former DUAL stockholders will continue to
be governed by applicable Delaware law ("Delaware Law"), and will be governed by
the Certificate of Incorporation, as amended, and Bylaws of ENSCO (the "ENSCO
Certificate" and the "ENSCO Bylaws," respectively). The following is a summary
of the material differences between the ENSCO Certificate and ENSCO Bylaws, on
the one hand, and the Certificate of Incorporation and Bylaws of DUAL (the "DUAL
Certificate" and the "DUAL Bylaws," respectively), on the other hand, that may
affect the rights of DUAL's stockholders who become holders of ENSCO Common
Stock.
CAPITAL STOCK
The authorized capital stock of ENSCO consists of 125,000,000 shares of
Common Stock, $.10 par value, 5,000,000 shares of First Preferred Stock (as
defined in the ENSCO Certificate), par value $1.00 and 15,000,000 shares of
Serial Preferred Stock (as defined in the ENSCO Certificate), par value $1.00.
No shares of First Preferred Stock or Serial Preferred Stock are currently
outstanding. All shares of ENSCO Common Stock are identical and have one vote
per share.
The authorized capital stock of DUAL consists of 50,000,000 shares of Common
Stock, $0.01 par value, and 10,000,000 shares of Preferred Stock (as defined in
the DUAL Certificate), $0.01 par value. No shares of DUAL's Preferred Stock are
currently outstanding. All shares of DUAL Common Stock are identical and have
one vote per share.
SPECIAL MEETINGS OF STOCKHOLDERS
Under Delaware Law, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the certificate
of incorporation or the bylaws.
The DUAL Certificate contains provisions concerning special meetings
consistent with the provisions of Delaware Law described above, and also
empowers holders of at least 33 1/3% of the stock entitled to vote on the matter
or matters to be considered at a special meeting to call such a meeting. The
ENSCO Certificate contains provisions concerning special meetings consistent
with the provisions of Delaware Law described above, and also empowers the
chairman of the board or the president to call a special meeting.
57
<PAGE>
NUMBER OF DIRECTORS
Under Delaware law, the minimum number of directors is one. Delaware law
permits the board of directors alone to change the authorized number, or the
range, of directors by amendment to the bylaws, unless the directors are not
authorized in the certificate of incorporation to amend the bylaws or the number
of directors is fixed in the certificate of incorporation, in which cases a
change in the number of directors may be made only upon approval of such change
by the stockholders.
The DUAL Bylaws provide for a variable number of directors between five and
seven, with the exact number currently fixed at six. The ENSCO Certificate and
the ENSCO Bylaws also provide for a variable number of directors between three
and 15, with the exact number currently fixed at eight.
CLASSIFICATION OF BOARD
A classified board is one in which a certain number of the directors are
elected on a rotating basis each year. This method of electing directors makes
changes in the composition of the board of directors, and thus a potential
change in control of a corporation, a lengthier and more difficult process.
Delaware law permits, but does not require, a classified board of directors,
with staggered terms under which one-half or one-third of the directors are
elected for terms of two or three years, respectively.
DUAL does not have a classified board of directors. The ENSCO Certificate
and Bylaws divide the ENSCO board of directors into three classes, with each
class serving a staggered three-year term.
REMOVAL OF DIRECTORS
Under Delaware law, a director of a corporation that does not have a
classified board of directors may be removed with or without cause with the
approval of a majority of the outstanding shares entitled to vote at an election
of directors, and a director of a corporation that has a classified board of
directors may be removed only for cause unless the corporation's certificate of
incorporation provides otherwise.
The ENSCO Certificate provides for a classified board of directors. The
ENSCO Bylaws provide that a director may be removed at any time and only for
cause by the holders of stock having more than 50% of the voting power of
outstanding stock. The DUAL Certificate provides that a director may be removed
at an annual or special meeting of stockholders and only for cause by the
holders of a majority of DUAL's voting capital stock.
ANTI-TAKEOVER PROVISIONS
ENSCO. On February 21, 1995, the ENSCO Board of Directors declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of ENSCO Common Stock. The dividend was payable on March 6, 1995 (the
"Rights Record Date") to the stockholders of record on that date. Each Right
entitles the registered holder to purchase from ENSCO one-hundredth of a share
of Series A Junior Participating Preferred Stock, par value $1.00 per share (the
"Series A Preferred Stock") of ENSCO at a price of $50.00 per one one-hundredth
of a share of Series A Preferred Stock (the "Purchase Price"), subject to
adjustment. The Rights are described on ENSCO's Form 8-A Registration Statement
filed with the Commission on February 23, 1995, which is incorporated herein by
reference.
DUAL. DUAL does not have a stockholders' rights plan and the DUAL
Certificate and the DUAL Bylaws do not contain specific anti-takeover
provisions.
INDEMNIFICATION AND LIMITATION OF MONETARY LIABILITIES
Section 145 of the General Corporation Law of the State of Delaware provides
generally and in pertinent part that a Delaware corporation may indemnify its
directors and officers against expenses, judgments, fines and settlements
actually and reasonably incurred by them in connection with any civil, criminal,
administrative, or investigative suit or action except actions by or in the
right of the corporation if, in connection with the matters in issues, they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation, and in connection
58
<PAGE>
with any criminal suit or proceeding, if in connection with the matters in
issue, they had no reasonable cause to believe their conduct was unlawful.
Section 145 further provides that in connection with the defense or settlement
of any action by or in the right of the corporation, a Delaware corporation may
indemnify its directors and officers against expenses actually and reasonably
incurred by them if, in connection with the matters in issue, they acted in good
faith, in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made with
respect to any claim, issue or matter as to which such person has been adjudged
liable for negligence or misconduct unless the Court of Chancery or the court in
which such action or suit to brought approves such indemnification. Section 145
further permits a Delaware corporation to grant its directors and officers
additional rights of indemnification through bylaw provisions and otherwise, and
to purchase indemnity insurance on behalf of its directors and officers.
Article Fifteen of the ENSCO Certificate provides, in general, that ENSCO
must indemnify its directors and officers under certain of the circumstances
defined in Section 145, and that no director of ENSCO will be personally liable
to ENSCO or its stockholders for monetary damages for any breach of such
director's fiduciary duty, with certain exceptions. This Article further allows
ENSCO to purchase and maintain insurance on behalf of its directors, officers,
employees, or agents and to provide for such indemnification by means of a trust
fund, security interest, letter of credit, surety bond, contract, and/or similar
arrangement. The directors and officers of ENSCO and its subsidiaries are
insured (subject to certain exceptions and deductions) against liabilities which
they may incur in their capacity as such, including liabilities under the
Securities Act, under a liability insurance policy carried by ENSCO. The ENSCO
Bylaws require ENSCO to indemnify its officers, directors, employees and agents
to the full extent permitted by the General Corporation Law of the State of
Delaware.
Article Eight of the DUAL Bylaws provides, in general, that DUAL must
indemnify its directors and officers under certain of the circumstances defined
in Section 145, and Article Sixth of the DUAL Certificate provides that no
director of DUAL will be personally liable to DUAL or its stockholders for
monetary damages for any breach of such director's fiduciary duty, with certain
exceptions identical to those set forth in the ENSCO Certificate. Article Eight
of the DUAL Bylaws further allows DUAL to purchase and maintain insurance on
behalf of its directors, officers, employees, or agents. The directors and
officers of DUAL and its subsidiaries are insured (subject to certain exceptions
and deductions) against liabilities which they may incur in their capacity as
such, including liabilities under the Securities Act, under a liability
insurance policy carried by DUAL. The DUAL Bylaws further require DUAL to
indemnify its officers, directors, employees and agents to the full extent
permitted by the General Corporation Law of the State of Delaware.
DISSOLUTION
The DUAL Certificate provides that, in the event of the dissolution,
liquidation or winding up of DUAL, the DUAL Preferred Stock shall have the
rights fixed for it by the Board of Directors of DUAL. The ENSCO Certificate
provides that, in the event of dissolution, liquidation or winding up of ENSCO,
holders of the First Preferred Stock shall have the rights fixed for them by the
ENSCO Board of Directors; provided that rights of any series of Serial Preferred
Stock to receive any such distribution will be junior and subordinate to the
liquidation preference of all outstanding shares of the $1.50 Preferred Stock
(as defined in the ENSCO Certificate and none of which are currently
outstanding), the Series A Preferred Stock (as defined in the ENSCO Certificate
and none of which are currently outstanding), and any other series of First
Preferred Stock which by its terms is senior to the shares of Serial Preferred
Stock.
PREEMPTIVE RIGHTS
Unless the certificate of incorporation provides otherwise, the stockholders
of a Delaware corporation do not have preemptive rights. Neither the ENSCO nor
the DUAL Certificate provides for any preemptive rights.
59
<PAGE>
PAYMENT OF DIVIDENDS
ENSCO has never paid dividends to the holders of its Common Stock. DUAL has
not paid dividends to holders of DUAL Common Stock since its initial public
offering in August 1993. ENSCO intends to retain all of its earnings for use in
its business and, therefore, does not anticipate paying cash dividends on ENSCO
Common Stock in the foreseeable future.
RESTRICTIONS ON ALIEN OWNERSHIP
The ENSCO Certificate contains certain provisions to limit ownership and
control of shares of any class of capital stock of ENSCO by certain non-U.S.
citizens in order to permit ENSCO to hold, obtain or reinstate a license or
franchise from a governmental agency necessary to conduct its business as an
owner and operator of U.S.-flag vessels. The ENSCO Certificate restricts the
transfer of shares of ENSCO Common Stock when such transfer would result in the
ownership or control by one or more non-U.S. citizens of an aggregate percentage
of the shares of ENSCO Common Stock in excess of a specified percentage.
DISSENTING STOCKHOLDERS' RIGHTS
No stockholder of DUAL or ENSCO will have any dissenters' rights in
connection with, or as a result of, the matters to be acted upon at the Special
Meeting.
STOCKHOLDERS' LISTS AND INSPECTION OF BOOKS AND RECORDS
Both the ENSCO Bylaws and the DUAL Bylaws provide that any stockholder may
examine the corporation's list of shareholders for a period of at least 10 days
prior to any meeting of stockholders, if such examination is for any purpose
germane to the meeting. The list may also be inspected at the time and place of
the meeting by an stockholder who is present. Except as stated above and as
provided by applicable law, no stockholder of ENSCO or DUAL has any additional
rights to inspect the corporation's books and records.
PROPOSAL TO APPROVE THE ADOPTION OF THE
DUAL SPECIAL PERFORMANCE UNIT PLAN
Effective August 21, 1995, DUAL's Board of Directors, upon a recommendation
of its Compensation Committee, adopted the Unit Plan and the performance goals
set forth therein, subject to approval by the stockholders of DUAL. The Unit
Plan is designed to retain and reward key executives of DUAL by granting them
special cash bonuses in the event of a Sale Transaction (as defined below)
involving DUAL during the term of the Unit Plan. The Unit Plan is intended to
provide the participants in the Unit Plan with an incentive to increase the
value of DUAL's business by allowing them to participate in a cash bonus pool
that is commensurate with the sale price of DUAL.
The Unit Plan appears as Appendix C to this Prospectus/Proxy Statement and
is incorporated herein by reference. The Unit Plan is intended to allow the
award of benefits that qualify as performance-based compensation within the
meaning of Section 162(m) of the Code. Stockholder approval of the Unit Plan is
sought in order to allow the Unit Plan to comply with the requirements set forth
in Section 162(m) of the Code.
The participants in the Unit Plan are L.H. Dick Robertson, W. Allen Parks,
Dudley M. Haralson, Robert C. McCoy, Lewis W. Kreps, William R. Dudark, and
Robert F. Chrone.
The Unit Plan will be administered by a committee appointed by the Board of
Directors of DUAL (the "Plan Committee"). The Plan Committee must be constituted
so as to permit the Unit Plan to comply with Rule 16b-3 under the Exchange Act.
Additionally, all members of the Plan Committee must be "outside directors" as
defined in Section 162(m) of the Code. The Compensation Committee of the Board
of Directors of DUAL currently serves as the Plan Committee.
Receipt of benefits pursuant to the Unit Plan is conditioned upon occurrence
of a merger, consolidation, or other reorganization of DUAL in which the
outstanding DUAL Common Stock is converted into or exchanged for securities of
another issuer, cash, or other property, or upon occurrence of a sale, lease, or
exchange of all or substantially all of the assets of DUAL (collectively, "Sale
Transactions").
60
<PAGE>
The bonus pool to be distributed pursuant to the Unit Plan (the "Performance
Bonus Pool") is a cash amount based on the Equivalent Share Price (defined
below), which amount is determined as follows:
<TABLE>
<CAPTION>
IF THE EQUIVALENT SHARE PRICE IS: THEN THE PERFORMANCE BONUS POOL AMOUNT IS:
- ------------------------------------------ ----------------------------------------------------------
<S> <C>
At least $12.00 but less than $13.00 The product of (i) the excess of the Equivalent Share
Price over $10.00 multiplied by (ii) 100,000.
At least $13.00 but less than $14.00 The product of (i) the excess of the Equivalent Share
Price over $10.00 multiplied by (ii) 200,000.
At least $14.00 but less than $15.00 The product of (i) the excess of the Equivalent Share
Price over $10.00 multiplied by (ii) 300,000.
$15.00 and above The product of (i) the excess of the Equivalent Share
Price over $10.00 multiplied by (ii) 400,000.
</TABLE>
Upon occurrence of a Sale Transaction, each participant will be paid, in
cash, the following proportions of the Performance Bonus Pool: 27.0% to Mr.
Robertson; 15.6% to each of Mr. Parks and Mr. Haralson; 13.2% to Mr. McCoy;
12.0% to each of Mr. Kreps and Dudark; and 4.5% to Mr. Chrone.
Pursuant to the Merger Agreement, DUAL has agreed to set the Performance
Bonus Pool associated with the Merger, together with certain payments due to Mr.
Skarke under his employment agreement with DUAL, at $2,000,000. See "The Merger
- -- Interests of Certain Persons; Possible Conflicts of Interest -- Skarke
Agreement." As so limited, and as limited by the terms of the DUAL Executive
Agreements, the amounts to be received by Unit Plan participants upon
consummation of the Merger, if the Merger is approved by the stockholders of
DUAL, would be as follows:
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
UNIT PLAN
-----------------------------------
NAME AND POSITION DOLLAR VALUE($) NUMBER OF UNITS
- ----------------------------------------------------------------------------- --------------- ------------------
<S> <C> <C>
L. H. Dick Robertson......................................................... $ 469,972 Not applicable.
CHIEF EXECUTIVE OFFICER, PRESIDENT, AND DIRECTOR
W. Allen Parks............................................................... 271,540 Not applicable.
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Robert C. McCoy.............................................................. 229,765 Not applicable.
SENIOR VICE PRESIDENT, MARKETING
Dudley M. Haralson........................................................... 271,540 Not applicable.
SENIOR VICE PRESIDENT, OPERATIONS
Lewis W. Kreps............................................................... 208,877 Not applicable.
VICE PRESIDENT, BUSINESS DEVELOPMENT
---------------
All current executive officers as a group.................................... 1,451,694 Not applicable.
---------------
---------------
All current directors who are not executive officers
as a group (1).............................................................. 261,100 Not applicable.
---------------
---------------
All employees, including all current officers who are not executive officers,
as a group.................................................................. 287,206 Not applicable.
---------------
---------------
</TABLE>
- ------------------------
(1) Consists of the cash bonus payable to Mr. Skarke pursuant to his employment
agreement. Although Mr. Skarke is not a participant in the Unit Plan, his
cash bonus is measured as a percentage of the Performance Bonus Pool. See
"The Merger -- Interests of Certain Persons; Possible Conflicts of Interest
-- Skarke Agreement."
61
<PAGE>
Approval of the Unit Plan is not a condition to consummation of the Merger,
and approval of the Merger is not a condition to effectiveness of the Unit Plan.
The "Equivalent Share Price" is a dollar amount which is equal to (A)(i) the
value of the consideration (as reasonably determined by the Plan Committee) paid
or given for the stock or assets of DUAL sold or transferred pursuant to the
Sale Transaction divided by (ii) the decimal representing the percentage of the
DUAL Common Stock or assets of DUAL that is sold or transferred pursuant to the
Sale Transaction, divided by (B) the number of outstanding shares of DUAL Common
Stock on August 21, 1995, as adjusted by the Plan Committee pursuant to the
terms of the Unit Plan.
Unless the Unit Plan is required by applicable law to be extended, it will
terminate on August 20, 1997, and payments under it will only be made with
respect to a Sale Transaction which is effective, or as to which a definitive
binding agreement is in effect, on or before that date.
The Unit Plan may be amended by the Board of Directors of DUAL, subject to
any stockholder approval required by Section 162(m) of the Code or other
applicable law.
The proposal to approve the Unit Plan must receive the favorable vote of a
majority of the total number of shares of DUAL Common Stock represented and
entitled to vote at the Special Meeting or any adjournment thereof for approval.
An affirmative vote by a stockholder shall also be deemed to be approval of the
performance goals under the Unit Plan for purposes of Section 162(m) of the
Code. Pursuant to the Principal Stockholder Agreement, the Principal Stockholder
Shares (representing approximately 59.6% of the outstanding shares of DUAL
Common Stock) will be voted at the Special Meeting in favor of the Unit Plan.
Therefore, no additional stockholder votes are necessary to approve the Unit
Plan.
THE BOARD OF DIRECTORS OF DUAL HAS ADOPTED THE UNIT PLAN AND RECOMMENDS THAT
DUAL STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE ADOPTION OF THE UNIT
PLAN.
62
<PAGE>
COMPENSATION OF DUAL'S EXECUTIVE OFFICERS
The following table reflects, for the fiscal years ended December 31, 1995,
1994 and 1993, cash compensation paid by DUAL or the Principal Stockholder, and
a summary of certain other compensation paid or accrued for such year, to DUAL's
Chief Executive Officer and the five other executive officers (the "Named
Executive Officers") of DUAL for service in all capacities with the Principal
Stockholder or DUAL and their subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
----------------------
ANNUAL COMPENSATION RESTRICTED OPTIONS
NAME AND ------------------------ STOCK (NO. OF ALL OTHER
PRINCIPAL POSITION YEAR SALARY (1) BONUS (2) AWARDS SHARES) COMPENSATION (4)
- --------------------------------------------- --------- ----------- ----------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
L. H. Robertson.............................. 1995 $ 360,000 $ 115,000 180,000 $ 24,192
President and Chief 1994 430,259 52,254 120,000 28,887
Executive Officer 1993 345,000 172,500 $ 766,499 60,000 20,603
W. Allen Parks............................... 1995 246,250 10,000 104,000 16,903
Executive Vice President 1994 295,360 36,194 65,000 15,416
and Chief Financial Officer 1993 228,000 112,500 358,335 39,000 13,491
Dudley M. Haralson........................... 1995 171,051 10,000 104,000 10,478
Senior Vice President 1994 187,028 22,673 65,000 9,704
Operations 1993 125,000 62,500 229,285 27,000 7,419
Robert C. McCoy.............................. 1995 156,000 10,000 88,000 10,347
Senior Vice President 1994 187,362 22,980 58,000 8,982
Marketing 1993 140,000 70,000 354,135 30,000 8,382
Lewis W. Kreps............................... 1995 145,688 10,000 80,000 10,000
Senior Vice President 1994 169,634 20,682 53,000 9,528
Business Development 1993 125,000 62,500 229,285 27,000 7,419
William R. Dudark............................ 1995 142,500 10,000 80,000 9,781
Vice President 1994 169,634 20,682 53,000 9,685
Operations and Engineering 1993 125,000 62,500 229,285 27,000 7,419
</TABLE>
- ------------------------
(1) Salary figures for 1994 include amounts paid for accumulated vacation
benefits upon termination of DUAL's previous vacation policy. The amounts
paid to Messrs. Robertson, Parks, Haralson, McCoy, Kreps and Dudark were
$82,759; $56,610; $37,472; $35,862; $32,759; and $32,759, respectively.
(2) Bonuses earned in 1993 were payable in installments equal to 50% of such
bonus in January 1994, 25% in January 1995 and 25% in January 1996. The 1994
bonuses were earned in 1994 and were paid in full in February 1995. The 1995
bonuses were earned and paid in 1995.
(3) At December 31, 1995, the number of shares of restricted stock granted by
DUAL as restricted stock awards under the 1993 Plan ("Restricted Stock
Awards") which had not vested and the total value of such shares, based on
the last reported sales price of the DUAL Common Stock on December 29, 1995
(the final trading day of 1995), held by each Named Executive Officer are
63
<PAGE>
included in the table below. All shares of restricted stock that had not
vested as of December 31, 1995 are attributable to a Restricted Stock Award
granted by DUAL on August 12, 1993. All such unvested shares vest fully on
August 12, 1996.
<TABLE>
<CAPTION>
SHARES VALUE
--------- -----------
<S> <C> <C>
Mr. Robertson............................................................... 9,000 $ 102,375
Mr. Parks................................................................... 4,800 54,600
Mr. Haralson................................................................ 3,900 44,363
Mr. McCoy................................................................... 4,500 51,188
Mr. Kreps................................................................... 3,900 44,363
Mr. Dudark.................................................................. 3,900 44,363
</TABLE>
On December 9, 1993, DUAL granted a Restricted Stock Award of 8,559; 3,891;
2,335; 3,891; 2,335 and 2,335 shares of DUAL's Common Stock to Messrs.
Robertson, Parks, Haralson, McCoy, Kreps and Dudark, respectively. The
shares of Common Stock vested 50% on June 9, 1994 and 50% on December 9,
1994.
On August 12, 1993, DUAL granted a Restricted Stock Award of 39,942; 18,155;
10,893; 18,155; 10,893 and 10,893 shares of Common Stock to Messrs.
Robertson, Parks, Haralson, McCoy, Kreps and Dudark, respectively. The
shares of Common Stock vested 50% on February 12, 1994 and 50% on August 12,
1994.
All Restricted Stock Awards granted by DUAL entitle the beneficiaries to all
rights as a stockholder from the date of grant (including the right to
receive dividends when, as, and if declared) other than (i) the right to
transfer or sell the shares prior to the vesting date, and (ii) the right to
possession prior to the vesting date.
(4) For 1995, All Other Compensation includes (i) Company matching contributions
under DUAL's 401(K) Plan in the amount of $9,000 each for Messrs. Robertson,
Parks, Haralson and McCoy, $8,741 for Mr. Kreps and $8,550 for Mr. Dudark,
(ii) Company Matching Contributions under DUAL's Benefit Restoration Plan in
the amount of $12,600 for Mr. Robertson and $5,775 for Mr. Parks, and (iii)
the dollar value of insurance premiums paid by DUAL with respect to term
life insurance in the amounts of $2,592; $2,128; $1,478; $1,347; $1,259; and
$1,231 for Messrs. Robertson, Parks, Haralson, McCoy, Kreps and Dudark,
respectively.
OPTION CANCELLATIONS
The table below sets forth information regarding stock options, previously
issued to the Named Executive Officers under the 1993 Plan, that were authorized
for cancellation during 1995 by DUAL's Board of Directors.
64
<PAGE>
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE OF EXERCISE LENGTH OF
UNDERLYING STOCK AT PRICE AT ORIGINAL OPTION
OPTIONS/ TIME OF TIME OF TERM REMAINING
SARS REPRICING REPRICING NEW AT DATE OF
REPRICED OR OR OR EXERCISE REPRICING OR
NAME AND PRINCIPAL POSITION DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- -------------------------------------------- --------- ----------- ----------- ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
L. H. Robertson............................. 8/21/95 60,000 $ 10.00 $ 14.000 $ 10.00 8 years
Director, President 8/21/95 120,000 10.00 12.125 10.00 9 years
and CEO
W. Allen Parks.............................. 8/21/95 39,000 10.00 14.000 10.00 8 years
Executive Vice 8/21/95 65,000 10.00 12.125 10.00 9 years
President and CFO
Dudley M. Haralson.......................... 8/21/95 27,000 10.00 14.000 10.00 8 years
Senior Vice President 8/21/95 65,000 10.00 12.125 10.00 9 years
USA/International
Operations
Robert C. McCoy............................. 8/21/95 30,000 10.00 14.000 10.00 8 years
Senior Vice President 8/21/95 58,000 10.00 12.125 10.00 9 years
International Marketing
Lewis W. Kreps.............................. 8/21/95 27,000 10.00 14.000 10.00 8 years
Senior Vice President 8/21/95 53,000 10.00 12.125 10.00 9 years
Business Development
William R. Dudark........................... 8/21/95 27,000 10.00 14.000 10.00 8 years
Vice President 8/21/95 53,000 10.00 12.125 10.00 9 years
International Operations
and Engineering
</TABLE>
In August 1995, the Compensation Committee of DUAL's Board of Directors
approved the granting of options to the executive officers and certain key
employees of DUAL in exchange for the cancellation of then existing options to
purchase Company common stock. The Compensation Committee carefully considered
its decision to grant new options and effectively reduce the exercise price of
then existing options. In making its decision, the Compensation Committee
consulted with an independent compensation consultant and also considered the
then current market price of the DUAL Common Stock, the exercise prices at which
the options had previously been granted, the overall performance of the DUAL
Common Stock since the previous options had been issued and the importance of
providing renewed incentive for the executive officers and employees to continue
in the service of DUAL and renew interest in the success of DUAL.
Compensation Committee: Frank Jungers
Aage Figenschou
Edward O. Vetter
Magne Kristiansen
65
<PAGE>
OPTION GRANTS
The table below sets forth information regarding Stock Options granted under
the 1993 Plan to the Named Executive Officers during 1995:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
PERCENTAGE OF AT ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OR FULL OPTION TERM (2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME GRANTED (1) FISCAL 1995 PER SHARE DATE 5% 10%
- ------------------------------------------ ----------- ------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. H. Robertson........................... 180,000 17.1% $ 10.000 08/21/05 $ 1,132,200 $ 2,869,200
W. Allen Parks............................ 104,000 13.3% 10.000 08/21/05 654,160 1,657,760
Dudley M. Haralson........................ 104,000 13.3% 10.000 08/21/05 654,160 1,657,760
Robert C. McCoy........................... 88,000 8.4% 10.000 08/21/05 553,520 1,402,720
William R. Dudark......................... 80,000 7.6% 10.000 08/21/05 503,200 1,275,200
Lewis W. Kreps............................ 80,000 7.6% 10.000 08/21/05 503,200 1,275,200
</TABLE>
- ------------------------
(1) The options are exercisable in increments of 20% on August 21, 1996, the
first anniversary of the date of grant, and 20% on each of the second,
third, fourth and fifth anniversary dates of the grant.
(2) Potential Realizable Value is based on the assumed annual growth rates of
Common Stock for the 10-year option term. A 5% annual growth rate results in
a stock price of $16.29 per share and a 10% annual growth rate results in a
stock price of $25.94 per share. Actual gains, if any, on stock options
exercised are dependent on the future performance of DUAL's common stock.
There can be no assurance that the amounts reflected in this table will be
achieved.
AGGREGATED EXERCISES OF OPTIONS/SARS AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
For each of the Named Executive Officers, the information set forth below
reflects for the fiscal year ended December 31, 1995, options under the 1993
Plan and the value realized thereon as well as exercisable and unexercisable
options which were unexercised at year-end 1995 and the realizable value thereon
at such date:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1995 AT DECEMBER 31, 1995
ACQUIRED ON VALUE -------------------------------- --------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ----------- ----------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. H. Robertson............................ N/A N/A -0- 180,000 N/A $ 247,500
W. Allen Parks............................. N/A N/A -0- 104,000 N/A 143,000
Dudley M. Haralson......................... N/A N/A -0- 104,000 N/A 143,000
Robert C. McCoy............................ N/A N/A -0- 88,000 N/A 121,000
William R. Dudark.......................... N/A N/A -0- 80,000 N/A 110,000
Lewis W. Kreps............................. N/A N/A -0- 80,000 N/A 110,000
</TABLE>
- ------------------------
* Represents the number of unexercised options multiplied by the difference
between $11.375, which was the last reported sales price of the DUAL Common
Stock on the Nasdaq Stock Market as of December 31, 1995, and the per-share
exercise price of $10.00 for the options granted in 1995.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In June 1993, DUAL implemented the SERP, a defined benefit pension plan
covering certain of its executive officers. The SERP is administered by the
Board of Directors or by the Compensation Committee and is intended to assist
DUAL in attracting and retaining employees of exceptional ability
66
<PAGE>
by providing certain benefits. The SERP provides that upon reaching age 65,
after 10 years of service with DUAL and upon termination of employment from
DUAL, a participant will receive annual benefits, which when added to Social
Security Benefits, equal 30% of the average of the participant's highest
consecutive 36-month base compensation during the participant's service with
DUAL ("Average Compensation"). During June 1994, the Compensation Committee
approved an amendment to the SERP that raised the annual benefit for DUAL's
president to 50% of Average Compensation when added to Social Security benefits.
DUAL is the sole contributor to the SERP and the cost of benefits under the SERP
are recognized as they accrue based on certain future salary and social security
benefit assumptions.
The table below provides certain information with respect to the Named
Executive Officers and the estimated benefits payable to the respective
executives under the SERP.
SERP BENEFITS
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL RETIREMENT
CURRENT YEARS OF BENEFIT AT AGE
NAME SERVICE 65*
- -------------------------------------------------- ----------------- -----------------
<S> <C> <C>
L. H. Robertson................................... 13 $ 180,000
W. Allen Parks.................................... 18 73,875
Dudley M. Haralson................................ 8 60,000
Robert W McCoy.................................... 7 48,000
Lewis W. Kreps.................................... 14 45,000
William R. Dudark................................. 9 43,500
</TABLE>
- ------------------------
* Amounts to be reduced by Social Security benefits.
LEGAL MATTERS
The legality of the shares of ENSCO Common Stock being offered hereby will
be passed upon for ENSCO by Baker & McKenzie, Dallas, Texas. The federal income
tax consequences in connection with the Merger will be passed upon by Akin,
Gump, Strauss, Hauer & Feld, L.L.P., Dallas, Texas.
EXPERTS
The financial statements incorporated in this Prospectus/Proxy Statement by
reference from the ENSCO 1995 Form 10-K have been audited by two independent
accountants. The companies and periods covered by these audits are indicated in
the individual accountants' reports. Such financial statements have been so
included in reliance on the reports of the two independent accountants given on
the authority of such firms as experts in auditing and accounting.
The consolidated financial statements and 1995 schedules incorporated by
reference in this Prospectus/Proxy Statement from the DUAL 1995 Form 10-K have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The fairness opinion of Simmons incorporated by reference in this
Prospectus/Proxy Statement has been so incorporated in reliance upon the
authority of Simmons as experts in investment banking.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, DUAL will hold its 1996 Annual Meeting of
Stockholders in August 1996. DUAL stockholders who intend to submit proposals
for inclusion in DUAL's 1996 Proxy Statement and Proxy for stockholder action at
the DUAL 1996 Annual Meeting of Stockholders must do so by sending the proposal
and supporting statements, if any, to DUAL at its corporate offices no later
than May 31, 1996.
67
<PAGE>
INDEX
DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
1993 Plan...................................... 9
401(k) Plan.................................... 46
affiliates..................................... 10
Alternative Proposal Fee....................... 9
Average Compensation........................... 66
Average Trading Price.......................... 40
Benefit Restoration Plan....................... 35
Cancelable Shares.............................. 7
CBK Loan....................................... 38
Certificates................................... 39
Change of Control Offer........................ 38
Change of Control Purchase Date................ 38
Change of Control Purchase Price............... 38
Citibank Facility.............................. 38
COBRA Coverage................................. 45
Code........................................... 7
Commission..................................... 1
Delaware Law................................... 56
DOL............................................ 46
DUAL........................................... 1
DUAL 1995 Form 10-K............................ 2
DUAL Bylaws.................................... 56
DUAL Certificate............................... 56
DUAL Common Stock.............................. 1
DUAL Comparable Companies...................... 29
DUAL Executive Agreements...................... 36
DUAL Medical Plan.............................. 45
DUAL Options................................... 9
EBDIT.......................................... 29
Effective Time................................. 1
ENSCO.......................................... 1
ENSCO 1995 Form 10-K........................... 2
ENSCO Bylaws................................... 56
ENSCO Certificate.............................. 56
ENSCO Common Stock............................. 1
ENSCO Comparable Companies..................... 30
Equivalent Share Price......................... 16
Exchange Act................................... 2
Exchange Agent................................. 39
Exchange Fund.................................. 38
Final Candidates............................... 23
Final Three Candidates......................... 23
GAAP........................................... 8
Group Insurance Plans.......................... 45
HSR Act........................................ 8
Implied Consideration.......................... 28
Indenture...................................... 38
Long-Term Options.............................. 44
<CAPTION>
PAGE
-----
<S> <C>
LTM............................................ 29
MARAD.......................................... 18
Merger......................................... 1
Merger Agreement............................... 1
Merger Subsidiary.............................. 1
Named Executive Officers....................... 62
Non-Employee Director Plan..................... 9
Non-Employee Options........................... 45
NYSE........................................... 2
OPA'90......................................... 17
Order.......................................... 9
Organizational Documents....................... 40
Penrod......................................... 48
Performance Bonus Pool......................... 60
Plan Committee................................. 59
Potential Candidates........................... 22
Potential Sale or Merger Transaction........... 21
Principal Stockholder.......................... 10
Principal Stockholder Agreement................ 10
Principal Stockholder Shares................... 10
Prospectus/Proxy Statement..................... 1
Purchase Price................................. 57
Record Date.................................... 6
Registration Statement......................... 1
Restricted Stock Awards........................ 62
Retiree Medical Plan........................... 46
Right.......................................... 57
Rights Record Date............................. 57
Sale Transactions.............................. 16
Securities Act................................. 2
Selected Candidates............................ 23
Senior Notes................................... 38
Series A Preferred Stock....................... 57
SERP........................................... 35
Simmons........................................ 7
Simmons Engagement Letter...................... 22
Simmons Transaction Fee........................ 22
Skaugen........................................ 37
Special Meeting................................ 1
Subsidiaries................................... 36
Subsidiary..................................... 36
Surviving Corporation.......................... 6
Tax Opinion.................................... 7
Team Incentive Program......................... 36
Terminating DUAL Breach........................ 43
Terminating ENSCO Breach....................... 43
U.S. Holder.................................... 32
Unit Plan...................................... 5
</TABLE>
68
<PAGE>
APPENDIX A
MERGER AGREEMENT
A-1
<PAGE>
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER*
AMONG
ENSCO INTERNATIONAL INCORPORATED,
DDC ACQUISITION COMPANY
AND
DUAL DRILLING COMPANY
DATED MARCH 21, 1996
*As amended and restated by Amendment No. 1 to Agreement and Plan of Merger
dated as of May 7, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-2
<PAGE>
a-i
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
THE MERGER
SECTION PAGE
- ----------------------------------------------------------------------------------------- ---------
1.01. The Merger.................................................................... A-9
<C> <S> <C>
1.02. Effective Time; Closing....................................................... A-9
1.03. Effect of the Merger.......................................................... A-9
1.04. Certificate of Incorporation; Bylaws.......................................... A-9
1.05. Directors and Officers........................................................ A-10
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.01. Conversion of Securities...................................................... A-10
2.02. Exchange of Certificates...................................................... A-11
2.03. Stock Transfer Books.......................................................... A-12
2.04. Stock Options................................................................. A-13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET
3.01. Organization and Qualification; Subsidiaries.................................. A-13
3.02. Certificate of Incorporation and Bylaws....................................... A-14
3.03. Capitalization................................................................ A-14
3.04. Authority Relative to This Agreement.......................................... A-14
3.05. No Conflict; Required Filings and Consents.................................... A-15
3.06. Permits; Compliance........................................................... A-15
3.07. SEC Filings; Financial Statements............................................. A-16
3.08. Absence of Certain Changes or Events.......................................... A-16
3.09. Absence of Litigation......................................................... A-17
3.10. Employee Benefit Matters...................................................... A-17
3.11. Labor Matters................................................................. A-21
3.12. Intellectual Property......................................................... A-21
3.13. Taxes......................................................................... A-21
3.14. Environmental Matters......................................................... A-22
3.15. Opinion of Financial Advisor.................................................. A-23
3.16. Vote Required................................................................. A-23
3.17. Brokers....................................................................... A-23
3.18. Tangible Property............................................................. A-23
3.19. Bareboat Charter.............................................................. A-23
3.20. Material Contracts............................................................ A-23
3.21. Parachute Payments............................................................ A-24
3.22. Certain Business Practices.................................................... A-24
3.23. Real Property and Leases...................................................... A-24
3.24. Insurance..................................................................... A-24
3.25. Accounting and Tax Matters.................................................... A-25
3.26. Board Recommendation.......................................................... A-25
3.27. Change in Control............................................................. A-26
3.28. Target Drilling Rigs.......................................................... A-26
3.29. Sime-Dual Sdn Bhd............................................................. A-27
</TABLE>
A-3
<PAGE>
a-ii
<TABLE>
<CAPTION>
SECTION PAGE
- ------------------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
3.30. Accounts Receivable.............................................................................. A-27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB
4.01. Corporate Organization and Qualification......................................................... A-27
4.02. Certificate of Incorporation and Bylaws.......................................................... A-28
4.03. Capitalization................................................................................... A-28
4.04. Authority Relative to This Agreement............................................................. A-28
4.05. No Conflict; Required Filings and Consents....................................................... A-29
4.06. SEC Filings; Financial Statements................................................................ A-29
4.07. Absence of Certain Changes or Events............................................................. A-30
4.08. Brokers.......................................................................................... A-30
4.09. Taxes............................................................................................ A-30
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.01. Conduct of Business by the Target Pending the Merger............................................. A-31
5.02. Conduct of Business by Acquiror Pending the Merger............................................... A-31
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Registration Statement; Proxy Statement.......................................................... A-32
6.02. Target Stockholder Meeting....................................................................... A-33
6.03. Appropriate Action; Consents; Filings............................................................ A-33
6.04. Access to Information; Confidentiality........................................................... A-34
6.05. No Solicitation of Transactions.................................................................. A-34
6.06. Directors' and Officers' Indemnification......................................................... A-35
6.07. Obligations of Acquiror Sub...................................................................... A-36
6.08. Public Announcements............................................................................. A-36
6.09. Delivery of SEC Documents........................................................................ A-36
6.10. Environmental Assessment......................................................................... A-36
6.11. Notification of Certain Matters.................................................................. A-36
6.12. Further Action................................................................................... A-36
6.13. Employee Benefits................................................................................ A-36
6.14. Affiliates; Accounting and Tax Treatment......................................................... A-39
6.15. Certain Employees................................................................................ A-40
ARTICLE VII
CONDITIONS TO THE MERGER
7.01. Conditions to the Obligations of Each Party...................................................... A-40
7.02. Conditions to the Obligations of Acquiror and Acquiror Sub....................................... A-40
7.03. Conditions to the Obligations of the Target...................................................... A-41
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01. Termination...................................................................................... A-42
8.02. Fees and Expenses................................................................................ A-42
8.03. Amendment........................................................................................ A-43
</TABLE>
A-4
<PAGE>
a-iii
<TABLE>
<CAPTION>
SECTION PAGE
- ------------------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
8.04. Waiver........................................................................................... A-43
ARTICLE IX
GENERAL PROVISIONS
9.01. Non-Survival of Representations, Warranties and Agreements....................................... A-44
9.02. Notices.......................................................................................... A-44
9.03. Certain Definitions.............................................................................. A-44
9.04. Severability..................................................................................... A-45
9.05. Assignment; Binding Effect; Benefit.............................................................. A-45
9.06. Incorporation of Schedules....................................................................... A-45
9.07. Specific Performance............................................................................. A-45
9.08. Governing Law.................................................................................... A-45
9.09. Headings......................................................................................... A-46
9.10. Counterparts..................................................................................... A-46
9.11. Waiver of Jury Trial............................................................................. A-46
9.12. Entire Agreement................................................................................. A-46
</TABLE>
EXHIBIT A -- Certificate of Incorporation
EXHIBIT B -- Affiliate Agreement
EXHIBIT C -- Legal Opinion for Counsel for the Target
EXHIBIT D -- Legal Opinion for Counsel for Acquiror
A-5
<PAGE>
DEFINED TERMS
<TABLE>
<CAPTION>
TERM LOCATION
- ------------------------------------------------------------------------------------------------ ---------------
<S> <C>
Acquiror........................................................................................ Recitals
Acquiror Common Stock........................................................................... 2.01(a)(i)
Acquiror Disclosure Schedules................................................................... Article IV
Acquiror Preferred Stock........................................................................ 4.03
Acquiror SEC Reports............................................................................ 4.06(a)
Acquiror Sub.................................................................................... Recitals
Acquiror Sub Common Stock....................................................................... 2.01(a)(iii)
Acquiror Subsidiary............................................................................. 4.03
affiliate....................................................................................... 9.03(a)
Affiliate Agreements............................................................................ 6.14
Agreement....................................................................................... Recitals
AICPA Statement................................................................................. 7.02(b)
Alternative Proposal Fee........................................................................ 8.02(a)
Average Trading Price........................................................................... 2.02(e)
beneficial owner................................................................................ 9.03(b)
Benefit Restoration Plan........................................................................ 6.13(e)
Board........................................................................................... 6.05(iii)
Blue Sky Laws................................................................................... 3.05(b)(i)
Business Combination Transaction................................................................ 8.02(a)
Business Combination Transaction Proposal....................................................... 8.01(d)
business day.................................................................................... 9.03(c)
Cancelable Shares............................................................................... 2.01(a)(i)
Certificate of Merger........................................................................... 1.02
Certificates.................................................................................... 2.02(b)
Claim........................................................................................... 6.06(b)
Closing......................................................................................... 2.02
Closing Agreement............................................................................... 6.13(a)(ii)
COBRA Coverage.................................................................................. 6.13(b)
Code............................................................................................ Recitals
Confidentiality Agreement....................................................................... 9.13
control......................................................................................... 9.03(d)
controlled by................................................................................... 9.03(d)
Delaware Law.................................................................................... Recitals
DOL............................................................................................. 6.13(n)
Dual Medical Plan............................................................................... 6.13(b)
Dual Unit Plan.................................................................................. 6.13(j)
Effective Time.................................................................................. 1.02
Employee Severance Plans........................................................................ 6.13(h)
Environmental Claims............................................................................ 3.14(b)(viii)
Environmental Laws.............................................................................. 3.14(a)(ii)
Environmental Permits........................................................................... 3.14(b)(ii)
Exchange Act.................................................................................... 3.05(b)(i)
Exchange Agent.................................................................................. 2.02(a)
Exchange Fund................................................................................... 2.02(a)
Exchange Ratio.................................................................................. 2.01(a)(i)
ERISA........................................................................................... 3.10
First Amendment................................................................................. 3.29(i)
401(k) Plan..................................................................................... 6.13(a)(i)
401(k) Plan Amendment........................................................................... 6.13(a)(i)
Governmental Authority.......................................................................... 3.06
</TABLE>
A-6
<PAGE>
<TABLE>
<CAPTION>
TERM LOCATION
- ------------------------------------------------------------------------------------------------ ---------------
Group Insurance Plans........................................................................... 6.13(b)
<S> <C>
Hazardous Substances............................................................................ 3.14(a)(i)
HSR Act......................................................................................... 3.05(b)(i)
IRS............................................................................................. 3.10(c)
Joint Bareboat Charter.......................................................................... 3.29(vii)
Joint Operating Agreement....................................................................... 3.29(vi)
Laws............................................................................................ 3.05(a)(y)(ii)
Long-Term Options............................................................................... 2.04(a)(i)
Material Adverse Effect......................................................................... 3.01
Material Contract............................................................................... 3.20
Merger.......................................................................................... Recitals
NASD............................................................................................ 6.08(b)
1995 Balance Sheet.............................................................................. 3.07(c)
Non-Employee Options............................................................................ 2.04(b)
NYSE............................................................................................ 2.02(E)
Officer Incentive Plan.......................................................................... 6.13(g)
Order........................................................................................... 7.01(b)
Original Agreement.............................................................................. 3.29(i)
PBGC............................................................................................ 3.10(c)
person.......................................................................................... 9.03(e)
Plans........................................................................................... 3.10(i)
Post-Employment Benefits........................................................................ 3.10(k)(iv)
Pre-Merger Period............................................................................... 3.25(a)(i)
Prior Thrift Plan............................................................................... 6.13(a)(i)
Proxy Statement................................................................................. 6.01(a)
Registration Statement.......................................................................... 6.01(a)
Retiree Medical Plan............................................................................ 6.13(c)
Sale............................................................................................ 3.25(b)
SD.............................................................................................. 3.29(i)
SDD............................................................................................. 3.29(i)
SEC............................................................................................. 3.07(a)(ii)
Secretary....................................................................................... 1.02
SERP............................................................................................ 6.13(d)(i)
Securities Act.................................................................................. 3.05(b)(i)
Shareholders Agreement.......................................................................... 3.29(i)
Specified Expenses.............................................................................. 8.02(d)
Sime-Dual....................................................................................... 3.29(i)
Stockholder Plan................................................................................ 3.25(b)
Subsidiary...................................................................................... 3.01
subsidiary...................................................................................... 9.03(f)
subsidiaries.................................................................................... 9.03(f)
Surviving Corporation........................................................................... 1.01
Target.......................................................................................... Recitals
Target Affiliate................................................................................ 6.14
Target Banker................................................................................... 3.16
Target Common Stock............................................................................. 2.01(a)(i)
Target Disclosure Schedule...................................................................... Article III
Target Drilling Rigs............................................................................ 3.19
Target Employment Contracts..................................................................... 3.10(ii)
Target Options.................................................................................. 2.04(h)
Target Permits.................................................................................. 3.06
Target Preferred Stock.......................................................................... 3.03
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TERM LOCATION
- ------------------------------------------------------------------------------------------------ ---------------
Target SEC Reports.............................................................................. 3.07(a)
<S> <C>
Target's Stockholder Meeting.................................................................... 6.02
Terminating Acquiror Breach..................................................................... 8.01(f)
Terminating Target Breach....................................................................... 8.01(f)
Third Party Provisions.......................................................................... 9.05
Transactions.................................................................................... Recitals
Trust........................................................................................... 6.13(f)(i)
Trustee......................................................................................... 6.13(f) (i)
under common control............................................................................ 9.03(d)
U.S. GAAP....................................................................................... 3.07(b)
Vessels......................................................................................... 3.28(a)
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of March 21, 1996 (this "AGREEMENT"),
by and among ENSCO International Incorporated, a Delaware corporation
("ACQUIROR"), DDC Acquisition Company, a Delaware corporation and a direct,
wholly owned subsidiary of Acquiror ("ACQUIROR SUB"), and DUAL DRILLING COMPANY,
a Delaware corporation (the "TARGET").
WHEREAS, Acquiror Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the Delaware General Corporation Law ("DELAWARE
LAW"), will merge with and into the Target (the "MERGER");
WHEREAS, the Board of Directors of the Target (i) has determined that the
Merger is in the best interests of the Target and its stockholders and approved
and adopted this Agreement and the transactions contemplated hereby
("TRANSACTIONS") and (ii) has unanimously recommended approval and adoption of
this Agreement and approval of the Merger by, and directed that this Agreement
and the Merger be submitted to a vote of, the stockholders of the Target;
WHEREAS, the Boards of Directors of Acquiror and Acquiror Sub have
determined that the Merger is in the best interests of Acquiror, Acquiror Sub
and their stockholders and have unanimously approved and adopted this Agreement
and the Transactions; and
WHEREAS, Acquiror and the Target intend that the Merger constitute a
tax-free "reorganization" within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code of 1986 (the "CODE") by reason of Section 368(a)(2)(E) of
the Code.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Acquiror, Acquiror Sub and the Target hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with Delaware Law, at the Effective
Time (as hereinafter defined), Acquiror Sub shall be merged with and into the
Target. As a result of the Merger, the separate corporate existence of Acquiror
Sub shall cease and the Target shall continue as the surviving corporation of
the Merger (the "SURVIVING CORPORATION"). The name of the Surviving Corporation
shall be Dual Holding Company.
SECTION 1.02. EFFECTIVE TIME; CLOSING. As promptly as practicable and in
no event later than the first business day following the satisfaction or waiver
of the conditions set forth in Article VII (or such other date as may be agreed
in writing by each of the parties hereto), the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "CERTIFICATE OF
MERGER") with the Secretary of State of the State of Delaware (the "SECRETARY")
in such form as is required by, and executed in accordance with the relevant
provisions of, Delaware Law. The term "EFFECTIVE TIME" means the date and time
of the filing of the Certificate of Merger with the Secretary (or such later
time as may be agreed in writing by each of the parties hereto and specified in
the Certificate of Merger). Immediately prior to the filing of the Certificate
of Merger, a closing (the "CLOSING") will be held at the offices of Baker &
McKenzie, 2001 Ross Avenue, Suite 4500, Dallas, Texas (or such other place and
time as the parties may agree).
SECTION 1.03. EFFECT OF THE MERGER. The effect of the Merger shall be as
provided in the applicable provisions of Delaware Law.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BYLAWS. (a) At the Effective
Time, the Certificate of Incorporation of the Target, as in effect immediately
prior to the Effective Time, shall be amended
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<PAGE>
as of the Effective Time by operation of this Agreement and by virtue of the
Merger without any further action by the stockholders or directors of the
Surviving Corporation to read in its entirety as set forth in EXHIBIT A attached
hereto.
(b) At the Effective Time, the Bylaws of Acquiror Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Acquiror Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation until a successor is
elected or appointed and has qualified or until the earliest of such director's
death, resignation, removal or disqualification, and the officers of Acquiror
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified, or as otherwise provided in the Bylaws of
the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of Acquiror Sub, the Target or
the holders of any of the following shares of capital stock:
(a) Subject to the other provisions of this Section 2.01 and to Section
2.02:
(i) each share of common stock, $0.01 par value, of the Target
("TARGET COMMON STOCK") issued and outstanding immediately prior to the
Effective Time (excluding any shares held by the Target, Acquiror or
Acquiror Sub or any other direct or indirect wholly owned subsidiary of
Acquiror or the Target immediately prior to the Merger (the "CANCELABLE
SHARES")) shall be converted into the right to receive .625 shares (the
"EXCHANGE RATIO") of common stock, $0.10 par value ("ACQUIROR COMMON
STOCK"), of Acquiror. At the Effective Time, all such shares of Target
Common Stock shall no longer be outstanding and automatically shall be
canceled and cease to exist, and each certificate previously evidencing
any such shares shall thereafter represent the right to receive a
certificate representing the shares of Acquiror Common Stock into which
such shares of Target Common Stock were converted in the Merger. The
holders of certificates previously evidencing such shares of Target
Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Target Common
Stock except as otherwise provided herein or by Delaware Law. Such
certificates previously evidencing shares of Target Common Stock shall be
exchanged for certificates representing whole shares of Acquiror Common
Stock issued in consideration therefor upon the surrender of such
certificates in accordance with the provisions of Section 2.02. No
fractional shares of Acquiror Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.02(e);
(ii) each Cancelable Share shall automatically be canceled and cease
to exist, and no consideration shall be paid or payable in respect of
such shares; and
(iii) each share of common stock, par value $.01 per share, of
Acquiror Sub ("ACQUIROR SUB COMMON STOCK") issued and outstanding
immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation.
(b) If between the date of this Agreement and the Effective Time the
outstanding shares of Acquiror Common Stock or Target Common Stock shall
have been changed into a different
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<PAGE>
number of shares or a different class, by reason of any stock dividend,
reclassification, recapitalization, split, division, combination or exchange
of shares, the Exchange Ratio shall be correspondingly adjusted to reflect
such stock dividend, reclassification, recapitalization, split, division,
combination or exchange of shares.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) Exchange Agent. As of or
before the Effective Time, Acquiror shall deposit, or shall cause to be
deposited, with a bank or trust company organized under the laws of, and having
an office in, the United States or any state thereof and designated by Acquiror
and approved by Target, which approval shall not be unreasonably withheld (the
"EXCHANGE AGENT"), for the benefit of the holders of shares of Target Common
Stock, for exchange in accordance with this Article II, through the Exchange
Agent, certificates representing the whole shares of Acquiror Common Stock
issuable pursuant to Section 2.01 in exchange for outstanding shares of Target
Common Stock and cash in an amount sufficient to permit payment of cash payable
in lieu of fractional shares pursuant to Section 2.02(e) (such certificates for
shares of Acquiror Common Stock, together with any dividends or distributions
with respect thereto, and cash, being hereinafter referred to as the "EXCHANGE
FUND"). The Exchange Agent shall, pursuant to irrevocable instructions from
Acquiror, deliver the Acquiror Common Stock and cash contemplated to be issued
pursuant to Section 2.01 out of the Exchange Fund.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Acquiror will instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time evidenced outstanding shares of Target Common Stock
(other than Cancelable Shares) (the "CERTIFICATES") (i) a letter of
transmittal and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates evidencing shares of Acquiror
Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing the number of whole shares of
Acquiror Common Stock which such holder has the right to receive in respect
of the shares of Target Common Stock formerly represented by such
Certificate (after taking into account all shares of Target Common Stock
then held by such holder), together with cash in lieu of fractional shares
of Acquiror Common Stock to which such holder is entitled pursuant to
Section 2.02(e) and any dividends or distributions to which such holder is
entitled pursuant to Section 2.02(c), and the Certificate so surrendered
shall forthwith be canceled. Subject to Section 2.02(h), under no
circumstances will any holder of a Certificate be entitled to receive any
part of the shares of Acquiror Common Stock into which the shares of Target
Common Stock were converted in the Merger until such holder shall have
surrendered such Certificate. In the event of a transfer of ownership of
shares of Target Common Stock which is not registered in the transfer
records of the Target, the shares of Acquiror Common Stock into which such
shares of Target Common Stock were converted in the Merger may be issued in
accordance with this Article II to the transferee if the Certificate
evidencing such shares of Target Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to evidence
only the right to receive upon such surrender the certificate representing
the number of whole shares of Acquiror Common Stock which the holder has the
right to receive in respect of the shares of Target Common Stock formerly
represented by such Certificate (after taking into account all shares of
Target Common Stock then held by such holder), together with cash in lieu of
fractional shares of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and any dividends or distributions to which such
holder is entitled pursuant to Section 2.02(c). Acquiror agrees, from and
after the Effective Time, to treat the holders of certificates formerly
representing shares of Target Common Stock as holding of record the whole
number of shares of Acquiror Common Stock for purposes of voting and
determinations of quorums for voting.
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<PAGE>
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF ACQUIROR COMMON
STOCK. No dividends or other distributions declared or made after the
Effective Time with respect to Acquiror Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Acquiror Common Stock into which
such shares of Target Common Stock were converted in the Merger, until the
holder of such Certificate shall surrender such Certificate for exchange as
provided herein. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of such
Certificate, in addition to the certificates representing shares of Acquiror
Common Stock as provided in 2.02(b), without interest, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to the whole shares of Acquiror Common Stock
evidenced by such Certificate.
(d) NO FURTHER RIGHTS IN TARGET COMMON STOCK. All shares of Acquiror
Common Stock delivered upon conversion of the shares of Target Common Stock
in accordance with the terms hereof (including any cash paid or other
distributions pursuant to Section 2.02(c) and (e)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Target Common Stock.
(e) NO FRACTIONAL SHARES. No certificates or scrip evidencing
fractional shares of Acquiror Common Stock shall be issued upon the
surrender for exchange of Certificates, but in lieu thereof each holder of
shares of Target Common Stock who would otherwise be entitled to receive a
fraction of a share of Acquiror Common Stock, after aggregating all shares
of Acquiror Common Stock which such holder would be entitled to receive
under Section 2.01, shall receive an amount equal to the Average Trading
Price multiplied by the fraction of a share of Acquiror Common Stock to
which such holder would otherwise be entitled, without interest. The
"AVERAGE TRADING PRICE" shall be the average of the closing sale prices of
the Acquiror Common Stock on the New York Stock Exchange ("NYSE") or, if not
listed on the NYSE, any exchange on which the Acquiror Common Stock may then
be principally listed (as reported by THE WALL STREET JOURNAL or, if not
reported thereby, by another authoritative source) over the ten business
days immediately preceding the Effective Time.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of Target Common Stock for one
year after the Effective Time shall be delivered to Acquiror, upon demand,
and, subject to Section 2.02(g), any holders of Target Common Stock who have
not theretofore complied with this Article II shall thereafter look only to
Acquiror for the shares of Acquiror Common Stock, any cash in lieu of
fractional shares of Acquiror Common Stock and any dividends or other
distributions to which they are entitled pursuant to this Section 2.02.
(g) NO LIABILITY. Neither Acquiror nor the Surviving Corporation shall
be liable to any holder of shares of Target Common Stock for any shares of
Acquiror Common Stock or cash (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(h) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen
or destroyed Certificate the shares of Acquiror Common Stock, cash in lieu
of fractional shares of Acquiror Common Stock and unpaid dividends and
distributions on shares of Acquiror Common Stock deliverable in respect
thereof pursuant to this Agreement.
SECTION 2.03. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Target shall be closed and there shall be no further
registration of transfers of shares of Target Common Stock thereafter on the
records of the Target. At or after the Effective Time, any Certificates
A-12
<PAGE>
presented to the Exchange Agent or Acquiror for any reason shall be converted
into the right to receive shares of Acquiror Common Stock, cash in lieu of
fractional shares of Acquiror Common Stock and any dividends or other
distributions to which they are entitled pursuant to Section 2.02.
SECTION 2.04. STOCK OPTIONS. (a) Pursuant to the Dual Drilling Company
1993 Long-Term Incentive Plan, all outstanding options issued thereunder (the
"LONG-TERM OPTIONS") shall be surrendered as of the Effective Time,
automatically and without any action on the part of the holder thereof, and the
Surviving Corporation shall within three (3) Business Days following the
Effective Time, deliver to each holder of a Long-Term Option a number of whole
shares of ENSCO Common Stock, and cash in lieu of fractional shares thereof as
provided in Section 2.02(e), equal to (A) the excess, if any, of (i) the
Exchange Ratio over (ii) a fraction, the numerator of which is the exercise
price under such Long-Term Option, and the denominator of which is the average
of the closing prices of Acquiror Common Stock on the NYSE for the five Business
Days immediately preceding the Effective Time, (B) multiplied by the number of
shares covered by such Long-Term Option.
(b) On or before the Effective Time, the Target will endeavor to enter into
one or more agreements with the holders of all outstanding options under the
Dual Drilling Company Non-Employee Director Stock Option Plan (the "NON-EMPLOYEE
OPTIONS" and, together with the Long-Term Options, the "TARGET OPTIONS"),
pursuant to which such holders shall surrender all such Non-Employee Options to
the Target no later than two business days prior to the Effective Time. Pursuant
to each such agreement and as consideration for such surrender, the Surviving
Corporation shall within three (3) Business Days following the Effective Time
deliver to the holder of any Non-Employee Option a number of whole shares of
ENSCO Common Stock, and cash in lieu of fractional shares thereof as provided in
Section 2.02(e), equal to (A) the excess, if any, of (i) the Exchange Ration
over (ii) a fraction, the numerator of which is the exercise price under such
Non-Employee Option, and the denominator of which average of the closing prices
of Acquiror Common Stock on the NYSE for the five Business Days immediately
preceding the Effective Time, (B) multiplied by the number of shares covered by
such Non-Employee Option.
(c) In performing its obligations pursuant to this Section 2.04, the Target
shall fully comply with the terms and conditions of the Dual Drilling Company
1993 Long-Term Incentive Plan and the Dual Drilling Company Non-Employee
Director Stock Option Plan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE TARGET
Except as set forth in the Disclosure Schedule delivered by the Target and
signed by the Target and Acquiror for identification prior to the execution and
delivery of this Agreement (the "TARGET DISCLOSURE SCHEDULE"), which shall
identify exceptions by specific section references, the Target hereby represents
and warrants to Acquiror and Acquiror Sub that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The Target is
a corporation, and each subsidiary of the Target (a "Subsidiary") is a
corporation or limited partnership (or in the case of the Sime-Dual, a Malaysian
company), in each case duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the requisite
corporate or partnership power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. The Target
and each Subsidiary are duly qualified or licensed as a foreign corporation or
limited partnership to do business, and are in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
them or the nature of their business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Material
Adverse Effect. As used in this Agreement, the term "MATERIAL ADVERSE EFFECT"
means with respect to any person, any change or effect that is or is reasonably
likely to be materially adverse to the financial condition, business or results
of operations of such person and its subsidiaries, taken as a whole. As of the
date hereof, a true and correct list of all Subsidiaries, together with the
jurisdiction of organization of each
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<PAGE>
Subsidiary and the percentage of the outstanding capital stock or other equity
interests of each Subsidiary owned by the Company and each other Subsidiary, is
set forth in Section 3.01 of the Target Disclosure Schedule. Except as disclosed
in Section 3.01 of the Target Disclosure Schedule, the Target does not directly
or indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
SECTION 3.02. CERTIFICATE OF INCORPORATION AND BYLAWS. The Target has
heretofore furnished or made available to Acquiror a complete and correct copy
of the Certificate of Incorporation and Bylaws or equivalent organizational
documents, each as amended to date, of the Target and each Subsidiary. Neither
the Target nor any Subsidiary is in violation of any provision of its
Certificate of Incorporation, Bylaws or equivalent organizational documents.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the Target
consists of 50,000,000 shares of Target Common Stock and 10,000,000 shares of
preferred stock, $.01 par value ("TARGET PREFERRED STOCK"). As of December 31,
1995 (a) 15,765,713 shares of Target Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable and not subject to
preemptive rights, (b) 41,499 shares of Target Common Stock were held in the
treasury of the Target or held by the Subsidiaries, and (c) 1,059,000 shares of
Target Common Stock were issuable pursuant to outstanding Target Options. No
shares of Target Preferred Stock are issued and outstanding, and, except as set
forth in Section 3.01 of the Target Disclosure Schedule, no shares of capital
stock of, or other equity interests in, the Target or any Subsidiary have been
acquired by the Target or any Subsidiary since December 31, 1995. Except as set
forth in Section 3.03 of the Target Disclosure Schedule and in the Target SEC
Reports (as herein defined), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of, or other equity interests in, the Target or any
Subsidiary obligating the Target or any Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in, the Target or any Subsidiary.
Between December 31, 1995 and the date of this Agreement, no shares of Target
Common Stock have been issued by the Target, except pursuant to the exercise of
the stock options described above that were outstanding on December 31, 1995 in
each case in accordance with their respective terms. All shares of Target Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There are
no outstanding contractual obligations of the Target or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Target Common Stock or any
capital stock of, or any equity interest in, any Subsidiary. Except as described
in Section 3.03 of the Target Disclosure Schedule, each outstanding share of
capital stock of, or other equity interest in, each Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and each such share or
interest owned by the Target or another Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Target's or such other Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Target has all
necessary corporate power and authority to execute and deliver this Agreement
and, with respect to the Merger, upon the approval and adoption of this
Agreement by the Target's stockholders in accordance with this Agreement and
Delaware Law, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by the Target and the
consummation by the Target of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Target are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding shares of Target Common Stock and the filing and recordation of an
appropriate Certificate of Merger with the Secretary as required by Delaware
Law). This Agreement has been duly and validly executed and delivered by the
Target
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<PAGE>
and, assuming the due authorization, execution and delivery of this Agreement by
Acquiror and Acquiror Sub, constitutes a legal, valid and binding obligation of
the Target, enforceable against the Target in accordance with its terms.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Target do not, and the
performance of this Agreement by the Target will not, subject to, (x) with
respect to the Merger, obtaining the requisite approval and adoption of this
Agreement by the Target's stockholders in accordance with this Agreement and
Delaware Law, and (y) obtaining the consents, approvals, authorizations and
permits and making the filings described in Section 3.05(b) and Section 3.05(b)
of the Target Disclosure Schedule, (i) conflict with or violate the Certificate
of Incorporation, Bylaws or equivalent organizational documents of the Target or
any Subsidiary, (ii) conflict with or violate any domestic (federal, state or
local) or foreign law, rule, regulation, order, judgment or decree
(collectively, "LAWS") applicable to the Target or any Subsidiary or by which
any property or asset of the Target or any Subsidiary is bound or affected, or
(iii) except as specified in Section 3.05(a)(iii) of the Target Disclosure
Schedule, result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any right of termination, unilateral amendment, acceleration or
cancellation of, or give to others any right to invalidate or terminate any
purchase or other right to acquire property under, or result in the creation of
a lien or other encumbrance on any property or asset of the Target or any
Subsidiary or require the consent of any third party pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Target or any
Subsidiary is a party or by which the Target or any Subsidiary or any property
or asset of the Target or any Subsidiary is bound or affected, except for such
conflicts, violations, breaches, defaults, rights, liens and consents which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect on Target.
(b) Except for notification relating to environmental agencies, the
execution and delivery of this Agreement by the Target do not, and the
performance of this Agreement by the Target will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic, foreign or supranational, except
(i) pursuant to the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), the Securities Act of 1933, as amended (the "SECURITIES ACT"), state
securities or "blue sky" laws ("BLUE SKY LAWS"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), the United States Maritime
Administration ("MARAD") and the rules and regulations promulgated thereunder,
and filing and recordation of an appropriate Certificate of Merger with the
Secretary as required by Delaware Law, (ii) as specified in Section 3.05(b) of
the Target Disclosure Schedule and (iii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Merger, or otherwise prevent the
Target from timely performing its obligations under this Agreement.
SECTION 3.06. PERMITS; COMPLIANCE. Except as disclosed in Section 3.06 of
the Target Disclosure Schedule, each of the Target and the Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any United States (federal, state or local) or foreign government, or
governmental, regulatory or administrative authority, agency or commission or
court of competent jurisdiction ("GOVERNMENTAL AUTHORITY") necessary for the
Target or any Subsidiary to own, lease and operate its properties or to carry on
its business as it is now being conducted, except for those which the failure to
possess would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect on Target (the "TARGET PERMITS") and, as of the
date hereof, no suspension or cancellation of any of the Target Permits is
pending or, to the knowledge of the Target, threatened. Except as disclosed in
Section 3.06 of the Target Disclosure Schedule, neither the Target nor any
Subsidiary is in conflict with, or in default or violation of, or, with the
giving of notice or the passage of time, would be in
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conflict with, or in default or violation of, (i) any Law applicable to the
Target or any Subsidiary or by which any property or asset of the Target or any
Subsidiary is bound or affected, or (ii) any of the Target Permits.
SECTION 3.07. SEC FILINGS; FINANCIAL STATEMENTS. (a) The Target has filed
all forms, reports and documents required to be filed by it with the Securities
and Exchange Commission (collectively, the "TARGET SEC REPORTS"). The Target SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (ii) did not, at the time they were
filed (or at the effective date thereof in the case of registration statements),
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Subsidiary is currently required to file any form, report or
other document with the Securities and Exchange Commission ("SEC").
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Target SEC Reports was prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis ("U.S. GAAP") throughout the periods indicated (except as may be indicated
in the notes thereto and except that financial statements included with
quarterly reports on Form 10-Q do not contain all U.S. GAAP notes to such
financial statements) and each fairly presented in all material respects the
financial position, results of operations and changes in stockholders' equity
and cash flows of the Target as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to have a Material Adverse
Effect).
(c) Except (i) to the extent set forth on the balance sheet of the Target
and the consolidated Subsidiaries as at December 31, 1995, including the notes
thereto (the "1995 BALANCE SHEET"), (ii) as set forth in Section 3.07(c) of the
Target Disclosure Schedule or (iii) as disclosed in any SEC Report filed by the
Target after December 31, 1995, neither the Target nor any Subsidiary has any
liability or obligation of any nature (whether accrued, absolute, contingent or
otherwise) which would be required to be reflected on a balance sheet, or in the
notes thereto, prepared in accordance with U.S. GAAP, except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since December 31, 1995, which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Target.
(d) The Target has heretofore furnished to Acquiror complete and correct
copies of all amendments and modifications (if any) that have not been filed by
the Target with the SEC to all agreements, documents and other instruments that
previously had been filed by the Target as exhibits to the Target SEC Reports
and are currently in effect.
SECTION 3.08. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1995, except as contemplated by, or disclosed pursuant to, this Agreement
including Section 3.08 of the Target Disclosure Schedule, or disclosed in any
Target SEC Report filed since December 31, 1995 and prior to the date of this
Agreement, each of the Target and the Subsidiaries has conducted its business
only in the ordinary course and in a manner consistent with past practice and,
since December 31, 1995, there has not been (a) any amendment or other change to
the Certificate of Incorporation or Bylaws or other equivalent organizational
documents of the Target or any Subsidiary, (b) any issuance, sale, pledge,
disposal, grant, encumbrance, or authorization of the issuance, sale, pledge,
disposition, grant or encumbrance by the Target or any Subsidiary of (i) any
shares of their capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of the Target or any Subsidiary (except for the issuance
of shares of capital stock issuable pursuant to Target Options outstanding on
January 25, 1996), or (ii) any of their assets other than in the ordinary course
of business consistent with past practice, (c) any declaration, setting aside,
making or payment
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of any dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of their capital stock by the Target or any
Subsidiary, (d) any reclassification, combination, split or division by the
Target or any Subsidiary of any of their capital stock or redemption, purchase
or other acquisition, directly or indirectly, of any of their capital stock or
securities or obligations convertible into or exchangeable or exercisable for
such capital stock, (e) any commitment or incurrence by the Target or any
Subsidiary of any capital expenditure in excess of $500,000, (f) any
mobilization of, or any agreement entered into by the Target or any Subsidiary
which would provide for the mobilization of, any drilling rig to any area of the
world other than such area in which such drilling rig was located on December
31, 1995, (g) any drilling contract entered into by the Target or any Subsidiary
with a rate fixed for a period in excess of six months, (h) any incurrence of
any indebtedness for borrowed money or issuance of any debt securities or
assumption, guarantee or endorsement, or otherwise becoming responsible as an
accommodation, for the obligations of any person, or making of any loans or
advances, (i) acquisition by the Target or any Subsidiary (including, without
limitation, by merger, consolidation or acquisition of stock or assets) of any
interest in any corporation, partnership, other business organization or any
division thereof or any assets, other than the acquisition of assets in the
ordinary course of business consistent with past practice, (j) any contract or
agreement (other than those covered by subparagraph (g) above) entered into or
amended by the Target or any Subsidiary material to their businesses, results of
operations or financial condition, (k) any increase in the compensation payable
or to become payable to any director, officer or other employee, or consultant
or advisor, of the Target or any Subsidiary, or grant of any bonus to, or grant
of any severance or termination pay to, or any employment or severance agreement
entered into with, any director, officer or other employee, or consultant or
advisor, of the Target or any Subsidiary or any collective bargaining agreement
entered into or amended, (l) any bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred compensation or
other plan, trust or fund established, adopted, entered into or amended for the
benefit of any director, officer or class of employees of the Target or any
Subsidiary, (m) any settlement or compromise by the Target or any Subsidiary of
any pending or threatened litigation which would reasonably be expected to have
a Material Adverse Effect on Target or which relates to the Transactions, (n)
any event or events (whether or not covered by insurance), individually or in
the aggregate, having a Material Adverse Effect, or (o) any change by the Target
or any Subsidiary in its accounting methods, principles or practices.
SECTION 3.09. ABSENCE OF LITIGATION. Section 3.09 of the Target Disclosure
Schedule sets forth each instance in which any of the Target and the
Subsidiaries (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the knowledge of the Target
and the Subsidiaries, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator, which has not otherwise been disclosed in
the Target SEC Reports and which would reasonably be expected to have a Material
Adverse Effect on Target. Neither the Target nor any Subsidiary nor any property
or asset of the Target or any Subsidiary is in violation of any order, writ,
judgment, injunction, decree, determination or award.
SECTION 3.10. EMPLOYEE BENEFIT MATTERS. (a) Set forth in Section 3.10(a)
of the Target Disclosure Schedule is a true, complete and correct list of (i)
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
subject to ERISA, and any other employee profit-sharing, bonus, incentive or
deferred compensation, welfare, pension, retirement, termination, retention,
change of control, stock option, stock appreciation, stock purchase, phantom
stock or other equity-based, performance, group insurance or other employee
benefit plan, retiree benefit or compensation plan, program, arrangement,
agreement, policy, practice or understanding, whether written or unwritten, that
provides or may provide benefits or compensation with respect to any employee or
former employee employed or formerly employed by the Target, or the
beneficiaries or dependents of any such employee or former employee, or to any
director, officer, stockholder or consultant of the Target or under which any
such individual is or may become eligible to participate or derive a benefit
(excluding social security,
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Medicare, Medicaid, national health care or any similar or analogous program or
plan sponsored by a foreign or domestic governmental entity) and either (A) is
or has been maintained or established by the Target or any other trade or
business, whether or not incorporated, which, together with the Target is or
would have been at any date of determination occurring within the preceding six
years treated as a single employer under Section 414 of the Code or Section
4001(b)(1) of ERISA (such other trades and businesses collectively, the "Related
Persons"), or (B) to which the Target or any Related Person contributes or is or
has been obligated or required to contribute or, to the Target's knowledge, with
respect to which the Target or any Related Person may have any liability or
obligation (collectively, the "PLANS") which are not disclosed in the Target SEC
Reports and (ii) all written contracts and agreements relating to employment and
all severance agreements with any of the directors, officers or employees of the
Target or the Subsidiaries (other than, in each case, any such contract or
agreement that is terminable by the Target or any Subsidiary at will without
penalty or other adverse consequence) (the "TARGET EMPLOYMENT CONTRACTS") which
are not disclosed in the Target SEC Reports. Except as set forth in Section
3.10(a) of the Target Disclosure Schedule and the Target SEC Reports and except
for any liabilities arising out of any defects that are or will be the subject
of the procedures or submissions described in Section 6.13(a), 6.13(m) and
6.13(n), to the knowledge of the Target and the Related Persons, there are no
material liabilities, including fines and penalties of the Target or any
Subsidiary, with respect to any plans, arrangements or practices of the type
described in the preceding sentence that were terminated or discontinued prior
to the date of this Agreement and previously maintained or contributed to by the
Target or any Related Person, or to which the Target or any Related Person
previously had an obligation to contribute.
(b) Section 3.10(b) of the Target Disclosure Schedule sets forth the name of
each officer or employee of the Target or any of the Subsidiaries with a current
annual base compensation greater than $100,000 and the annual base compensation
applicable to each such officer or employee.
(c) The Target previously has delivered to Acquiror complete and correct
copies of each of the Plans and Target Employment Contracts, including all
amendments thereto, and any other documents or other instruments applying and
relating thereto that are reasonably requested by Acquiror, including
descriptions of all unwritten Plans; all trust agreements, insurance contracts
or other funding arrangements; the three most recent actuarial and trust
reports; the three most recently filed Forms 5500 and all schedules thereto; the
most recent determination letter from the Internal Revenue Service ("IRS"); any
documents submitted to the IRS concerning a pending request for a determination
letter; current summary plan descriptions; all material communications received
from or sent to the IRS, the Pension Benefit Guaranty Corporation ("PBGC") or
the Department of Labor during the three-year period preceding the Effective
Time (including a written description of any oral communication) that could
reasonably be expected to result in material liability or obligation on the part
of the Target or any Subsidiary or disqualification of any Plan intended to be
qualified under Section 401(a) of the Code; and all amendments and modifications
to any such document.
(d) Except as set forth in Section 3.10(d) of the Target Disclosure
Schedule, (i) each of the Plans and Target Employment Contracts is being, and
has been, maintained, operated and administered in all material respects in
accordance with its respective terms, (ii) each of the Plans and Target
Employment Contracts has been maintained, operated and administered in all
material respects in compliance with all applicable laws, including but not
limited to the Age Discrimination in Employment Act, as amended, Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended, ERISA and
the Code, and (iii) no material liability or obligation has been incurred (and
is unsatisfied) or is expected to be incurred by the Target or any Subsidiary
(either directly or indirectly, including as a result of an indemnification
obligation, but excluding the penalties that are or will be payable pursuant to
Section 6.13(a), (m) and (n)) under or pursuant to any applicable law, including
Titles I and IV of ERISA and the penalty, excise tax or joint and several
liability provisions of the Code relating to employee benefit plans.
(e) The Target and the Related Persons have not within the past six years
had an obligation to contribute to a qualified "defined benefit plan" as defined
in Section 3(35) of ERISA and covered by
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Part 3 of Title I of ERISA, a pension plan subject to the minimum funding
standards of Section 302 of ERISA or Section 412 of the Code, or a
"multiemployer plan" as defined in Section 3(37) of and covered by ERISA or
Section 414(f) of the Code or a "multiple employer plan" within the meaning of
Section 210(a) of and covered by ERISA or Section 413(c) of the Code. Except as
set forth in Section 3.10(e) of Target Disclosure Schedule, no other trade or
business is, or, at any time within the past six years, has been treated,
together with the Target and the Related Persons, as a single employer under
Section 414 of the Code or Section 4001 of ERISA.
(f) Except with respect to those defects which are or will be the subject of
the procedures and submissions described in Section 6.13(a), each Plan intended
to be qualified under Section 401(a) of the Code, and the trust (if any) forming
a part thereof, has received a favorable determination letter from the IRS as to
its qualification under the Code and to the effect that each such trust is
exempt from taxation under Section 501(a) of the Code or an application for
determination under Section 401(a) of the Code has been submitted to the IRS
prior to the expiration of the applicable remedial amendment period, all
amendments necessary to maintain qualification of each such Plan have been made
within the time allowed by the Code and ERISA and, to the knowledge of the
Target and all Related Persons, no event has occurred or condition exists that
could adversely affect such determination or pending application for
determination of qualification or tax-exempt status, including any compliance
problems resulting from failures to follow the terms of the plan documents for
any Plan, and no such determination has been revoked and no application for
determination has been denied, nor has any Plan been amended since the date of
its most recent determination letter or application therefor in any respect that
would adversely affect its qualification or materially increase its costs.
(g) Except as set forth in Section 3.10(g) of the Target Disclosure
Schedule, to the knowledge of the Target and all Related Persons, there have
been no prohibited transactions as defined in Section 406 of ERISA or Section
4975 of the Code or breaches of any of the duties imposed on "fiduciaries"
(within the meaning of Section 3(21) of ERISA) by ERISA with respect to the
Plans that could result in the Target or any Subsidiary becoming liable directly
or indirectly (by indemnification or otherwise) for any material liability for
any excise tax, penalty or other liability under ERISA or the Code.
(h) Except as set forth in Section 3.10(h) of the Target Disclosure Schedule
and except with respect to liabilities arising out of any defects that are or
will be the subject of the procedures or submissions described in Section
6.13(a), 6.13(m) and 6.13(n), there are no actions, suits, arbitrations or
claims (other than routine claims for benefits), pending or, to the knowledge of
the Target or any Related Person, threatened, with respect to any Plan or Target
Employment Contract, any trust which is a part of any Plan or Target Employment
Contract, any trustee, fiduciary, custodian, administrator or other person
holding or controlling assets of any Plan or Target Employment Contract, and, to
the knowledge of the Target and all Related Persons, no basis to anticipate any
such action, suit, arbitration or claim exists (other than routine claims for
benefits), and there are no investigations or audits of any Plan or Target
Employment Contract by any governmental authority currently pending and there
have been no such investigations or audits that have been concluded that
resulted in any liability of the Target or any Related Person that has not been
fully discharged. Except with respect to the procedure and submission described
in Section 6.13(a) hereof, no closing agreement with the IRS is being, or has
been, negotiated with respect to any Plan, and no Plan has been submitted to the
IRS pursuant to the Voluntary Compliance Resolution Program as described in
Revenue Procedures 92-89 and 93-36.
(i) Except as set forth in Section 3.10(i), there are no unpaid or overdue
(i) insurance premiums required to be paid with respect to, (ii) benefits,
expenses, and other amounts due and payable under, and (iii) contributions,
transfers or payments required to be made to, any Plan or Target Employment
Contract have been made on or before their due dates. With respect to any
insurance policy providing funding for benefits under any Plan or Target
Employment Contract (i) there is no material liability of the Target or any
Related Person in the nature of a retroactive or retrospective rate adjustment,
loss sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if
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such insurance policy was terminated on the date hereof except as set forth in
Section 3.10(i) of the Target Disclosure Schedule, and (ii) to the knowledge of
the Target and all Related Persons, no insurance company issuing any such policy
is in receivership, conservatorship, liquidation or similar proceeding and no
such proceedings with respect to any insurer are imminent.
(j) With respect to any Plan that is an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, except as disclosed in Section 3.10(j) of the
Target Disclosure Schedule, (i) no such Plan is unfunded or funded through a
"welfare benefit fund", as such term is defined in Section 419(e) of the Code,
(ii) to the knowledge of the Target and all Related Persons, each such Plan that
is a "group health plan", as such term is defined in Section 5000(b)(1) of the
Code, is in compliance in all material respects with the applicable requirements
of Section 4980B(f) of the Code, and (iii) to the knowledge of the Target and
all Related Persons, each such Plan (including any such Plan covering retirees
or former employees) may be amended or terminated subject to the provisions of
any applicable collective bargaining agreement, without material liability to
the Target and the Subsidiaries.
(k) Section 3.10(k) of the Target Disclosure Schedule contains a separate
identification of each Plan and Target Employment Contract other than those set
forth in Section 3.10(l) of the Target Disclosure Schedule that provides
benefits, including, without limitation, death or medical benefits, beyond
termination of employment or retirement other than (i) coverage mandated by law,
(ii) death or retirement benefits under any qualified Plan, (iii) deferred
compensation benefits fully reflected on the 1995 Balance Sheet or (iv)
benefits, the full cost of which is borne by the employee (or the employee's
beneficiary) (the "POST-EMPLOYMENT BENEFITS"); such balance sheets accurately
reflect the liabilities relating to the Post-Employment Benefits and an
actuarial study of the Post-Employment Benefits has been delivered to Acquiror.
(l) Except as set forth in Section 3.10(l) of the Target Disclosure
Schedule, the execution, delivery and performance of this Agreement will not,
solely in and of itself and without regard to any subsequent events, (i)
constitute an event under any Plan or Target Employment Contract that will
result in any payment (whether of severance pay or otherwise) becoming due from
the Target or any Related Person to any present or former officer, employee,
director, stockholder or consultant (or dependents), (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to any present or
former officer, employee, director, stockholder or consultant of the Target or
any Related Person, or (iii) constitute a "deemed severance" or "deemed
termination" under any Plan or Target Employment Contract or under any
applicable law.
(m) Neither the Target nor any Related Person has any obligation in
connection with any Plan pursuant to the terms of a collective bargaining
agreement.
(n) The Target and all Related Persons have made or will make all
contributions required under GAAP to be made by the Target or any Related Person
under each Plan and Target Employment Contract for all periods through and
including the Effective Time or adequate accruals therefor have been or will be
provided.
(o) Except as otherwise provided in Section 3.10(o) of the Target Disclosure
Schedule and except with respect to the submissions and filings contemplated by
Section 6.13(a), 6.13(m) and 6.13(n) hereof, all returns, reports and filings
required by any governmental agency or which must be furnished to any person
with respect to each of the Plans and Target Employment Contracts have been
timely filed or furnished. The Target and all Subsidiaries shall cooperate in
full with Acquiror with any reasonably necessary action to ensure compliance
with any federal or state law applicable to the Plans and Target Employment
Contracts, whether such action occurs prior to, on, or after the Effective Time.
(p) Except as set forth in Section 3.10(p) of the Target Disclosure Schedule
and except as provided in Section 6.13(a), the Target and the Related Persons
have not agreed or committed (orally or in writing) to make any amendments to
any Plan or Target Employment Contract not already
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embodied in the documents comprising the Plans and Target Employment Contracts,
other than any amendments required by law, or to establish or implement any
other employee or retiree benefit or compensation arrangement.
(q) To the knowledge of Target and all Related Persons, the Target and the
Subsidiaries have not incurred any liability under, and have complied in all
respects with, the Worker Adjustment Retraining Notification Act and, to the
knowledge of Target, no fact or event exists that could give rise to liability
under such act, except for such occurrences, noncompliances and liabilities as
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.11. LABOR MATTERS. Neither the Target nor any Subsidiary is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Target or any Subsidiary.
SECTION 3.12. INTELLECTUAL PROPERTY. Target and the Subsidiaries own or
have valid, binding and enforceable rights to use each patent, invention,
industrial model, process, design and all registrations and applications for any
of the foregoing used, employed or exploited in the business of the Target or
any Subsidiary without any known conflict with the rights of others.
SECTION 3.13. TAXES. (a) The Target and each of the Subsidiaries have (i)
filed all federal, state, local and foreign tax returns required to be filed by
them prior to the date of this Agreement (taking into account extensions) and
all of such returns were true and correct in all material respects when filed
and in compliance with applicable law, (ii) paid or accrued all taxes shown to
be due on such returns and paid all applicable ad valorem and value added taxes
as are due and (iii) paid or accrued all taxes for which a notice of assessment
or collection has been received (other than amounts being contested in good
faith by appropriate proceedings), except in the case of clause (i), (ii) or
(iii) for any such filings, payments or accruals which would not, individually
or in the aggregate, have a Material Adverse Effect. Except as set forth in
Section 3.13(a) of the Target Disclosure Schedule, neither the Internal Revenue
Service nor any other federal, state, local or foreign taxing authority has
asserted any claim for taxes, or to the best knowledge of the Target, is
threatening to assert any claims for taxes, which claims, individually or in the
aggregate, could have a Material Adverse Effect. The Target has open years for
federal, state and foreign income tax returns only as set forth in Section
3.13(a) of the Target Disclosure Schedule. The Target and each Subsidiary have
withheld or collected and paid over to the appropriate governmental authorities
(or are properly holding for such payment) all taxes required by law to be
withheld or collected, except for amounts which would not, individually or in
the aggregate, have a Material Adverse Effect. Neither the Target nor any
Subsidiary has made an election under Section 341(f) of the Code. There are no
liens for taxes upon the assets of the Target or any Subsidiary (other than
liens for taxes that are not yet due or that are being contested in good faith
by appropriate proceedings), except for liens which would not, individually or
in the aggregate, have a Material Adverse Effect. Target and each Subsidiary
have complied with all federal, state, local and foreign tax laws in all
material respects. Except as disclosed in Section 3.13(a) of the Target
Disclosure Schedule, neither the Target nor any Subsidiary (i) has executed any
waiver to extend the time for assessment of any federal, state, local or foreign
tax, or (ii) filed, or has pending, any request or application for ruling,
whether federal, state, local or foreign.
(b) Neither the Target nor any Subsidiary has taken or agreed to take any
action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
(c) The 1995 Balance Sheet includes appropriate reserves for all federal,
state, local and foreign taxes and other liabilities incurred as of such date
but not yet payable.
(d) The net operating losses and other carryovers available to the Target
and each Subsidiary as of the date hereof are described in Section 3.13 of the
Target Disclosure Schedule and as of the date
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hereof the ability of Target and each Subsidiary to use such carryovers will not
have been affected by Section 382, 383 or 384 of the Code or by the separate
return limitation year or consolidated return change of ownership limitations of
Treas. Regs. Section 1.1502-21 or 1.1502.22.
(e) Neither Target or any Subsidiary is a U. S. real property holding
company under Section 897 of the Code.
SECTION 3.14. ENVIRONMENTAL MATTERS. (a) For purposes of this Agreement,
the following terms shall have the following meanings: (i) "HAZARDOUS
SUBSTANCES" means (A) those substances defined in or regulated under the
following federal statutes and their state counterparts, as each may be amended
from time to time, and all regulations thereunder: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide, and Rodenticide Act, the Toxic Substances Control Act
and the Clean Air Act; (B) petroleum and petroleum products, byproducts and
breakdown products including crude oil and any fractions thereof; (C) natural
gas, synthetic gas, and any mixtures thereof; (D) polychlorinated biphenyls; (E)
any other chemicals, materials or substances defined or regulated as toxic or
hazardous or as a pollutant or contaminant or as a waste under any applicable
Environmental Law; and (F) any substance with respect to which a federal, state
or local agency requires environmental investigation, monitoring, reporting or
remediation; and (ii) "ENVIRONMENTAL LAWS" means any federal, state, foreign, or
local law, rule or regulation, now or hereafter in effect and as amended, and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment, health, safety or natural resources, including
without limitation, those relating to (A) releases or threatened releases of
Hazardous Substances or materials containing Hazardous Substances or (B) the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances.
(b) Except as described in Section 3.14 of the Target Disclosure Schedule or
as would not individually or in the aggregate result in or be likely to result
in any fine, tax, assessment, penalty, loss, cost, damage, liability, expense or
other payment related thereto in excess of $250,000: (i) the Target and each
Subsidiary are and have been in compliance with all applicable Environmental
Laws; (ii) the Target and each Subsidiary have obtained all permits, approvals,
identification numbers, licenses or other authorizations required under any
applicable Environmental Laws ("ENVIRONMENTAL PERMITS") and are and have been in
compliance with their requirements; (iii) such Environmental Permits are
transferable to the Surviving Corporation pursuant to the Merger without the
consent of any Governmental Authority; (iv) there are no underground or
aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps
or lagoons in which Hazardous Substances are being or have been treated, stored
or disposed of on any owned or leased real property or on any real property
formerly owned, leased or occupied by the Target or any Subsidiary; (v) there
is, to the best knowledge of the Target, no asbestos or asbestos-containing
material on any owned or leased real property in violation of applicable
Environmental Laws; (vi) the Target and the Subsidiaries have not released,
discharged or disposed of Hazardous Substances on any owned or leased real
property or on any real property formerly owned, leased or occupied by the
Target or any Subsidiary in an amount requiring remediation and none of such
property is contaminated with any Hazardous Substances in an amount requiring
remediation; (vii) other than routine operational matters neither the Target nor
any of the Subsidiaries is undertaking, and neither the Target nor any of the
Subsidiaries has completed, any investigation or assessment or remedial or
response action relating to any such release, discharge or disposal of or
contamination with Hazardous Substances at any site, location or operation,
either voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law; (viii) there are no pending or, to the
knowledge of Target, past or threatened actions, suits, demands, demand letters,
claims, liens, notices of non-compliance or violation, notices of liability or
potential liability, investigations, proceedings, consent orders or consent
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agreements relating in any way to Environmental Laws, any Environmental Permits
or any Hazardous Substances ("ENVIRONMENTAL CLAIMS") against the Target or any
Subsidiary or any of their property, and there are no circumstances that can
reasonably be expected to form the basis of any such Environmental Claim,
including without limitation with respect to any off-site disposal location
presently or formerly used by the Target or any Subsidiaries or any of their
predecessors; and (ix) the Target and each Subsidiary have satisfied and are
currently in compliance with all financial responsibility requirements
applicable to their operations and imposed by the U.S. Coast Guard or Minerals
Management Service pursuant to the Oil Pollution Act of 1990, as amended, or by
any other governmental authority under any other Environmental Law, and the
Target and the Subsidiaries have not received any notice of noncompliance with
any such financial responsibility requirements.
(c) The Target and the Subsidiaries have provided Acquiror or Acquiror Sub
with copies of any environmental reports, studies or analyses in its possession
or under its control relating to owned or leased real property or the operations
of the Target or the Subsidiaries.
SECTION 3.15. OPINION OF FINANCIAL ADVISOR. The Target has received the
written opinion of Simmons & Company International ("TARGET BANKER") on the date
of this Agreement to the effect that the consideration to be paid by Acquiror in
the Merger is fair from a financial point of view to the Target's stockholders
as of the date thereof. A copy of the Target Banker engagement letter, dated
October 17, 1995, has previously been delivered to Acquiror.
SECTION 3.16. VOTE REQUIRED. The affirmative vote of the holders of a
majority of the then outstanding shares of Target Common Stock is the only vote
of the holders of any class or series of capital stock of the Target necessary
to approve the Merger.
SECTION 3.17. BROKERS. No broker, finder or investment banker (other than
Target Banker) is entitled to any brokerage, finder's or other fee or commission
in connection with the Transactions based upon arrangements made by or on behalf
of the Target or any Subsidiary. The Target has heretofore furnished to Acquiror
a correct copy of all agreements between the Target and Target Banker pursuant
to which such firm would be entitled to any payment relating to the
Transactions. The total fee due to Target Banker as a result of the
Transactions, including expenses, shall not exceed $3,000,000.
SECTION 3.18. TANGIBLE PROPERTY. The Target and its Subsidiaries have good
and marketable title to, or a valid leasehold interest in, the properties and
assets used by them or shown on the 1995 Balance Sheet or acquired after the
date thereof, other than all drilling rigs owned, leased, chartered or managed
by the Target or any Subsidiary on the date hereof (the "TARGET DRILLING RIGS"),
are free and clear of any mortgage, pledge, lien, encumbrance, charge, or other
security interest, other than (a) mechanic's, materialmen's, and similar liens,
(b) liens for taxes not yet due and payable or for taxes that the taxpayer is
contesting in good faith through appropriate proceedings, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) liens and encumbrances identified and reflected on the 1995 Balance Sheet,
except for properties and assets disposed of in the ordinary course of business.
SECTION 3.19. BAREBOAT CHARTER. Target has exercised in accordance with
the terms of that certain Bareboat Charter dated March 15, 1991 between Balboa
Marine Limited Partnership and Dual Offshore, Ltd., as amended, its option for
the First Option Term (as defined therein) and the First Option Term shall
expire on September 4, 1996. Neither Mosvold Shipping AS nor Dual Invest AS nor
any of either of their affiliates (other than Target and the Subsidiaries) has
any right, title or interest (including profits interest) in or with respect to
such bareboat charter agreement.
SECTION 3.20. MATERIAL CONTRACTS. Section 3.20 of the Target Disclosure
Schedule lists each contract which (i) is required by its terms or is currently
expected to result in the payment or receipt by the Target or any Subsidiary of
more than $500,000 and which is not terminable by the Target without the payment
of any penalty or fine on not more than three months' notice, or (ii) contains
any terms or provisions which restrict, or would restrict if terminated, the
ability of the Target or any
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Subsidiary from the operation, charter, leasing or operation of offshore
drilling rigs in any geographic area of the world without the consent or joint
participation of, or payment of any kind to, a third party (a "MATERIAL
CONTRACT") to which the Target or any Subsidiary is a party, other than
contracts which have been filed as an exhibit to or have been incorporated by
reference in any Target SEC Report. Each Material Contract is in full force and
effect and, to the knowledge of Target, is enforceable against the parties
thereto (other than the Target or any such Subsidiary) in accordance with its
terms and no condition or state of facts exists that, with notice or the passage
of time, or both, would constitute a default by the Target or any Subsidiary or,
to the best knowledge of the Target, any third party under such Material
Contracts, except for such defaults which individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect on Target. The
Target or the applicable Subsidiary has duly complied in all material respects
with the provisions of each Material Contract to which it is a party.
SECTION 3.21. PARACHUTE PAYMENTS. Except as disclosed in Section 3.21 of
the Target Disclosure Schedule, neither the Target nor any Subsidiary has
entered into any agreement that would result in the making of "parachute
payments," as defined in Section 280G of the Code, to any person and none of
such agreements requires the Target or any Subsidiary to gross-up or otherwise
pay the amount of any taxes due in respect of such "parachute payments."
SECTION 3.22. CERTAIN BUSINESS PRACTICES. As of the date of this
Agreement, neither the Target nor any Subsidiary, nor any director, officer, or,
to the knowledge of the Target, any agent or employee of the Target or any
Subsidiary has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
made any other unlawful payment, or (iv) violated any of the provisions of
Section 999 of the Code or Section 8 of the Export Administration Act, as
amended.
SECTION 3.23 REAL PROPERTY AND LEASES.
(a) Section 3.23 of the Target Disclosure Schedule lists and describes
briefly all real property that any of the Target and each Subsidiary owns. With
respect to each such parcel of owned real property and except as noted in
Section 3.23 of the Target Disclosure Schedule: (i) the identified owner has
good and marketable title to the parcel of real property, free and clear of any
liens or encumbrances, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent, recorded easements,
covenants, and other restrictions, and utility easements, building restrictions,
zoning restrictions, and other easements and restrictions existing generally
with respect to properties of a similar character which do not affect materially
and adversely the current use, occupancy, or value, or the marketability of
title, of the property subject thereto; (ii) there are no leases, subleases,
licenses, concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of the parcel of
real property; and (iii) there are no outstanding options or rights of first
refusal to purchase, lease or occupy the parcel of real property, or any portion
thereof or interest therein.
(b) Section 3.23 of the Target Disclosure Schedule lists and describes
briefly all real property leased or subleased to any of the Target and any
Subsidiary. With respect to each lease and sublease (i) the lease or sublease is
legal, valid, binding, enforceable, and in full force and effect in all material
respects; (ii) to the knowledge of Target, no party to the lease or sublease is
in material breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder; (iii) to the knowledge of
Target, no party to the lease or sublease has repudiated any material provision
thereof; (iv) there are no material disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease; (v) none of the Target or any
Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold; and (vi) all
facilities leased or subleased thereunder have received all approvals of
governmental authorities (including
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material licenses and permits) required in connection with the operation
thereof, and have been operated and maintained in accordance with applicable
laws, rules, and regulations in all material respects.
SECTION 3.24. INSURANCE. Section 3.24 of the Target Disclosure Schedule
sets forth a list of each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which any of the Target or any Subsidiary has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
within the past three years. With respect to each such insurance policy
designated as "current": (i) the policy is in full force and effect; (ii) Target
has not received notice from any insurance carrier of the intention of such
carrier to discontinue any such policy; (iii) neither any of the Target or any
Subsidiary nor, to the knowledge of Target, any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (iv) no party to the policy
has repudiated any provision thereof. Section 3.24 of the Target Disclosure
Schedule lists any self-insurance arrangements affecting any of the Target and
the Subsidiaries. All material assets and risks of the Target and each
Subsidiary are covered by valid and currently effective insurance policies in
such types and amounts as are consistent with customary practices and standards
of companies engaged in businesses and operations similar to those of the Target
or such Subsidiary.
SECTION 3.25. ACCOUNTING AND TAX MATTERS.
(a) Except as set forth in Section 3.25(a) of the Target Disclosure
Schedule, the Target has no knowledge of any plan or intention on the part of
the Target's stockholders (a "STOCKHOLDER PLAN") to engage in a sale, exchange,
transfer, distribution (including, without limitation, a distribution by a
partnership to its partners or by a corporation to its stockholders), pledge,
disposition or any other transaction which results in a reduction in the risk of
ownership or a direct or indirect disposition (a "SALE") of a number of shares
of Acquiror Common Stock to be issued to such stockholders in the Merger,
sufficient to reduce the Target's stockholders' ownership of Acquiror Common
Stock to a number of shares having an aggregate fair market value, as of the
Effective Time of the Merger, of less than fifty percent (50%) of the aggregate
fair market value, immediately prior to the Merger, of all outstanding shares of
Target Common Stock. For purposes of this paragraph, shares of Target Common
Stock (i) with respect to which a Target stockholder receives consideration in
the Merger other than Acquiror Common Stock (including, without limitation, cash
received in lieu of fractional shares of Acquiror Common Stock) and/or (ii) with
respect to which a Sale occurs prior to and in contemplation of the Merger,
shall be considered shares of outstanding Target Common Stock exchanged for
Acquiror Common Stock in the Merger and then disposed of pursuant to a
Stockholder Plan.
(b) Neither the Target nor any Subsidiary is an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(c) As of the Effective Time, the fair market value of the assets of the
Target and the Subsidiaries will exceed the sum of its liabilities, plus the
amount of other liabilities, if any, to which its assets are subject.
(d) Neither the Target nor any Subsidiary 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.
SECTION 3.26. BOARD RECOMMENDATION. At a meeting duly called and held in
compliance with Delaware Law, the Board of Directors of the Target has
unanimously adopted a resolution (i) approving the Merger, based on a
determination that the Merger offers the best value reasonably available to the
stockholders of Target and is in the best interests of such Target stockholders
and (ii) approving and adopting this Agreement and the Transactions and
recommending approval and adoption of this Agreement and the Transactions by the
stockholders of the Target.
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SECTION 3.27. CHANGE IN CONTROL. Except as set forth in Section 3.27 of
the Target Disclosure Schedule, neither the Target nor any Subsidiary is a party
to any contract, agreement or understanding which contains a "change in
control," "potential change in control" or similar provision. Except as set
forth in Section 3.27 of the Target Disclosure Schedule, the consummation of the
Transactions will not (either alone or upon the occurrence of any additional
acts or events) result in any payment (whether of severance pay or otherwise)
becoming due from the Target or any Subsidiary to any person.
SECTION 3.28. TARGET DRILLING RIGS. (a) Section 3.28 of the Target
Disclosure Schedule sets forth a list of the Target Drilling Rigs and, if
applicable, the name of the nation under which each drilling rig is documented
and flagged and indicates all drilling rigs that are laid up or being held for
sale on the date hereof. With respect to the owned Target Drilling Rigs, the
Target or a Subsidiary has good title to each such drilling rig, free and clear
of all mortgages, pledges, liens, encumbrances, charges, or other security
interests except for such as are disclosed in Section 3.28 of the Target
Disclosure Schedule and in the Target SEC Reports.
(b) With respect to each Target Drilling Rig that is operated by the Target
or any Subsidiary under lease or charter, (i) the Target or such Subsidiary has
a valid right to charter or a valid leasehold interest in such drilling rig;
(ii) such charter agreement or lease is in full force and effect in accordance
with its terms; (iii) all rents, charter payments and other similar monetary
amounts that have become due and payable thereunder have been paid in full; (iv)
no waiver, indulgence or postponement of the obligations thereunder has been
granted by the other party thereof; (v) there exists no material default (or an
event that, with notice or lapse of time or both would constitute a material
default) on the part of the Target, or to the knowledge of the Target, any other
person under such charter agreement or lease; (vi) the Target or such Subsidiary
has not violated any of the terms or conditions under any such charter agreement
or lease and to the knowledge of the Target there are no conditions or covenants
to be observed or performed by any other party under such charter agreement or
lease that have not been observed or performed in all material respects; and
(vii) the transactions described in this Agreement will not constitute a default
under or cause for termination or modification of any terms of such charter
agreement or lease.
(c) Section 3.28 of the Target Disclosure Schedule contains a list of all
leases or charters providing for the use by the Target or any Subsidiary of a
Target Drilling Rig. Complete and correct copies of each lease or charter have
been delivered to Acquiror.
(d) With respect to each Target Drilling Rig: (i) if applicable, such Target
Drilling Rig is lawfully documented under the flag of the nation listed on
Section 3.28 of the Target Disclosure Schedule for such Target Drilling Rig;
(ii) if applicable, such Target Drilling Rig is afloat and in satisfactory
operating condition for charter hire; (iii) such Target Drilling Rig holds in
full force and effect all certificates, licenses, permits and rights required
for operation in the manner drilling rigs of its kind are being operated in the
geographical area in which such Target Drilling Rig is presently being operated
which the failure to hold would reasonably be expected to have a Material
Adverse Effect on Target; (iv) no event has occurred and no condition exists
that would endanger the maintenance of the classification of such Target
Drilling Rig, (v) such Target Drilling Rig which is a jack-up drilling rig is
considered by the American Bureau of Shipping to be in class as a Maltese Cross
A1 Self-Elevating Drilling Unit and free of any recommendations and average
damages affecting class, and (vi) there exists no outstanding requirements or
recommendations resulting from any inspections by, or rules or regulations of,
the U.S. Coast Guard, the U.S. Minerals Management Service, the U.S.
Occupational Safety and Health Administration, or any nation under which any of
the Target Drilling Rigs are flagged which would reasonably be expected to have
a Material Adverse Effect on Target.
(e) Section 3.28 of the Target Disclosure Schedule contains a list of the
geographical location in which each Target Drilling Rig is being operated as of
the date hereof. Each Target Drilling Rig can be
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removed from such geographical location and transported to the United States
without the payment, liability or imposition of any material tax, duty, impost
or other payment of any kind to any foreign governmental authority.
SECTION 3.29. SIME-DUAL SDN BHD. Section 3.29 of the Target Disclosure
Schedule lists all agreements in respect of Sime-Dual Drilling Sdn Bhd, a
Malaysian company ("SIME-DUAL"). Target represents and warrants that (i) the
Shareholders Agreement dated October 24, 1994 by and among SD Holdings Berhad, a
Malaysian company ("SD"), Target and Sime-Dual (the "ORIGINAL AGREEMENT"), as
amended pursuant to that certain First Amendment to the Shareholders Agreement
dated June 5, 1995 by and among SD, Sime Darby Drilling Sdn Bhd, a Malaysian
company ("SDD"), Target, DAI and Sime-Dual (the "FIRST AMENDMENT") (the Original
Agreement and the First Amendment are collectively referred to as, the
"SHAREHOLDERS AGREEMENT") has not been amended (other than the First Amendment)
and remains in full force and effect and to the knowledge of the Target there
exists no Event of Default (as defined in the Shareholders Agreement), or facts
or events which with the passage of time or the giving or notice would
constitute an Event of Default, and no waivers of performance have been granted
by Target or DAI of any of SD's or SDD's obligations thereunder, (ii) neither a
Dual Triggering Event or a SD Triggering Event (as those terms are defined in
the Shareholders Agreement) has occurred, (iii) there have been no guaranties
given by either Target or, to the knowledge of the Target, SDD as described in
Sub-Clause 6.3 of the First Amendment, (iv) there have been no notices provided
by SDD or SD to trigger the put option described in Clause 19.5 of the Original
Agreement, (v) the Joint Operating Agreement dated June 5, 1995 by and among SDD
and DAI (the "JOINT OPERATING AGREEMENT") has not been amended and remains in
full force and effect and to the knowledge of the Target there exists no
material defaults, or facts or events which with the passage of time or the
giving or notice would constitute a material default, and no waivers of
performance have been granted by Target or DAI of any of SD's or SDD's
obligations thereunder, (vi) no Sale Notice (as defined in the Joint Operating
Agreement) has been given by DAI or SDD, and (vii) the Joint Bareboat Charter
Agreement dated June 5, 1995 by and among SDD, DAI and Sime-Dual (the "JOINT
BAREBOAT CHARTER") has not been amended and remains in full force and effect and
to the knowledge of the Target there exists no material defaults, or facts or
events which with the passage of time or the giving or notice would constitute a
material default, and no waivers of performance have been granted by Sime-Dual
of any of SDD's or DAI's obligations thereunder.
SECTION 3.30. ACCOUNTS RECEIVABLE. All of the accounts receivable
reflected in the 1995 Balance Sheet or created thereafter to the best of the
Target's knowledge are valid receivables subject to no setoffs or counterclaims,
are current and collectible and will be collected in accordance with their terms
at their recorded amounts, subject only to the reserve for bad debts set forth
in the 1995 Balance Sheet as adjusted for operations and transactions through
the Effective Time in accordance with the past custom and practice of the Target
and the Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND ACQUIROR SUB
Except as set forth in the Disclosure Schedules delivered by Acquiror to the
Target and signed by the Target and Acquiror for identification prior to the
execution and delivery of this Agreement (the "ACQUIROR DISCLOSURE SCHEDULES"),
which shall identify exceptions by specific section references, Acquiror and
Acquiror Sub hereby, jointly and severally, represent and warrant to the Target
that:
SECTION 4.01. CORPORATE ORGANIZATION AND QUALIFICATION. Acquiror and
Acquiror Sub are corporations duly organized, validly existing and in good
standing under the laws of the jurisdiction of their incorporation and have the
requisite corporate power and authority and all necessary governmental approvals
to own, lease and operate their properties and to carry on their respective
businesses as they are now being conducted, except where the failure to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Material Adverse Effect. Acquiror and Acquiror Sub are
duly qualified or licensed as a foreign corporation to do business, and are in
good
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standing, in each jurisdiction where the character of the properties owned,
leased or operated by them or the nature of their respective businesses makes
such qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing as would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BYLAWS. Acquiror has
heretofore furnished or made available to the Target a complete and correct copy
of the Certificate of Incorporation and Bylaws of Acquiror, and the Certificate
of Incorporation and Bylaws of Acquiror Sub, each as amended to date. Neither
Acquiror nor Acquiror Sub is in violation of any provision of its Certificate of
Incorporation or Bylaws.
SECTION 4.03. CAPITALIZATION. As of the date of this Agreement, the
authorized capital stock of Acquiror consists of 125,000,000 shares of Acquiror
Common Stock, 5,000,000 shares of First Preferred Stock, $1.00 par value, and
15,000,000 shares of Serial Preferred Stock, $1.00 par value, 1,250,000 of which
have been designated as Series A Junior Participating Preferred Stock
(collectively, "ACQUIROR PREFERRED STOCK"). As of December 31, 1995, (a)
60,605,772 shares of Acquiror Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable, (b) 6,285,448 shares of
Acquiror Common Stock were held in the treasury of Acquiror, (c) 1,120,850
shares of Acquiror Common Stock were reserved for future issuance pursuant to
outstanding stock options granted pursuant to Acquiror's stock option plan, and
(d) no shares of Acquiror Preferred Stock were outstanding. The authorized
capital stock of Acquiror Sub consists of 10,000 shares of Acquiror Sub Common
Stock, of which, as of the date of this Agreement, 1,000 shares are issued and
outstanding and held by Acquiror. Except as contemplated by this Agreement or
that certain Rights Agreement (herein so called) dated February 21, 1995 or as
set forth in Section 4.03 of the Acquiror Disclosure Schedule or the Acquiror
SEC Reports, as of the date of this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Acquiror or any subsidiary of
Acquiror, including Acquiror Sub ("ACQUIROR SUBSIDIARY"), obligating Acquiror or
any Acquiror Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, Acquiror or any Acquiror Subsidiary. Between December
31, 1995 and the date of this Agreement, no shares of Acquiror Common Stock have
been issued by Acquiror, except pursuant to the options, warrants or other
rights, agreements, arrangements and commitments described in this Section 4.03
or Section 4.03 of the Acquiror Disclosure Schedule, in each case, in accordance
with their respective terms. There are no outstanding contractual obligations of
Acquiror or any Acquiror Subsidiary to repurchase, redeem or otherwise acquire
any shares of Acquiror Common Stock, or any capital stock of, or any equity
interests in, any Acquiror Subsidiary. The shares of Acquiror Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights created by statute,
Acquiror's Certificate of Incorporation or Bylaws or any agreement to which
Acquiror is a party or by which Acquiror is bound and will, when issued, except
with respect to shares to be issued to Dual Invest AS, be registered under the
Securities Act and the Exchange Act and registered or exempt from registration
under applicable Blue Sky Laws.
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Acquiror and
Acquiror Sub has all necessary corporate power and authority to execute and
deliver this Agreement and, with respect to the Merger, to perform its
obligations hereunder and to consummate the Transactions. The execution and
delivery of this Agreement by Acquiror and Acquiror Sub and the consummation by
Acquiror and Acquiror Sub of the Transactions have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Acquiror or Acquiror Sub are necessary to authorize this
Agreement or to consummate the Transactions (other than, with respect to the
issuance of Acquiror Common Stock pursuant to the Merger, the applicable rules
and regulations of NYSE, and with respect to the Merger, the filing and
recordation of an appropriate Certificate of Merger with the Secretary as
required by Delaware Law). This Agreement has been duly and validly executed and
delivered by Acquiror and Acquiror Sub and, assuming the due authorization,
execution
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and delivery of this Agreement by the Target, constitutes a legal, valid and
binding obligation of each of Acquiror and Acquiror Sub enforceable against each
of Acquiror and Acquiror Sub in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Acquiror and Acquiror Sub do not,
and the performance of this Agreement by Acquiror and Acquiror Sub will not,
subject to obtaining the consents, approvals, authorizations and permits and
making the filings described in Section 4.05(b) and Section 4.05(b) of the
Acquiror Disclosure Schedule, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of either Acquiror or any Acquiror Subsidiary, (ii)
conflict with or violate any Law applicable to Acquiror or any Acquiror
Subsidiary or by which any property or asset of any of them is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Acquiror or any Acquiror Subsidiary or require the consent
of any third party pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Acquiror or any Acquiror Subsidiary is a party or by which Acquiror or
any Acquiror Subsidiary or any property or asset of any of them is bound or
affected, except for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a Material
Adverse Effect on Acquiror or prevent Acquiror and Acquiror Sub from timely
performing their respective obligations under this Agreement and consummating
the Transactions.
(b) The execution and delivery of this Agreement by Acquiror and Acquiror
Sub do not, and the performance of this Agreement by Acquiror and Acquiror Sub
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic or
foreign, except (i) pursuant to the Exchange Act, the Securities Act, Blue Sky
Laws and the HSR Act and filing and recordation of an appropriate Certificate of
Merger with the Secretary as required by Delaware Law, (ii) as specified in
Section 4.05(b) of the Acquiror Disclosure Schedule, and (iii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not have a Material Adverse Effect on Acquiror
and would not prevent or delay consummation of the Transactions, or otherwise
prevent Acquiror or Acquiror Sub from performing their respective obligations
under this Agreement.
SECTION 4.06. SEC FILINGS; FINANCIAL STATEMENTS. (a) Acquiror has filed
all forms, reports and documents required to be filed by it with the SEC since
December 31, 1992 (collectively, the "ACQUIROR SEC REPORTS"). The Acquiror SEC
Reports (i) were prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder and (ii) did not, at the time they were
filed (or at the effective date thereof in the case of registration statements),
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No Acquiror Subsidiary is currently required to file any form,
report or other document with the SEC under Section 12 of the Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Acquiror SEC Reports was prepared in
accordance with U.S. GAAP throughout the periods indicated (except as may be
indicated in the notes thereto and except that financial statements included
with interim reports do not contain all U.S. GAAP notes to such financial
statements) and each fairly presented in all material respects the consolidated
financial position, results of operations and changes in stockholders' equity
and cash flows of Acquiror and its consolidated subsidiaries as at the
respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments which were not and are not expected, individually or in the
aggregate, to have a Material Adverse Effect on Acquiror).
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SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1995, except as contemplated by, or disclosed pursuant to, this Agreement
including Section 4.07 of the Acquiror Disclosure Schedule, or disclosed in any
Acquiror SEC Report filed since December 31, 1995 and prior to the date of this
Agreement, Acquiror and each Acquiror Subsidiary has conducted their businesses
only in the ordinary course and in a manner consistent with past practice and,
since December 31, 1995, there has not been (a) any event or events (whether or
not covered by insurance), individually or in the aggregate, having a Material
Adverse Effect on Acquiror, (b) any material change by Acquiror in its
accounting methods, principles or practices, (c) any entry by Acquiror or any
Acquiror Subsidiary into any commitment or transaction material to Acquiror or
any Acquiror Subsidiary, except in the ordinary course of business and
consistent with past practice, (d) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of Acquiror or any
redemption, purchase or other acquisition of any of its securities or (e) other
than pursuant to Acquiror's benefit plans, 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 consistent with past practice.
(b) As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the Transactions and except for this Agreement and any other agreements or
arrangements contemplated by this Agreement, Acquiror Sub has not and will not
have incurred, directly or indirectly, through any subsidiary or affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
SECTION 4.08. BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Acquiror or any
Acquiror Subsidiary.
SECTION 4.09. TAXES. (a) Acquiror and each Acquiror Subsidiary has (i)
filed all federal, state, local and foreign tax returns required to be filed by
them prior to the date of this Agreement (taking into account extensions) and
all of such returns were true and correct in all material respects when filed
and in compliance with applicable law, (ii) paid or accrued all taxes shown to
be due on such returns and paid all applicable ad valorem and value added taxes
as are due and (iii) paid or accrued all taxes for which a notice of assessment
or collection has been received (other than amounts being contested in good
faith by appropriate proceedings), except in the case of clause (i), (ii) or
(iii) for any such filings, payments or accruals which would not, individually
or in the aggregate, have a Material Adverse Effect. Except as set forth in
Section 4.09(a) of the Acquiror Disclosure Schedule, neither the Internal
Revenue Service nor any other federal, state, local or foreign taxing authority
has asserted any claim for taxes, or to the best knowledge of Acquiror, is
threatening to assert any claims for taxes, which claims, individually or in the
aggregate, could have a Material Adverse Effect. Acquiror has open years for
federal, state and foreign income tax returns only as set forth in Section
4.09(a) of the Acquiror Disclosure Schedule, and neither Acquiror nor any
Acquiror Subsidiary (i) has executed any waiver to extend the time for
assessment of any federal, state, local or foreign tax, or (ii) filed, or has
pending, any request or application for ruling, whether federal, state, local or
foreign. Acquiror and each Acquiror Subsidiary have withheld or collected and
paid over to the appropriate governmental authorities (or are properly holding
for such payment) all taxes required by law to be withheld or collected, except
for amounts that would not, individually or in the aggregate, have a Material
Adverse Effect. Neither Acquiror nor any Acquiror Subsidiary has made an
election under Section 341(f) of the Code. There are no liens for taxes upon the
assets of Acquiror or any Acquiror Subsidiary (other than liens for taxes that
are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens which would not, individually or in the
aggregate, have a Material Adverse Effect. Acquiror and each Acquiror Subsidiary
have complied with all federal, state, local and foreign tax laws except where
such failure would not result in a Material Adverse Effect.
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(b) Neither Acquiror nor any Acquiror Subsidiary has taken or agreed to take
any action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.
(c) The financial statements included in the Acquiror SEC Reports as of
December 31, 1995 includes appropriate reserves for all federal, state, local
and foreign taxes and other liabilities incurred as of such date but not yet
payable.
(d) The net operating losses and other carryovers available to Acquiror and
each Acquiror Subsidiary as of the date hereof are described in Section 4.09 of
the Acquiror Disclosure Schedule or the Acquiror SEC Reports and as of the date
hereof the ability of Acquiror and each Acquiror Subsidiary to use such
carryovers will not have been affected by Section 382, 383, or 384 of the Code
or by the separate return limitation year or consolidated return charge of
ownership limitations of Treas. Regs. Section 1.1502-21 or 1.1502-22.
(e) Acquiror is not a U.S. real property holding company under Section 897
of the Code.
(f) Neither Acquiror nor Acquiror Sub is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(g) Neither Acquiror nor any Acquiror Subsidiary is under the jurisdiction
of a court in Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(h) Neither Acquiror or any Acquiror Subsidiary holds stock of the Target
and will not hold stock of the Target prior to the Merger.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. CONDUCT OF BUSINESS BY THE TARGET PENDING THE MERGER. The
Target covenants and agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.01 of the Target Disclosure
Schedule or as contemplated by any other provision of this Agreement, unless
Acquiror shall otherwise agree in writing (which agreement shall not be
unreasonably withheld), (i) the business of the Target and the Subsidiaries
shall be conducted only in, and the Target and the Subsidiaries shall not take
any action except in, the ordinary course of business consistent with past
practice and in accordance with all applicable laws, (ii) the Target shall use
all reasonable efforts to preserve substantially intact its business
organization, to keep available the services of the current officers, employees
and consultants of the Target and the Subsidiaries and to preserve the current
relationships of the Target and the Subsidiaries with customers, suppliers and
other persons with which the Target or any Subsidiary has significant business
relations, (iii) the Target shall not and shall not permit any Subsidiary to
engage in any practice, take any action, or enter into any transaction of the
sort described in Section 3.08 above, and (iv) the Target and each Subsidiary
shall cause to be maintained in full force and effect, and without modification
or amendment, or any lapse of coverage under, all insurance polices described in
Section 3.24 of the Target Disclosure Schedule.
SECTION 5.02. CONDUCT OF BUSINESS BY ACQUIROR PENDING THE MERGER. Acquiror
covenants and agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 5.02 of the Acquiror Disclosure Schedule or
as contemplated by any other provision of this Agreement, unless the Target
shall otherwise agree in writing (which agreement will not be unreasonably
withheld), (i) the businesses of Acquiror and Acquiror Sub shall be conducted
only in, and the Acquiror shall not, and shall cause Acquiror Sub not to, take
any action except in, the ordinary course of business consistent with past
practice and in accordance with all applicable Laws, and (ii) Acquiror will not
(a) amend or otherwise change its Certificate of Incorporation or Bylaws, (b)
declare, set aside, make or pay any dividend or other distribution, payable in
cash, stock, property or otherwise, with
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respect to any of its capital stock, or (c) reclassify, combine, split or divide
its capital stock or redeem, purchase or otherwise acquire, directly or
indirectly, any of its capital stock or securities or obligations convertible
into or exchangeable for such capital stock.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. REGISTRATION STATEMENT; PROXY STATEMENT. (a) As promptly as
practicable after the execution of this Agreement, Acquiror shall prepare and
file with the SEC a registration statement on Form S-4 (together with all
amendments thereto, the "REGISTRATION STATEMENT") including therein a combined
proxy statement to be sent to the stockholders of the Target (the "PROXY
STATEMENT") and Prospectus, in connection with the registration under the
Securities Act of the shares of Acquiror Common Stock to be issued to the
stockholders of the Target pursuant to the Merger. Acquiror and the Target each
shall use all reasonable efforts to cause the Registration Statement to become
effective as promptly as practicable, and, prior to the effective date of the
Registration Statement, Acquiror shall take all or any action required under any
applicable federal or state securities laws in connection with the issuance of
shares of Acquiror Common Stock pursuant to the Merger. Each of the Target and
Acquiror shall pay its own expenses incurred in connection with the Registration
Statement, Proxy Statement and the Target's Stockholders' Meeting, including,
without limitation, the fees and disbursements of their respective counsel,
accountants and other representatives, except that the Target and Acquiror each
shall pay one-half of any printing, filing and other fees and expenses incurred
in connection therewith. The Target shall furnish all information concerning the
Target as Acquiror may reasonably request in connection with such actions and
the preparation of the Registration Statement and Proxy Statement. As promptly
as practicable after the Registration Statement shall have become effective, the
Target shall mail the Proxy Statement to its stockholders. The Proxy Statement
shall include the unanimous recommendation of the Board of Directors of the
Target in favor of the Merger.
No amendment or supplement to the Proxy Statement or the Registration
Statement will be made by Acquiror or the Target without the approval of the
other party, which shall not be unreasonably withheld. Acquiror and the Target
each will advise the other, promptly after it receives notice thereof, of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order, the suspension of the
qualification of the Acquiror Common Stock 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 or the Registration Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
Acquiror shall promptly prepare and submit to the NYSE a listing application
covering the shares of Acquiror Common Stock issuable in the Merger, and shall
use its reasonable best efforts to obtain, prior to the Effective Time, approval
for the listing of such Acquiror Common Stock, subject to official notice of
issuance, and the Target shall cooperate with Acquiror with respect to such
listing.
(b) Acquiror represents, warrants and agrees that the information supplied
by Acquiror for inclusion in the Registration Statement and the Proxy Statement
shall not, at (i) the time the Registration Statement is declared effective,
(ii) the time the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to the stockholders of the Target, (iii) the time of
the Target's Stockholder Meeting (as hereinafter defined), and (iv) the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein,
or necessary in order to make the statements therein not false or misleading. If
at any time prior to the Effective Time any event or circumstance relating to
Acquiror or Acquiror Subsidiary, or their respective officers or directors,
should be discovered by Acquiror which should be set forth in an amendment or a
supplement to the Registration Statement or Proxy Statement, Acquiror shall
promptly inform the Target. Notwithstanding the foregoing, Acquiror and Acquiror
Sub make no representation or warranty with respect to any information supplied
by the Target or any of its
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representatives which is contained in the Registration Statement or Proxy
Statement. All documents that Acquiror is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply as to form and
substance in all material aspects with the applicable requirements of the
Securities Act and the rules and regulations promulgated thereunder and the
Exchange Act and the rules and regulations promulgated thereunder.
(c) The Target represents, warrants and agrees that the information supplied
by the Target for inclusion in the Registration Statement and the Proxy
Statement shall not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Target, (iii) the
time of the Target's Stockholder Meeting, and (iv) the Effective Time, contain
any statement which, at such time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or omit to
state any material fact required to be stated therein, or necessary in order to
make the statements therein not false or misleading. If at any time prior to the
Effective Time any event or circumstance relating to the Target, or its officers
or directors, should be discovered by the Target which should be set forth in an
amendment or a supplement to the Registration Statement or Proxy Statement, the
Target shall promptly inform Acquiror. Notwithstanding the foregoing, the Target
makes no representation or warranty with respect to any information supplied by
Acquiror or Acquiror Sub or any of their representatives in the Registration
Statement or Proxy Statement. All documents that the Target is responsible for
filing with the SEC in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations promulgated
thereunder and the Exchange Act and the rules and regulations promulgated
thereunder.
(d) The Target, Acquiror and Acquiror Sub each hereby (i) consents to the
use of its name and, on behalf of its subsidiaries and affiliates, the names of
such subsidiaries and affiliates and to the inclusion of financial statements
and business information relating to such party and its subsidiaries and
affiliates (in each case, to the extent required by applicable securities laws)
in the Registration Statement and the Proxy Statement; (ii) agrees to use all
reasonable efforts to obtain the written consent of any person or entity
retained by it which may be required to be named (as an expert or otherwise) in
the Registration Statement or the Proxy Statement; and (iii) agrees to
cooperate, and agrees to use all reasonable efforts to cause its subsidiaries
and affiliates to cooperate, with any legal counsel, investment banker,
accountant or other agent or representative retained by any of the parties
specified in clause (i) above in connection with the preparation of any and all
information required, as determined after consultation with each party's
counsel, to be disclosed by applicable securities laws in the Registration
Statement or the Proxy Statement.
SECTION 6.02. TARGET STOCKHOLDER MEETING. The Target shall call and hold a
meeting of its stockholders (the "TARGET'S STOCKHOLDER MEETING") as promptly as
practicable for the purpose of voting upon the approval of this Agreement and
the Merger, and the Target shall use all commercially reasonable efforts to hold
the Target's Stockholder Meeting as soon as practicable after the date on which
the Registration Statement becomes effective. The Target shall use all
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the approval of this Agreement and the Merger and shall take all other
action reasonably necessary or advisable to secure the vote or consent of
stockholders required by Delaware Law to obtain such approvals (including
unanimously recommending such approval).
SECTION 6.03. APPROPRIATE ACTION; CONSENTS; FILINGS. (a) The Target,
Acquiror and Acquiror Sub shall use their best efforts to (i) take, or cause to
be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or required to be taken by
any Governmental Authority or otherwise to consummate and make effective the
Transactions as promptly as practicable, (ii) obtain from any Governmental
Authorities any consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by Acquiror or the Target or any of
their subsidiaries in connection with the authorization, execution and delivery
of this Agreement and the consummation of the Transactions, including, without
limitation, the Merger, and
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(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities Laws, (B) the rules and regulations of
the NYSE, (C) Delaware Law, (D) the HSR Act and any related governmental request
thereunder, and (E) any other applicable Law; PROVIDED that Acquiror and the
Target shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, accepting all
reasonable additions, deletions or changes suggested in connection therewith.
The Target and Acquiror shall use reasonable best efforts to furnish to each
other all information required for any application or other filing to be made
pursuant to the rules and regulations of any applicable Law (including all
information required to be included in the Proxy Statement and the Registration
Statement) in connection with the transactions contemplated by this Agreement.
(b) (i) Each of Acquiror and the Target shall give (or shall cause their
respective subsidiaries to give) any notices to third parties, and use, and
cause their respective subsidiaries to use, their commercially reasonable
efforts to obtain any third party consents (including those set forth in Section
3.05(a)(iii)), (A) necessary to consummate the Transactions, (B) disclosed or
required to be disclosed in the Target Disclosure Schedule or the Acquiror
Disclosure Schedule or (C) required to prevent a Material Adverse Effect from
occurring prior to or after the Effective Time.
(ii) In the event that Acquiror or the Target shall fail to obtain any
third party consent described in subsection (b)(i) above, it shall use its
best efforts, and shall take any such actions reasonably requested by the
other party, to minimize any adverse effect upon the Target and Acquiror,
their respective subsidiaries, and their respective businesses resulting, or
which could reasonably be expected to result after the Effective Time, from
the failure to obtain such consent.
(iii) The Target agrees to cooperate with Acquiror prior to the Effective
Time to clarify the terms of any agreements which the Target or any
Subsidiary is currently a party which might restrict the Target or any
Subsidiary from the conduct of the operation, charter or leasing of drilling
rigs in any area of the world so that from and after the Effective Time
Acquiror and the Target will obtain the benefits of the current practice
under such agreements whereby Acquiror and the Target will not be so
restricted in their operations.
(c) From the date of this Agreement until the Effective Time, each party
shall promptly notify the other party of any pending, or to the best knowledge
of the first party, threatened, action, proceeding or investigation by or before
any Governmental Authority or any other person (i) challenging or seeking
material damages in connection with the Merger or the conversion of the Target
Common Stock into Acquiror Common Stock pursuant to the Merger or (ii) seeking
to restrain or prohibit the consummation of the Merger or otherwise limit the
right of Acquiror or, to the knowledge of such first party, Acquiror Subsidiary
to own or operate all or any portion of the businesses or assets of the Target,
which in either case is reasonably likely to have a Material Adverse Effect on
the Target prior to the Effective Time, or a Material Adverse Effect on Acquiror
and the Acquiror Sub (including the Surviving Corporation) after the Effective
Time.
SECTION 6.04. ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to the
Confidentiality Agreement (as hereinafter defined), from the date hereof to the
Effective Time, Acquiror and the Target will each provide to the other, during
normal business hours and upon reasonable notice, access to all information and
documents which the other may reasonably request regarding the business, assets,
liabilities, employees and other aspects of the other party, other than
information and documents that in the opinion of such other party's counsel may
not be disclosed under applicable Law.
SECTION 6.05. NO SOLICITATION OF TRANSACTIONS. The Target shall not,
directly or indirectly, negotiate with any person other than Acquiror with
respect to the acquisition of the Target or the shares of the Target Common
Stock owned by Dual Invest AS and it will not, and will not permit any of its
officers, directors, employees, agents or representatives (including without
limitation, investment bankers, attorneys and accountants) to (i) initiate
contact with, (ii) make, solicit or encourage any
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inquiries or proposals, (iii) enter into, or participate in, any discussions or
negotiations with, (iv) disclose, directly or indirectly, any information not
customarily disclosed concerning the business and properties of the Target or
any Subsidiary to or (v) afford any access to any of the Target's or any
Subsidiary's properties, books and records to any person in connection with any
possible proposal relating to (a) the disposition of their respective businesses
or substantially all or their assets,(b) the acquisition of equity or debt
securities of the Target including equity or debt securities owned by Dual
Invest AS, or (iii) the merger, share exchange or business combination, or
similar acquisition transaction of or involving Target or any Subsidiary with
any person other than Acquiror; PROVIDED, HOWEVER, that nothing contained in
this Section 6.05 shall prohibit the Board of Directors of the Target (the
"BOARD") from taking and disclosing to the stockholders of the Target a position
in accordance with Rules 14d-9 and 14e-2 under the Exchange Act with respect to
a tender offer or an exchange offer for share of Target Common Stock commenced
by a third party. The Target shall notify Acquiror promptly if any proposal or
offer, or any inquiry or contact with any person with respect thereto, is made
and shall, in any such notice to Acquiror, indicate in reasonable detail the
identity of the person making such proposal, offer, inquiry or contact and the
terms and conditions of such proposal, offer, inquiry or contact. The Target
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Target is a party. The
Target immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
SECTION 6.06. DIRECTORS' AND OFFICERS' INDEMNIFICATION. (a) The
Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in Article VIII of the Bylaws of the Target, which provisions shall
not be amended, repealed or otherwise modified for a period of six (6) years
from the Effective Time in any manner that would affect adversely the rights
thereunder of individuals who at any time prior to the Effective Time were
directors, officers or employees of the Target or any of its Subsidiaries,
unless such modification shall be required by Delaware Law.
(b) From and after the Effective Time and for a period of six (6) years
thereafter, the Surviving Corporation shall indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer or director of
Target or any of the Subsidiaries, or an employee of Target or any of the
Subsidiaries who acts as a fiduciary under any employee benefit plans of Target
or any of the Subsidiaries (collectively, the "INDEMNIFIED PARTIES") against all
losses, expenses (including reasonable attorneys' fees), claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of the
Surviving Corporation (which approval shall not unreasonably be withheld), or
otherwise in connection with, any threatened or actual claim, action, suit,
proceeding or investigation (a "CLAIM"), based in whole or in part on or arising
in whole or in part out of the fact that the Indemnified Party (or the Person
controlled by the Indemnified Party) is or was a director, officer or such an
employee of Target or any of the Subsidiaries and pertaining to any matter
existing or arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, any Claim arising out of this
Agreement or any of the transactions contemplated hereby), whether asserted or
claimed prior to, at or after the Effective Time, in each case to the fullest
extent permitted under Delaware Law, and shall pay any expenses, as incurred, in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under Delaware Law. Without
limiting the foregoing, in the event any such claim is brought against any of
the Indemnified Parties, (i) such Indemnified Parties may retain counsel
(including local counsel) satisfactory to them and which shall be reasonably
satisfactory to Acquiror and the Surviving Corporation shall pay all reasonable
fees and expenses of such counsel for such Indemnified Parties; and (ii) the
Surviving Corporation shall use all reasonable efforts to assist in the defense
of any such Claim, provided that the Surviving Corporation shall not be liable
for any settlement effected without its written consent, which consent, however,
shall not be unreasonably withheld. The Indemnified Parties as a group shall
retain only one law firm (plus appropriate local counsel) to represent them with
respect to each such Claim unless there is, as
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determined by counsel to the Indemnified Parties, under applicable standards of
professional conduct, a conflict or a reasonable likelihood of a conflict on any
significant issue between the positions of any two or more Indemnified Parties
at the expense of the Surviving Corporation.
(c) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Target and the
Subsidiaries covering all of the individuals currently covered thereby (provided
that the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous to such officers and directors) with respect to claims arising from
facts or events which occurred before the Effective Time; provided, however, the
Surviving Corporation shall not be required to pay premiums for such insurance
in excess of $275,000 in the aggregate.
SECTION 6.07. OBLIGATIONS OF ACQUIROR SUB. Acquiror shall take all action
necessary to cause Acquiror Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and subject to conditions set forth in
this Agreement.
SECTION 6.08. PUBLIC ANNOUNCEMENTS. (a) Acquiror and the Target shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or any Transaction and shall
not issue any such press release or make any such public statement prior to such
consultation and (b) prior to the Effective Time, the Target will not issue any
other press release or otherwise make any public statements regarding its
business, except as may be required by Law or any listing agreement with the
National Association of Securities Dealers, Inc. (the "NASD") to which the
Target is a party.
SECTION 6.09. DELIVERY OF SEC DOCUMENTS. Each of the Target and Acquiror
shall promptly deliver to the other true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement.
SECTION 6.10. ENVIRONMENTAL ASSESSMENT. The Target agrees that Acquiror
may perform or have performed on its behalf an environmental assessment of its
owned or leased real property. The Target will give Acquiror and the officers,
directors, employees, agents, consultants and representatives of Acquiror access
to the owned or leased real property, including without limitation, access to
enter upon and investigate and collect air, surface water, groundwater and soil
samples, in order to conduct the environmental assessment. The Target will
cooperate with Acquiror in connection with such assessment, including without
limitation scheduling site visits as necessary to complete the assessment prior
to the Effective Time. The environmental assessment conducted by Acquiror or on
Acquiror's behalf shall be satisfactory to Acquiror in its sole and absolute
discretion.
SECTION 6.11. NOTIFICATION OF CERTAIN MATTERS. The Target shall give
prompt notice to Acquiror, and Acquiror shall give prompt notice to the Target,
of (i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Target, Acquiror or Acquiror Sub, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 6.11 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.12. FURTHER ACTION. At any time and from time to time, each
party to this Agreement agrees, subject to the terms and conditions of this
Agreement, to take such actions and to execute and deliver such documents as may
be necessary to effectuate the purposes of this Agreement at the earliest
practicable time.
SECTION 6.13. EMPLOYEE BENEFITS. (a) On or before March 31, 1996, the
Target shall (i) amend the Dual Drilling Company Employees Tax Deferred/Thrift
Savings Plan and Trust (the "401(K) PLAN") to (A) provide for the limitation on
compensation that may be considered under the
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401(k) Plan imposed by Section 401(a)(17) of the Code, as amended by the Omnibus
Budget Reconciliation Act of 1993, Publ. L. No. 103-66 effective January 1, 1994
and (B) amend the 401(k) Plan to provide clarification that the 401(k) Plan, as
amended and restated effective January 1, 1991, also constitutes an amendment
and restatement of the separate plan documents governing the 401(k) Plan and the
Dual Drilling Company Employees Thrift Plan and Trust that was merged into the
401(k) Plan effective January 1, 1991 (the "PRIOR THRIFT PLAN") to the extent
required for both the 401(k) Plan and Prior Thrift Plan to constitute qualified
plans within the meaning of Sections 401(a) and 501(a) of the Code for their
plan years 1987 through 1990 (collectively the "401(K) PLAN AMENDMENT"), and
(ii) file the 401(k) Plan Amendment with the Dallas Key District of the Internal
Revenue Service for the purpose of entering into a closing agreement with the
Internal Revenue Service regarding the 401(k) Plan Amendment pursuant to Rev.
Proc 94-16, 1994-1 C.B. 576, as modified by the Memorandum from Internal Revenue
Service Assistant Commissioner (Employee Plans and Exempt Organizations) James
McGovern to Field Offices Outlining Procedures for Processing Employee Plans not
Amended Timely Under Tax Reform Act of 1986, Released October 26, 1995 (the
"CLOSING AGREEMENT"). Target shall timely pay any monetary sanction assessed by
the Internal Revenue Service pursuant to the Closing Agreement. Subject to the
Target taking the action required by the two preceding sentences and the
Internal Revenue Service entering into the Closing Agreement, Acquiror agrees to
(i) assume sponsorship of the 401(k) Plan as of the Effective Time, (ii) upon
entering into the Closing Agreement, file the 401(k) Plan Amendment with the
Internal Revenue Service for the purpose of obtaining a determination letter
from the Internal Revenue Service that both the 401(k) Plan and the Prior Thrift
Plan are qualified within the meaning of Sections 401(a) and 501(a) of the Code
retroactive to the 1987 plan year of each plan and (iii) upon issuance by the
Internal Revenue Service of a favorable determination letter as described in
clause (ii) of this sentence, merge the 401(k) Plan into the ENSCO Savings Plan
as soon as administratively practicable thereafter. Amounts payable under the
401(k) Plan to employees whose employment is terminated for any reason prior to
December 31, 1996 shall be paid promptly after any such termination and not
after the end of the 1996 plan year if requested by the employee and such
payment is permitted by the terms of the 401(k) Plan.
(b) Effective as of the Effective Time, Acquiror agrees to assume or,
alternatively, cause the Surviving Corporation to assume, the Dual Drilling
Company Employee Health Benefit Plan (the "DUAL MEDICAL PLAN"), the Dual
Drilling Company Group Life Insurance Plan, the Dual Drilling Company Long-Term
Disability Plan, the Dual Drilling Company Group Travel Accident Insurance Plan,
the Voluntary Personal Accident Insurance Plan, the Long-Term Disability Plan
for Third Country Nationals, and the Premium Conversion Cafeteria Plan unless
any such plan has been terminated by the Target as directed by Acquiror prior to
the Effective Time (collectively, the "GROUP INSURANCE PLANS"). Acquiror agrees
to provide to former employees of the Target and its Subsidiaries under the
plans continued or to be established by Acquiror continuation group health
coverage under Section 4980B of the Code and Sections 601 to 608 of ERISA
("COBRA COVERAGE") for any individuals receiving COBRA Coverage under the Dual
Medical Plan as of the Effective Time and for any employees of the Target and
its Subsidiaries and their dependents who become eligible for and elect COBRA
Coverage as a result of the Transactions contemplated by the Agreement;
provided, however, nothing contained herein shall obligate Acquiror to extend
COBRA Coverage beyond its normal expiration period. As soon as practicable after
the Effective Time, the Target shall transfer to Acquiror or, if directed by
Acquiror, to the Surviving Corporation, any assets, including any insurance
policies, held by the Target or a Subsidiary supporting the payment of benefits
under the Group Insurance Plans. Acquiror and the Target agree that Acquiror may
direct the Target to take such action as Acquiror deems appropriate to terminate
any Group Insurance Plan conditioned upon the occurrence of and as of the
Effective Time, liquidate the assets of any trust or funding arrangement for any
such plan and settle all claims for benefits under any such plan.
(c) Effective as of the Effective Time, the Target shall take all such
action necessary (i) to amend the terms of the post-retirement medical coverage
provided by the Target under the Dual Medical Plan (the "RETIREE MEDICAL PLAN")
to provide that no employee of the Target or any Subsidiary, or any
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beneficiary or dependent of any such employee, may become entitled to
post-retirement medical coverage under the Retiree Medical Plan due to a
retirement or other termination of employment after the Effective Time and (ii)
to terminate the Retiree Medical Plan. Effective as of the Effective Time,
Acquiror agrees to provide post-retirement medical coverage under the ENSCO
Medical Plan to any former employee of the Target or any Subsidiary who as of
the Effective Time is receiving post-retirement medical coverage under the
Retiree Medical Plan, provided that such coverage under the ENSCO Medical Plan
shall be on the same terms and conditions and shall provide the same benefits as
currently available to retired former employees of Acquiror under the ENSCO
Medical Plan, but without regard to the age and service provisions of the ENSCO
Medical Plan that determine initial eligibility for post-retirement medical
coverage and without regard to any preexisting condition limitations contained
in the ENSCO Medical Plan. Any employee of the Target or any Subsidiary who is
not entitled to post-retirement medical coverage under the Retiree Medical Plan
as of the Effective Time will be eligible for post-retirement medical coverage
under the ENSCO Medical Plan only if the terms and conditions for such coverage
under the ENSCO Medical Plan are satisfied.
(d) Effective as of the day before the Effective Time, the Target shall take
all such action necessary (i) to amend the provisions of the Dual Drilling
Company Supplemental Executive Retirement Plan (the "SERP") to freeze all
benefits under the SERP as of the day before the Effective Time and to permit
Acquiror or the Surviving Corporation, as successor to the Target's rights under
the SERP, to distribute the determined benefit under the SERP payable to each
participant covered by the SERP in one lump sum payment in the sole discretion
of Acquiror at any time from and after January 1, 1997, (ii) to determine the
benefits payable thereunder to each participant, and (iii) to terminate the SERP
effective as of the day before the Effective Time.
(e) Effective as of the day before the Effective Time, the Target shall take
all such action necessary (i) to amend the provisions of the Dual Drilling
Company Benefit Restoration Plan (the "BENEFIT RESTORATION PLAN") to freeze all
benefits under the Benefit Restoration Plan, (ii) to determine the benefits
payable thereunder to each participant, and (iii) to terminate the Benefit
Restoration Plan effective as of the day before the Effective Time.
(f) To facilitate the payment of benefits from the Benefit Restoration Plan
and, if directed by Acquiror to facilitate the payment of benefits under the
SERP, the Target shall take all such action necessary (i) to provide a schedule
of benefits payable under the Benefit Restoration Plan and, if applicable, the
SERP, to the Trust Company of Texas in its capacity as trustee (the "TRUSTEE")
of the Umbrella Trust evidenced by that certain Trust Agreement dated October 1,
1994 by and between Dual Drilling Company and Trust Company of Texas (the
"TRUST"), (ii) to direct the Trustee to make payment from the assets of the
Trust of all benefits payable under the Benefit Restoration Plan or the SERP,
and (iii) to cause the Trustee to liquidate the assets of the Trust, except as
otherwise determined by Acquiror, provided that such actions are consistent with
the terms of the SERP, Benefit Restoration Plan and Trust, each as amended.
(g) Effective as of the day before the Effective Time, the Target shall take
all such action necessary to freeze all benefits under the Discontinued
Executive and Manager Team Incentive Program ("TEAM INCENTIVE PROGRAM")
maintained by the Target and Acquiror agrees to assume the benefit payment
obligations of the Target under the Team Incentive Plan, and after all such
benefit payments have been made, the Team Incentive Program shall be deemed
terminated and Acquiror shall take such other action as it deems appropriate to
accomplish such termination.
(h) Effective as of the Effective Time, Acquiror shall assume the Dual
Drilling Company Severance Pay Plan for Office Employees, the Dual Drilling
Company Severance Pay Plan for Key Operating and Support Staff Employees and the
Dual Drilling Company Severance Pay Plan for Key Operating and Engineering
Managers (collectively, the "EMPLOYEE SEVERANCE PLANS"), provided that Acquiror
shall not be obligated to continue the Employee Severance Plans for any
specified period of time.
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(i) Effective as of the day before the Effective Time, the Target shall take
all such action necessary to freeze all benefits under the Employee Incentive
Plan, the Safety Bonus Plan, and the Pro-Performance Bonus Plan for Toolpushers
maintained by the Target and Acquiror agrees to assume the benefit payment
obligations of the Target under such plans and cause such payments to be made
after the Effective Time, and after all such payments have been made, the plans
shall be deemed terminated and Acquiror shall take such other action as it deems
appropriate to accomplish such termination.
(j) Acquiror agrees to assume the benefit payment obligations of the Target
under the Dual Special Performance Unit Plan, effective August 21, 1995 (as
amended, the "DUAL UNIT PLAN"), maintained by the Target and cause such payments
to be made, and after all such payments have been made, the Dual Unit Plan shall
be deemed terminated and Acquiror shall take such other action as it deems
appropriate to accomplish such termination. Target agrees that the aggregate
amount of the Performance Bonus Pool (as defined in the Dual Unit Plan) plus the
amount payable to David W. Skarke as a performance bonus calculated based on the
amount of the Performance Bonus Pool pursuant to that certain letter agreement
dated October 2, 1995 (the "Letter Agreement") shall be $2,000,000. The Target
shall take all required actions prior to the Effective Time to amend the terms
of the Dual Unit Plan and the Letter Agreement so that the aggregate amounts
payable thereunder shall be $2,000,000.
(k) The Target agrees to terminate the Annual Incentive Plan as of the date
of the commencement of such plan and accordingly no benefits shall accrue
thereunder.
(l) Nothing in this Section 6.13 is intended or shall be construed to limit
Acquiror's right to modify, change, terminate or otherwise alter any of the
provisions of, or benefits provided under, any new plans or plans established by
Acquiror or the plans described in this Section 6.13 that are assumed by
Acquiror or the Surviving Corporation, or to create any vested rights for
participants in the benefits provided under such plans.
(m) Prior to the Effective Time, the Target shall file with the Internal
Revenue Service, all Annual Reports, Form 5500, and the applicable Schedule F,
required to be filed under Section 6039(d) of the Code, with respect to the
Premium Conversion Cafeteria Plan for each plan year since the inception of the
Premium Conversion Cafeteria Plan.
(n) Prior to the Effective Time, the Target shall, pursuant to the
requirements of the Delinquent Filer Voluntary Compliance Program described in
the Department of Labor ("DOL") Notice published in 59 Fed. Reg. 20873 (April
27, 1995), as a condition of relief from the annual reporting requirements, (i)
elect to file the one-time statement required under DOL Reg. 2520-104-23 with
respect to (A) the SERP and (B) the Target Employment Contracts applicable to
L.H. Dick Robertson, W. Allen Parks and Dudley M. Haralson, (ii) file with the
DOL, the first page of the Form 5500, Annual Report, with the applicable items
completed, (iii) pay to the DOL the Two Thousand Five Hundred Dollar ($2,500)
penalty applicable to such Form 5500 filings, and (iv) file with the DOL the
applicable one-time statements required with respect to the SERP and such Target
Employment Contracts.
(o) All of the employment agreements listed on Schedule 6.13(o) of the
Target Disclosure Schedule will be terminated by the Target as of the Effective
Time. Notwithstanding the foregoing, Acquiror may offer employment prior to the
Effective Time to persons who have such employment agreements and the terms of
such employment, if accepted by such employee of the Target, may affect the
Target's obligations to the affected employee.
SECTION 6.14. AFFILIATES; ACCOUNTING AND TAX TREATMENT. (a) Section 6.14
of the Target Disclosure Schedule lists the names and addresses of those persons
who are, in the Target's reasonable judgment, "affiliates" of the Target within
the meaning of Rule 145 under the Securities Act (each, a "TARGET AFFILIATE").
The Target shall use all commercially reasonable efforts to obtain Affiliate
Agreements in the form of EXHIBIT B hereto ("AFFILIATE AGREEMENTS") from (i) at
least 30 days prior to the Effective Time, each of the officers, directors and
stockholders (other than Dual Invest AS) of the
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Target specified in Section 6.14 of the Target Disclosure Schedule and (ii) any
person who may be deemed to have become an affiliate of the Target (under Rule
145 under the Securities Act) after the date of this Agreement and on or prior
to the Effective Time as soon as practicable after the date on which such person
attains such status. Each party hereto shall use its best efforts to cause the
Merger to qualify, and shall not take any actions which would (or fail to take
any actions the failure of which would) prevent the Merger from qualifying, as a
reorganization qualifying under the provisions of Section 368(a) of the Code,
including, without limitation, that Acquiror agrees that it will cause Target,
in its new capacity as a subsidiary of Acquiror, to (i) continue the Target's
historic business and (ii) use a significant portion of its historic business
assets in such business.
(b) The Target shall provide to Acquiror for inclusion in the Proxy
Statement a written opinion from Akin, Gump, Strauss, Hauer & Feld, L.L.P. dated
as of the date that the Proxy Statement is first mailed to stockholders of the
Target to the effect that (i) the Merger will be treated for U.S. federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the
Code; (ii) Acquiror, Acquiror Sub and the Target will each be a party to that
reorganization within the meaning of Section 368(b) of the Code; and (iii) the
stockholders of the Target shall not recognize any gain or loss for U.S. federal
income tax purposes as a result of the Merger, other than to the extent such
stockholders receive cash in lieu of fractional shares.
SECTION 6.15. CERTAIN EMPLOYEES. The Target agrees to terminate the
employment of any executive officer (as that term is defined in Rule 405
promulgated under the Exchange Act) of the Target identified by Acquiror at
least one day prior to the Effective Time. Such termination shall not adversely
affect any Long-Term Options, severance or other benefits such executive
officers shall be entitled to receive.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Target, Acquiror and Acquiror Sub to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) this Agreement and the Transactions contemplated hereby shall have
been approved and adopted by the affirmative vote of the stockholders of the
Target in accordance with Delaware Law and the Target's Certificate of
Incorporation and Bylaws and the rules of the NASD;
(b) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any order, executive order, stay, decree, judgment or
injunction (each an "ORDER") or statute, rule or regulation which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger;
(c) the Registration Statement shall have been declared effective, and
no stop order suspending the effectiveness of the Registration Statement
shall be in effect;
(d) Acquiror and the Target shall have received from the NYSE evidence
that the shares of Acquiror Common Stock to be issued to the stockholders of
the Target in the Merger shall be listed on the NYSE immediately following
the Effective Time; and
(e) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated.
SECTION 7.02. CONDITIONS TO THE OBLIGATIONS OF ACQUIROR AND ACQUIROR
SUB. The obligations of Acquiror and Acquiror Sub to consummate the Merger are
subject to the satisfaction of the following further conditions:
(a) the Target shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed
or complied with by it at or prior to the
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Effective Time and each of the representations and warranties of the Target
contained in this Agreement shall be true and correct in all material
respects as of the Effective Time as though made on and as of the Effective
Time, except that those representations and warranties which address matters
only as of a particular date shall remain true and correct as of such date
and Acquiror shall have received a certificate of an executive officer of
the Target to that effect;
(b) Acquiror shall have received from each Target Affiliate and any
other person who may be deemed to have become an affiliate of the Target
(under Rule 145 under the Securities Act) after the date of this Agreement
and at or prior to the Effective Time a signed Affiliate Agreement;
(c) since the date of this Agreement, no material adverse change in the
financial condition, results of operations or business of the Target and the
Subsidiaries, taken as a whole, shall have occurred, and neither the Target
nor any Subsidiary shall have suffered any damage, destruction or loss
materially affecting the business or properties of the Target and the
Subsidiaries, taken as a whole;
(d) the Target and each Subsidiary shall have delivered to Acquiror,
each dated as of a date not earlier than thirty days prior to the Effective
Time, (i) copies of the certificates of incorporation or other
organizational documents, including all amendments thereto, certified by the
appropriate government official, of the Target and each Subsidiary, (ii) to
the extent issued by such jurisdiction, certificates from the appropriate
governmental official to the effect that Target and each Subsidiary is in
good standing in such jurisdiction and listing all organizational documents
of Target and each Subsidiary on file, (iii) to the extent issued by such
jurisdiction, a certificate from the appropriate governmental official in
each jurisdiction in which the Target and each Subsidiary is qualified to do
business to the effect that such member is in good standing in such
jurisdiction, (iv) to the extent issued by such jurisdiction, certificates
indicating all taxes are current for the Target and each Subsidiary in its
jurisdiction of organization and each jurisdiction in which such member is
qualified to do or conducting business, (v) to the extent issued by such
jurisdiction, certificates from the appropriate governmental official to the
effect that each Target Drilling Rig is documented and flagged in the
jurisdiction described in Section 3.28 of the Target Disclosure Schedule,
and (vi) Confirmation of Class Certificates from the American Bureau of
Shipping indicating that each of the Target Drilling Rigs that is a jack-up
drilling rig is in class and free of any recommendations; and
(e) Acquiror shall have received from Akin, Gump, Strauss, Hauer & Feld,
L.L.P., a written opinion dated as of the date of the Closing covering the
matters set forth on EXHIBIT C hereto in form and substance reasonably
acceptable to counsel for Acquiror.
SECTION 7.03. CONDITIONS TO THE OBLIGATIONS OF THE TARGET. The obligations
of the Target to consummate the Merger are subject are subject to the
satisfaction of the following further conditions:
(a) Acquiror and Acquiror Sub shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the
Effective Time and each of the representations and warranties of Acquiror
and Acquiror Sub contained in this Agreement shall be true and correct in
all material respects as of the Effective Time, as though made on and as of
the Effective Time, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct
as of such date and the Target shall have received a certificate of an
executive officer of Acquiror to that effect;
(b) since the date of this Agreement, no material adverse change in the
financial condition, results of operations or business of Acquiror and the
Acquiror Subsidiaries, taken as a whole, shall have occurred, and Acquiror
and the Acquiror Subsidiaries shall not have suffered any damage,
destruction or loss materially affecting the business or properties of
Acquiror and the Acquiror Subsidiaries, taken as a whole; and
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(c) the Target shall have received from Baker & McKenzie a written
opinion dated as of the date of the Closing covering the matters set forth
on EXHIBIT D hereto in form and substance reasonably acceptable to counsel
for the Target.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, notwithstanding any requisite approval and adoption of this Agreement and
the Transactions, as follows:
(a) by mutual written consent duly authorized by the Boards of Directors
of each of Acquiror, Acquiror Sub and the Target;
(b) by either Acquiror or the Target, if either (i) the Effective Time
shall not have occurred on or before July 31, 1996; PROVIDED, HOWEVER, that
the right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; or (ii) there shall be any
Order which is final and nonappealable preventing the consummation of the
Merger, except if the party relying on such Order has not complied with its
obligations under Section 6.03(a);
(c) by Acquiror, if a tender offer or exchange offer for 50% or more of
the outstanding shares of capital stock of the Target is commenced, and the
Board of Directors of the Target fails to recommend against the stockholders
of the Target tendering their shares into such tender offer or exchange
offer;
(d) by Acquiror, if the stockholders of the Target shall have failed to
approve and adopt this Agreement, the Merger and other Transactions at a
meeting duly convened therefor;
(e) by Acquiror, upon a breach of any representation, warranty, covenant
or agreement on the part of the Target set forth in this Agreement, or if
any representation or warranty of the Target shall have become untrue, in
either case such that the conditions set forth in Section 7.02(a) would not
be satisfied (a "TERMINATING TARGET BREACH"); PROVIDED, HOWEVER, that, if
such Terminating Target Breach is curable by the Target through the exercise
of its best efforts and for so long as the Target continues to exercise such
best efforts, Acquiror may not terminate this Agreement under this Section
8.01(e); or
(f) by the Target, upon breach of any representation, warranty, covenant
or agreement on the part of Acquiror set forth in this Agreement, or if any
representation or warranty of Acquiror shall have become untrue, in either
case such that the conditions set forth in Section 7.03 would not be
satisfied ("TERMINATING ACQUIROR BREACH"); PROVIDED, HOWEVER, that, if such
Terminating Acquiror Breach is curable by Acquiror through best efforts and
for so long as Acquiror continues to exercise such best efforts, the Target
may not terminate this Agreement under this Section 8.01(f).
SECTION 8.02. FEES AND EXPENSES. (a) The Target shall pay Acquiror a fee
(an "Alternative Proposal Fee") of $5,000,000, which amount is inclusive of all
of Specified Expenses (as hereinafter defined), if:
(i) this Agreement is terminated pursuant to Section 8.01(c); or
(ii) this Agreement is terminated pursuant to Section 8.01(d) as a
result of the failure of the stockholders of the Target to approve the
Merger and a Business Combination Transaction Proposal shall have been made
prior to such termination, and any Business Combination Transaction is
thereafter consummated within 12 months of such termination.
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As used herein, the term "BUSINESS COMBINATION TRANSACTION" shall mean any
of the following involving the Target: (1) any merger, consolidation, share
exchange, business combination or other similar transaction (other than the
Transactions); (2) any sale, lease, exchange, transfer or other disposition
(other than a pledge or mortgage) of 25% or more of the assets of the Target and
the Subsidiaries, taken as a whole, in a single transaction or series of
transactions; or (3) the acquisition by a person or entity or any "group" (as
such term is defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of beneficial ownership of 33 1/3% or more of the shares
of Target Common Stock, whether by tender offer, exchange offer or otherwise.
(b) Acquiror shall be entitled to receive its Specified Expenses (but not
the Alternative Proposal Fee) in immediately available funds in the event that
this Agreement is terminated pursuant to Section 8.01(b) (subject to the proviso
thereof) or Section 8.01(e). Target shall be entitled to receive its Specified
Expenses in immediately available funds in the event that this Agreement is
terminated pursuant to Section 8.01(f).
(c) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to Section 8.01, all obligations of the parties hereto shall
terminate except the obligations of the parties pursuant to this Section 8.02
and Sections 8.03, 8.04, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07, 9.08, 9.10 and 9.11
and pursuant to the Confidentiality Agreement. No termination of this Agreement
pursuant to Section 8.01(e) or 8.01(f) shall prejudice the ability of a
non-breaching party from seeking damages from any other party for any breach of
this Agreement, including, without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity. Notwithstanding the foregoing, if
Acquiror is required to file suit to seek the Alternative Proposal Fee or either
Acquiror or the Target is required to file suit to seek its Specified Expenses,
and it ultimately succeeds on the merits, it shall be entitled to all expenses,
including attorneys' fees, which it has incurred in enforcing its rights under
this Section 8.02.
(d) As used herein, "SPECIFIED EXPENSES" means all out-of-pocket expenses
and fees actually incurred or accrued by a Person or on its behalf in connection
with the Transactions prior to the termination of this Agreement (including,
without limitation, all fees and expenses of counsel, financial advisors, banks
or other entities providing financing to such Person (including financing,
commitment and other fees payable thereto), accountants, environmental and other
experts and consultants to such Person and its affiliates, and all printing and
advertising expenses) and in connection with the negotiation, preparation,
execution, performance and termination of this Agreement, the structuring of the
Transactions, any agreements relating thereto and any filings to be made in
connection therewith.
(e) The Target agrees that from and after the Effective Time it shall
reimburse Acquiror for all out-of-pocket expenses and fees actually incurred or
accrued by Acquiror in connection with the Transaction.
(f) Except as set forth in this Section and Section 6.01, all costs and
expenses incurred in connection with this Agreement and the Transactions shall
be paid by the party incurring such expenses, whether or not any Transaction is
consummated.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after the
approval and adoption of this Agreement and the Transactions by the stockholders
of the Target, no amendment may be made which would violate Delaware Law. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
SECTION 8.04. WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document
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delivered pursuant hereto and (c) waive compliance with any agreement or
condition contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to be bound
thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
and any certificate delivered pursuant hereto by any person shall terminate at
the Effective Time, except that the agreements set forth in Articles I and II
and Sections 6.06 and 6.07 shall survive the Effective Time indefinitely.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
facsimile, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
<TABLE>
<S> <C>
if to Acquiror or Acquiror Sub: with a copy to:
ENSCO International Incorporated Daniel W. Rabun
1445 Ross Avenue, Suite 2700 Baker & McKenzie
Dallas, Texas 75202 2001 Ross Avenue
Attention: C. Christopher Gaut 4500 Trammell Crow Center
Facsimile: 214/855-0300 Dallas, Texas 75201
Facsimile: 214/978-3096/99
if to the Target: with a copy to:
DUAL DRILLING COMPANY David S. Peterman
5956 Sherry Lane, Suite 1500 Akin, Gump, Strauss, Hauer & Feld, L.L.P.
Dallas, Texas 75225 7900 Pennzoil Place -- South Tower
Attention: David W. Skarke 711 Louisiana Street
Facsimile: 214/373-0533 Houston, Texas 77002
Facsimile: 713/236-0823
</TABLE>
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a specified person means a person who, directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such specified person;
(b) "BENEFICIAL OWNER" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
consideration rights, exchange rights, warrants or options, or otherwise, or
(B) the right to vote pursuant to any agreement, arrangement or
understanding, (iii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates or any person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any such shares, or (iv)
pursuant to Section 13(d) of the Exchange Act and any rules or regulations
promulgated thereunder;
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<PAGE>
(c) "BUSINESS DAY" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the New York, New York;
(d) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise;
(e) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "PERSON" as
defined in Section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government; and
(f) "SUBSIDIARY" or "SUBSIDIARIES" of any person means any corporation,
partnership, joint venture or other legal entity of which such person
(either alone or through or together with any other subsidiary), owns or has
rights to acquire, directly or indirectly, more than 50% (or 49% in the case
of Sime-Dual) of the stock or other equity interests the holders of which
are generally entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal entity.
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article II and Sections 6.06 (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 successors and assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 9.06. INCORPORATION OF SCHEDULES. The Target Disclosure Schedule
and the Acquiror Disclosure Schedule referred to herein and signed for
identification by the parties hereto are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 9.08. GOVERNING LAW. EXCEPT TO THE EXTENT THAT DELAWARE LAW IS
MANDATORILY APPLICABLE TO THE MERGER AND THE RIGHTS OF THE STOCKHOLDERS OF THE
TARGET AND ACQUIROR SUB, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE RULES OF
CONFLICTS OF LAW THEREOF. ALL ACTIONS AND PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN ANY COURT SITTING IN THE CITY
OF DALLAS, TEXAS.
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<PAGE>
SECTION 9.09. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.11. WAIVER OF JURY TRIAL. Each of Acquiror, the Target and
Acquiror Sub hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the actions of Acquiror, the
Target or Acquiror Sub in the negotiation, administration, performance and
enforcement thereof.
SECTION 9.12. ENTIRE AGREEMENT. This Agreement, the Target Disclosure
Schedule, the Acquiror Disclosure Schedule, the confidentiality agreement, dated
November 2, 1995, (the "Confidentiality Agreement"), between the Target and
Acquiror, the confidentiality agreement, dated February 5, 1996, between the
Target and Acquiror, 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. 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.
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<PAGE>
IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Target have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ENSCO INTERNATIONAL INCORPORATED
By /s/ CARL F. THORNE
-----------------------------------
Carl F. Thorne, Chairman of the
Board,
President and Chief Executive
Officer
DDC ACQUISITION COMPANY
By /s/ C. CHRISTOPHER GAUT
-----------------------------------
C. Christopher Gaut, President
DUAL DRILLING COMPANY
By /s/ DAVID W. SKARKE
-----------------------------------
David W. Skarke, Chairman
A-47
<PAGE>
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
DDC ACQUISITION COMPANY
ARTICLE I
The name of the corporation is DDC Acquisition Company (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
The total number of shares of stock which the Corporation shall have the
authority to issue is Ten Thousand (10,000) shares of Common Stock, par value
$0.10 per share.
ARTICLE V
The name and mailing address of the incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
- --------------------------- ------------------------
<S> <C>
Albert G. McGrath, Jr. 2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202
</TABLE>
ARTICLE VI
The powers of the incorporator are to terminate upon the filing of this
certificate of incorporation, and the name and mailing address of the persons
who are to serve as the board of directors until the first annual meeting of the
stockholders or until their successors are elected and qualified are as follows:
<TABLE>
<CAPTION>
NAMES OF DIRECTORS MAILING ADDRESS
- ----------------------------- ------------------------
<S> <C>
William S. Chadwick, Jr. 2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202
C. Christopher Gaut 2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202
H. E. Malone 2700 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202
</TABLE>
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<PAGE>
ARTICLE VII
Elections of directors need not be by written ballot unless the bylaws of
the Corporation shall so provide.
ARTICLE VIII
The Board of Directors of the Corporation is expressly authorized to adopt,
amend or repeal bylaws of the Corporation, but the stockholders may make
additional bylaws and may alter or repeal any bylaw whether adopted by them or
otherwise.
ARTICLE IX
No contract or transaction between the Corporation and one or more of its
directors, officers, or stockholders or between the Corporation and any person
(as used herein "person" means other corporation, partnership, association,
firm, trust, joint venture, political subdivision, or instrumentality) or other
organization in which one or more of its directors, officers, or stockholders
are directors, officers, or stockholders, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board or committee
which authorizes the contract or transaction, or solely because his, her, or
their votes are counted for such purpose, if: (i) the material facts as to his
or her relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the board
of directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to his or her relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved, or ratified by the
board of directors, a committee thereof, or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
ARTICLE X
The Corporation shall indemnify any person who was, is, or is threatened to
be made a party to a proceeding (as hereinafter defined) by reason of the fact
that he or she (i) is or was a director or officer of the Corporation or (ii)
while a director or officer of the Corporation, is or was serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent permitted under the
Delaware General Corporation Law, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article X is in effect. Any
repeal or amendment of this Article X shall be prospective only and shall not
limit the rights of any such director or officer or the obligations of the
Corporation with respect to any claim arising from or related to the services of
such director or officer in any of the foregoing capacities prior to any such
repeal or amendment to this Article X. Such right shall include the right to be
paid by the Corporation expenses incurred in defending any such proceeding in
advance of its final disposition to the maximum extent permitted under the
Delaware General Corporation Law, as the same exists or may hereafter be
amended. If a claim for indemnification or advancement of expenses hereunder is
not paid in full by the Corporation within sixty (60) days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim,
and if successful in whole or in part, the claimant shall also be entitled to be
paid the expenses of prosecuting such claim. It shall be a defense to any such
action that such indemnification or advancement of costs of defense
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<PAGE>
are not permitted under the Delaware General Corporation Law, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its board of directors or any committee thereof,
independent legal counsel, or stockholders) to have made its determination prior
to the commencement of such action that indemnification of, or advancement of
costs of defense to, the claimant is permissible in the circumstances nor an
actual determination by the Corporation (including its board of directors or any
committee thereof, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
ARTICLE XI
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions of
Section 291 of the General Corporation Law of the State of Delaware or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of the General
Corporation Law of the State of Delaware, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all of the creditors or class of creditors, and/or
on all of the stockholders or class of stockholders, of this Corporation, as the
case may be, and also on this Corporation.
ARTICLE XII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is amended after the date
of filing of this certificate of incorporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended General Corporation Law of the State of Delaware. Any
repeal or modification of this Article XII by
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<PAGE>
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
The undersigned incorporator under penalties of perjury hereby acknowledges
that the foregoing certificate of incorporation is his act and deed and that the
facts stated therein are true.
--------------------------------------
Albert G. McGrath, Jr.
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<PAGE>
EXHIBIT B
AFFILIATE AGREEMENT
ENSCO International Incorporated
1445 Ross Avenue, Suite 2700
Dallas, Texas 75202
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Dual Drilling Company, a Delaware corporation ("Dual"), 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"). Pursuant to the terms of the Agreement and Plan of Merger
dated March , 1996 (the "Agreement"), between ENSCO International
Incorporated, a Delaware corporation ("ENSCO"), , a Delaware
corporation and a wholly owned subsidiary of ENSCO ("Acquiror Sub"), and Dual,
Acquiror Sub will be merged with and into Dual (the "Merger").
In connection with the transactions contemplated by the Agreement, I may
receive shares of Common Stock, par value $.10 per share, of ENSCO (the "ENSCO
Securities").
I represent, warrant and covenant to ENSCO that in the event I receive any
ENSCO Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
ENSCO Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the ENSCO Securities to
the extent I felt necessary with my counsel or counsel for Dual.
C. I have been advised that the issuance of ENSCO Securities to me in
connection with the transactions contemplated by the Agreement has been
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 and the Agreement were submitted for a vote of the stockholders of
Dual, I may be deemed to have been an affiliate of Dual and the distribution
by me of the ENSCO Securities has not been registered under the Act, I may
be prohibited from selling, transferring or otherwise disposing of the ENSCO
Securities issued to me in connection with the transactions contemplated by
the Agreement 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 Rule 145 promulgated by the Commission under the
Act, or (iii) in the opinion of counsel reasonably acceptable to ENSCO, or a
"no action" letter obtained by the undersigned from the staff of the
Commission, such sale, transfer or other disposition is otherwise exempt
from registration under the Act.
D. I understand that ENSCO is under no obligation to register the sale,
transfer or other disposition of the ENSCO Securities by me or on my behalf
under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
It is understood and agreed that prior to any transfer of any of the ENSCO
Securities, I will give written notice to ENSCO of my intention to effect such
offer, sale or transfer, describing the proposed transaction in sufficient
detail to enable ENSCO and its counsel to determine that the proposed
transaction will not violate the Act.
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<PAGE>
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Dual as described in the first paragraph of this
letter or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
Very truly yours,
--------------------------------------
Name:
Accepted this day of May, 1996 by
ENSCO INTERNATIONAL INCORPORATED
By:
----------------------------------------------
William S. Chadwick, Jr., Secretary
A-53
<PAGE>
EXHIBIT C
LEGAL OPINION FOR COUNSEL FOR THE TARGET
[COUNSEL FOR TARGET LETTERHEAD]
, 1996
ENSCO International Incorporated
1445 Ross Avenue, Suite 2700
Dallas, Texas 57202
To whom it may concern:
We have acted as counsel to Dual Drilling Company, a Delaware corporation
(the "Target"), in connection with the execution and delivery of the Agreement
and Plan of Merger (the "Agreement"), dated as of March 21, 1996, among ENSCO
International Incorporated, a Delaware corporation ("Acquiror"), Dual
Acquisition Company, a Delaware corporation and a wholly-owned subsidiary of
Acquiror ("Acquiror Sub"), and the Target providing for the merger of Acquiror
Sub with and into the Target (the "Merger"). This opinion letter is being
furnished to you pursuant to Section 7.02 of the Agreement. Unless otherwise
defined herein or the context hereof otherwise requires, each term used herein
with its initial letter capitalized has the meaning given to such term in the
Agreement.
We have made such legal and factual examinations and inquiries, including an
examination of the originals, or copies certified or otherwise identified to our
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary or appropriate for the purposes of this opinion, including
(i) the Agreement, (ii) the Certificate of Merger dated as of , 1996
between the Target and Acquiror Sub, and (iii) the Certificate of Incorporation
and Bylaws, or equivalent organizational documents, of Target and each
Subsidiary.
We have relied, to the extent we deem appropriate, upon oral advice of Staff
of the Securities and Exchange Commission and, as to matters of fact, upon
representations made by the Target in the Agreement, certificates of the Target
or its officers and certificates or other written statements of officials of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Target. We have assumed that the signatures on all
documents examined by us are genuine, that all documents submitted to us as
originals are accurate and complete, and that all documents submitted to us as
copies are true and correct copies of the originals thereof. We are members of
the State Bar of Texas. We call your attention to the fact that, in rendering
our opinion, we are expressing our views only as to the laws of the State of
Texas and the federal laws of the United States of America.
Based upon the foregoing and subject to the qualifications and limitations
set forth herein, we are of the opinion that:
1. The Target is a corporation, and each U.S. Subsidiary is a corporation
or limited partnership, in each case duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and has the
requisite corporate or partnership power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted. The
Target and each U.S. Subsidiary are duly qualified or licensed as a foreign
corporation or limited partnership to do business, and are in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by them or the nature of their business makes such qualification or
licensing necessary, except for such failures to be qualified or licensed and in
good standing that would not, individually or in the aggregate, have a Material
Adverse Effect.
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<PAGE>
2. The Target has all necessary corporate power and authority to execute
and deliver the Agreement and, with respect to the Merger, to perform its
obligations thereunder and to consummate the Transactions. The execution and
delivery of the Agreement by the Target and the consummation by the Target of
the Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of the Target
are necessary to authorize the Agreement or to consummate the Transactions
(other than the filing and recordation of an appropriate Certificate of Merger
with the Secretary as required by Delaware Law).
3. The Agreement has been duly and validly executed and delivered by the
Target and, assuming the due authorization, execution and delivery of the
Agreement by Acquiror and Acquiror Sub, constitutes a legal, valid and binding
obligation of the Target, enforceable against the Target in accordance with its
terms, except as may be (1) limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other laws affecting enforcement of
creditors' rights generally, and (2) subject to general principles of equity,
regardless of whether enforcement is considered in a proceeding at law or in
equity.
4. The execution and delivery of the Agreement by the Target do not, and
the performance of the Agreement by the Target will not (1) conflict with or
violate the Certificate of Incorporation, Bylaws or equivalent organizational
documents of the Target or any U.S. Subsidiary, (2) conflict with or violate
Delaware Law or any Laws of the State of Texas or the United States of America,
or to the best of our knowledge, any other Laws applicable to the Target or any,
U.S. Subsidiary or by which any property or asset of the Target or any U.S.
Subsidiary is bound or affected, or (3) to the best of our knowledge, result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or give to others any
right to invalidate or terminate any purchase or other right to acquire property
under, or result in the creation of a lien or other encumbrance on any property
or asset of the Target or any Subsidiary or require the consent of any third
party pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Target or any Subsidiary is a party or by which the Target or any Subsidiary or
any property or asset of the Target or any Subsidiary is bound or affected.
5. The execution and delivery of the Agreement by the Target do not, and
the performance of the Agreement by the Target will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
domestic governmental or regulatory authority, except the filing and recordation
of an appropriate Certificate of Merger with the Secretary as required by
Delaware Law.
6. To our knowledge, except as set forth in the Target Disclosure Schedule
(as may have been updated), no actions, suits or proceedings are pending or
threatened against Target or any Subsidiary seeking to prevent or delay the
transactions contemplated by the Agreement or challenging any of the terms or
provisions of the Agreement or seeking material damages in connection therewith.
7. The authorized capital stock of the Target and each U.S. Subsidiary is
as set forth in Section 3.03 of the Agreement.
8. Upon the issuance of a Certificate of Merger by the Secretary of State
of the State of Delaware, the Merger will become effective in accordance with
the Agreement and the Delaware Law, and each issued and outstanding share of
Company Common Stock (other than any Cancelable Shares) will be converted into
the consideration provided in Section 2.01 of the Agreement.
We have participated in conferences with officers and other representatives
of Acquiror, Acquiror Sub and the Target, and the representatives of the
independent auditors of Acquiror, Acquiror Sub and the Target, at which the
contents of the Registration Statement on Form S-4 (File No. 333-[ ])
declared effective by the SEC on [ ], 1996, (the "Registration
Statement"), the Proxy Statement/Prospectus dated [ ], 1996 included
in the Registration Statement (the "Proxy Statement") and related matters were
discussed. Although we do not pass upon, and are not assuming any responsibility
for and have not independently verified the accuracy, completeness or
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<PAGE>
fairness of the statements contained in the Registration Statement and the Proxy
Statement, on the basis of the foregoing (relying as to materiality to a large
extent upon statements and representations of officers and other representatives
of the Target, Acquiror and Acquiror Sub), no facts have come to our attention
which lead us to believe that the Registration Statement (except for (i) the
financial statements and related schedules contained therein, including the
notes thereto and the independent auditors' reports thereon, (ii) the other
financial and statistical data contained therein and (iii) the exhibits thereto,
as to which we do not comment), at the time it became effective contained an
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or that the Proxy Statement (except for (i) the financial statements
and related schedules contained therein, including the notes thereto and the
independent auditors' reports thereon, and (ii) the other financial and
statistical data contained therein, as to which we do not comment), as of the
date thereof, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make statements therein, in the
light of the circumstances under which they were made, not misleading.
The preceding opinions and "negative assurance" statements are subject to
the following qualifications and limitations:
A. In connection with statements herein qualified by "to our knowledge"
or as to matters that have "come to our attention," our examination has been
limited to discussions with the officers and other representatives of the
Target and each Subsidiary by, and those statements refer only to what is in
the actual current consciousness of, attorneys in the Dallas, Houston and
Washington D.C. offices of this Firm who have been involved in the
representation of the Target and each Subsidiary in connection with the
transactions described in the Agreement, and we have made no independent
investigations as to the accuracy or completeness of any of the
representations, warranties, data or other information, written or oral,
made or furnished by Acquiror or Acquiror Sub to us or to you.
B. This opinion letter is limited in all respects to the laws of the
State of Texas, the federal laws of the United States of America and the
General Corporation Law of the State of Delaware, and we assume no
responsibility as to the applicability or the effect of any other laws. No
opinion is expressed herein with respect to any laws, ordinances, statutes
or regulations of any county, city or other political subdivision of the
State of Texas.
C. The opinions and statements expressed herein are limited to the
matters specifically addressed, and no opinion or statement is implied or
may be inferred beyond the matters so specifically addressed.
D. With respect to the opinion expressed in Paragraph 6, we have not
conducted any search of any indexes, dockets or other records of any court
or other Governmental Entity.
E. The opinions and statements expressed herein are rendered as of the
time immediately preceding the Effective Time, and we hereby disclaim any
obligation to advise you of, or to supplement any of our opinions or
statements because of, any changes in fact or laws which might affect any of
those opinions or statements.
F. This opinion letter is solely for your benefit in connection with
the transactions described in the Agreement and may not be relied upon,
quoted or otherwise used by any other person or entity or for any other
purpose without our express written consent.
Very truly yours,
AKIN, GUMP, STRAUSS, HAUER & FELD,
L.L.P.
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<PAGE>
EXHIBIT D
LEGAL OPINION FOR COUNSEL FOR ACQUIROR
[COUNSEL FOR ACQUIROR LETTERHEAD]
, 1996
DUAL DRILLING COMPANY
5956 Sherry Lane, Suite 1500
Dallas, Texas 75225
We have acted as counsel to ENSCO International Incorporated, a Delaware
corporation ("Acquiror"), and Dual Acquisition Company, a Delaware corporation
and a wholly-owned subsidiary of Acquiror ("Acquiror Sub"), in connection with
the execution and delivery of the Agreement and Plan of Merger (the
"Agreement"), dated as of March 21, 1996, among DUAL DRILLING COMPANY, a
Delaware corporation (the "Target"), Acquiror and Acquiror Sub, providing for
the merger of Acquiror Sub with and into the Target (the "Merger"). This opinion
letter is being furnished to you pursuant to Section 7.03 of the Agreement.
Unless otherwise defined herein or the context hereof otherwise requires, each
term used herein with its initial letter capitalized has the meaning given to
such term in the Agreement.
We have examined and are familiar with originals or copies, certified or
otherwise authenticated to our satisfaction, of such documents and records of
Acquiror and Acquiror Sub, and such statutes, regulations and instruments as we
have deemed necessary or advisable for the purposes of this opinion letter,
including, without limitation, (i) the Agreement, (ii) the Certificate of Merger
dated as of , 1996 between the Target and Acquiror Sub, (iii) the
Certificate of Incorporation and Bylaws of Acquiror, and (iv) the Certificate of
Incorporation and Bylaws of Acquiror Sub.
As to certain facts material to our opinions herein, we have assumed the
accuracy of the representations of Acquiror and Acquiror Sub in the Agreement
and of one or more officers of Acquiror or Acquiror Sub. In addition, we have
assumed that all signatures on all documents presented to us are genuine, that
all documents submitted to us as originals are accurate and complete, that all
documents submitted to us as copies are true and complete copies of the
originals thereof, that all information submitted to us was accurate and
complete, and that all persons executing and delivering originals or copies of
documents examined by us were competent to execute and deliver such documents.
We have also assumed the due authorization, execution and delivery by the Target
of the Agreement and the Certificate of Merger and that the Agreement and the
Certificate of Merger constitute legal, valid and binding obligations of the
Target enforceable against the Target in accordance with their terms.
We have also considered applicable provisions of the Code and Department of
Treasury regulations promulgated under the Code (whether proposed, temporary or
final) now in effect (collectively, "Treasury Regulations"), pertinent judicial
authorities regarding applicable provisions of the Code and Treasury
Regulations, interpretive rulings of the IRS and such other federal tax-related
authorities as we have considered relevant.
A-57
<PAGE>
Based upon the foregoing and subject to the qualifications and limitations
set forth below, we are of the opinion that:
1. Each of Acquiror and Acquiror Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease
and operate its properties as now owned, leased and operated and to carry on
its business as is now being conducted.
2. Each of Acquiror and Acquiror Sub has all necessary corporate power
and authority to execute and deliver the Agreement and, with respect to the
Merger, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of the Agreement by Acquiror and
Acquiror Sub and the consummation by Acquiror and Acquiror Sub of the
Transactions have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of Acquiror
or Acquiror Sub are necessary to authorize the Agreement or to consummate
the Transactions (other than the filing and recordation of an appropriate
Certificate of Merger with the Secretary as required by Delaware Law).
3. The Agreement has been duly and validly executed and delivered by
Acquiror and Acquiror Sub and, assuming the due authorization, execution and
delivery of the Agreement by the Target, constitutes a legal, valid and
binding obligation of each of Acquiror and Acquiror Sub enforceable against
each of Acquiror and Acquiror Sub in accordance with its terms, except as
may be (i) limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or other laws affecting enforcement of
creditors' rights generally, and (ii) subject to general principles of
equity, regardless of whether enforcement is considered in a proceeding at
law or in equity.
4. The execution and delivery of the Agreement by Acquiror and Acquiror
Sub do not, and the performance of the Agreement by Acquiror and Acquiror
Sub will not (i) conflict with or violate the Certificate of Incorporation
or Bylaws of either Acquiror or any Acquiror Subsidiary, (ii) conflict with
or violate any Law applicable to Acquiror or any Acquiror Subsidiary or by
which any property or asset of any of them is bound or affected, or (iii)
result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or other encumbrance on any property
or asset of Acquiror or any Acquiror Subsidiary or require the consent of
any third party pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Acquiror or any Acquiror Subsidiary is a party or by
which Acquiror or any Acquiror Subsidiary or any property or asset of any of
them is bound or affected and which is identified in the Officer's
Certificate attached hereto as Exhibit A (the "Officer's Certificate").
5. The execution and delivery of the Agreement by Acquiror and Acquiror
Sub do not, and the performance of this Agreement by Acquiror and Acquiror
Sub will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except pursuant to the filing and recordation of an
appropriate Certificate of Merger with the Secretary as required by Delaware
Law.
6. Upon the issuance of a Certificate of Merger by the Secretary of
State of the State of Delaware, the Merger will become effective in
accordance with the Agreement and the Delaware Law, and each issued and
outstanding share of Company Common Stock (other than any Cancelable Shares)
will be converted into the consideration provided in Section 2.01 of the
Agreement.
7. To our knowledge, except as set forth in the Acquiror Disclosure
Schedule (as may have been updated), no actions, suits or proceedings are
pending or threatened against Acquiror or
A-58
<PAGE>
Acquiror Sub seeking to prevent or delay the transactions contemplated by
the Agreement or challenging any of the terms or provisions of the Agreement
or seeking material damages in connection therewith.
8. The authorized capital stock of Acquiror and Acquiror Sub is as set
forth in Section 4.03 of the Agreement.
9. The shares of Acquiror Common Stock to be issued in the Merger have
been duly authorized and, when issued and delivered pursuant to the terms of
the Agreement, will be validly issued, fully paid, non-assessable and free
of preemptive rights.
We have participated in conferences with officers and other representatives
of Acquiror, Acquiror Sub and the Target, and representatives of the independent
auditors for the Target and Acquiror, at which the contents of the Registration
Statement on Form S-4 (File No. 333- ) declared effective by the SEC on
, 1996 (the "Registration Statement"), the Proxy
Statement/Prospectus dated , 1996 included in the Registration
Statement (the "Proxy Statement") and related matters were discussed. We are not
passing upon, do not assume any responsibility for and have not, and shall not
be deemed to have, independently verified the accuracy, completeness, or
fairness of the statements contained in the Registration Statement and the Proxy
Statement; however, on the basis of our participation in the preparation of the
Proxy Statement and the Registration Statement and our participation in
discussions relating to the contents thereof, no facts have come to our
attention which lead us to believe that the information with respect to Acquiror
and Acquiror Sub contained in the Registration Statement or the Proxy Statement
(except for the financial information, financial statements, financial schedules
and other financial or statistical data contained therein, as to which we
express no opinion), on the date such Registration Statement became effective
under the Securities Act, on the date such Proxy Statement was first mailed to
stockholders of the Target, on the date of the Target Stockholders' Meeting
convened to consider the Merger, or on the date hereof, contained or contains
any untrue statement of a material fact or omitted or omits 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.
The preceding opinions and "negative assurance" statements are subject to
the following qualifications and limitations:
A. In connection with statements herein qualified by "to our knowledge"
or as to matters that have "come to our attention," our examination has been
limited to discussions with the officers and other representatives of
Acquiror and Acquiror Sub by, and those statements refer only to what is in
the actual current consciousness of, attorneys in the Dallas, Chicago and
Washington D.C. offices of this Firm who have been involved in the
representation of Acquiror and Acquiror Sub in connection with the
transactions described in the Agreement, and we have made no independent
investigations as to the accuracy or completeness of any of the
representations, warranties, data or other information, written or oral,
made or furnished by Acquiror or Acquiror Sub to us or to you.
B. This opinion letter is limited in all respects to the laws of the
State of Texas, the federal laws of the United States of America and the
General Corporation Law of the State of Delaware, and we assume no
responsibility as to the applicability or the effect of any other laws. No
opinion is expressed herein with respect to any laws, ordinances, statutes
or regulations of any county, city or other political subdivision of the
State of Texas.
C. The opinions and statements expressed herein are limited to the
matters specifically addressed, and no opinion or statement is implied or
may be inferred beyond the matters so specifically addressed.
D. With respect to the opinion expressed in Paragraph 7, we have not
conducted any search of any indexes, dockets or other records of any court
or other Governmental Entity.
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<PAGE>
E. The opinions and statements expressed herein are rendered as of the
time immediately preceding the Effective Time, and we hereby disclaim any
obligation to advise you of, or to supplement any of our opinions or
statements because of, any changes in fact or law which might affect any of
those opinions or statements.
F. This opinion letter is solely for your benefit in connection with
the transactions described in the Agreement and may not be relied upon,
quoted or otherwise used by any other person or entity or for any other
purpose without our express written consent.
Very truly yours,
A-60
<PAGE>
APPENDIX B
FAIRNESS OPINION
B-1
<PAGE>
March 21, 1996
Board of Directors
DUAL DRILLING COMPANY
5956 Sherry Lane, Suite 1500
Dallas, Texas 75225
Members of the Board:
You have requested the opinion of Simmons & Company International
("Simmons") as investment bankers as to the fairness, from a financial point of
view, to the holders of shares of common stock, par value $0.01 per share (the
"Company Common Stock"), of DUAL DRILLING COMPANY (the "Company") of the
consideration to be received by such stockholders in the proposed merger of the
Company with DDC Acquisition Company (the "Sub"), a wholly owned subsidiary of
ENSCO International Incorporated ("ENSCO"), pursuant to the Agreement and Plan
of Merger (the "Agreement") to be executed by ENSCO, the Sub, and the Company
(the "Proposed Merger").
As more specifically set forth in the Agreement, in the Proposed Merger each
issued and outstanding share of the Company Common Stock will be converted into
0.625 of a share of common stock, par value $0.10 per share, of ENSCO (the
"ENSCO Common Stock").
Simmons, as a specialized energy-related investment banking firm, is engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, the management and underwriting of sales of equity and debt to
the public, and private placements of equity and debt. Simmons has previously
rendered investment banking services to the Company and ENSCO in connection with
a number of transactions for which Simmons received customary compensation and
may provide investment banking services to ENSCO in the future. In addition, in
the ordinary course of business, Simmons may actively trade the securities of
the Company and ENSCO for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
In connection with rendering its opinion, Simmons has reviewed and analyzed,
among other things, the following: (i) the Letter of Intent between ENSCO and
the Company dated January 25, 1996; (ii) a draft of the Agreement; (iii) the
financial statements and other information concerning the Company, including the
Annual Reports on Form 10-K of the Company for the three years ended December
31, 1995, the Company's prospectus dated August 5, 1993 relating to the sale of
6.25 million shares of Company Common Stock, the Company's prospectus dated
January 20, 1994 relating to the sale of $100 million principal amount of its
senior subordinated notes, and the Current Reports on Form 8-K of the Company
dated January 25, 1996, August 5, 1995 and June 5, 1995; (iv) certain other
internal information, primarily financial in nature, concerning the business and
operations of the Company furnished by the Company for purposes of Simmons'
analysis; (v) certain publicly available information concerning the trading of,
and the trading market for, the Company Common Stock; (vi) certain publicly
available information concerning ENSCO, including the Annual Reports on Form
10-K of ENSCO for the three years ended December 31, 1995, and the Current
Reports on Form 8-K dated January 25, 1996, September 11, 1995, May 23, 1995 and
March 23, 1995; (vii) certain other internal information, primarily financial in
nature, concerning the business and operations of ENSCO furnished by ENSCO for
purposes of Simmons' analysis; (viii) certain publicly available information
concerning the trading of, and the trading market for, ENSCO Common Stock; (ix)
certain publicly available information with respect to certain other companies
that Simmons believes to be comparable to the Company or ENSCO and the trading
markets for certain of such other companies' securities; (x) certain publicly
available information concerning the estimates of the future operating and
financial performance of the Company, ENSCO and the comparable companies
prepared by industry analysts unaffiliated with either the Company or ENSCO; and
(xi) certain publicly available information concerning the nature and terms of
certain other transactions considered relevant to the inquiry. Simmons has also
met with certain officers and employees of the
B-2
<PAGE>
Company and ENSCO to discuss the foregoing, as well as other matters believed
relevant to the inquiry. In addition, Simmons has made such other analyses and
examinations as it considered appropriate in expressing its opinion contained
herein.
In arriving at its opinion, Simmons has assumed and relied upon the accuracy
and completeness of all of the financial and other information provided by the
Company and ENSCO, or publicly available, including, without limitation,
information with respect to asset conditions, tax positions, liability reserves
and insurance coverages, and has not attempted independently to verify any of
such information. Simmons has not conducted a physical inspection of any of the
assets, properties or facilities of the Company or ENSCO, nor has Simmons made
or obtained any independent evaluations or appraisal of any of such assets,
properties or facilities. In addition, Simmons has discussed the prospects of
the Company with certain representatives of the Company and has been provided
with certain financial projections of the Company. Simmons has also discussed
the prospects of ENSCO with certain representatives of ENSCO.
In conducting its analysis and arriving at its opinion as expressed herein,
Simmons has considered such financial and other factors as it deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company and ENSCO; (ii) the business prospects of the Company and ENSCO; (iii)
the historical and current market for the Company Common Stock, for ENSCO Common
Stock and for the equity securities of certain other companies believed to be
comparable to the Company or ENSCO; (iv) the respective contributions in terms
of various financial measures of the Company and ENSCO to the combined company,
and the relative pro forma ownership of ENSCO after the Proposed Merger by the
current holders of the Company Common Stock and ENSCO Common Stock; and (v) the
nature and terms of certain other acquisition transactions that Simmons believes
to be relevant. Simmons has also taken into account its assessment of general
economic, market and financial conditions and its experience in connection with
similar transactions and securities' valuation generally. Simmons' opinion
necessarily is based upon conditions as they exist and can be evaluated on, and
on the information made available at, the date hereof. The opinion rendered by
Simmons does not constitute an opinion as to the future value of ENSCO Common
Stock upon consummation of the Proposed Merger or the price at which ENSCO
Common Stock will trade at any time.
Simmons is acting as financial advisor to the Company in this transaction
and will receive a fee for its services that is contingent upon the consummation
of the Proposed Merger.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without
Simmons' prior written consent.
Based upon and subject to the foregoing, Simmons is of the opinion, as
investment bankers, that the consideration to be received by the holders of the
Company Common Stock in the Proposed Merger is fair to such holders from a
financial point of view.
Sincerely,
SIMMONS & COMPANY INTERNATIONAL
/s/ BEN A. GUILL
--------------------------------------
Ben A. Guill
MANAGING DIRECTOR
B-3
<PAGE>
APPENDIX C
DUAL SPECIAL PERFORMANCE UNIT PLAN
C-1
<PAGE>
DUAL SPECIAL PERFORMANCE UNIT PLAN
1. PURPOSE. Dual Drilling Company, a Delaware corporation (the "Company"),
hereby establishes this DUAL Special Performance Unit Plan (the "Plan") in order
to retain and reward key executives of the Company by granting them special cash
bonuses in the event of the sale of the Company during the term of the Plan. The
Plan is intended to provide the Participants with the incentive to increase the
value of the business of the Company by allowing them to participate in a cash
bonus pool that is commensurate with the sale price of the Company.
2. ADMINISTRATION. The Plan shall be administered by a committee which
shall be (i) appointed by the Board of Directors of the Company (the "Board"),
(ii) constituted so as to permit the Plan to comply with Rule 16(b)-3 of the
Securities Exchange Act of 1934 and (iii) constituted such that all members of
such committee are "outside directors" as defined in Section 162(m) of the
Internal Revenue Code of 1986 and all rules and regulations promulgated
thereunder (the "Code"). Such committee shall be referred to herein as the
"Committee." The Committee shall administer the Plan in accordance with its
terms and shall settle all disputes arising thereunder. In addition, the
Committee shall have all authority and duties prescribed for a "compensation
committee" under Section 162(m) of the Code. The Compensation Committee of the
Board is hereby appointed as the Committee for purposes of the Plan, to serve
until such time as the Board appoints another committee.
3. PARTICIPATION. The participants int he Plan (the "Participants") shall
consist of the following individual officers: L.H. Robertson, President and
C.E.O.; W. Allen Parks, Executive Vice President and C.F.O.; Dudley M. Haralson,
Senior Vice President; Robert C. McCoy, Senior Vice President; Lewis W. Kreps,
Senior Vice President; William R. Dudark, Vice President; and Robert F. Chrone,
Controller and Corporate Secretary.
4. PAYMENT OF PERFORMANCE BONUSES. If a Sale Transaction (as defined
below) occurs on or prior to the end of the term of the Plan and if a
Participate is employed by the Company on such date, then the Participant shall
be paid his respective Applicable Percentage of the Performance Bonus Pool. Such
amount shall be paid within thirty (30) days after the effective date of the
Sale Transaction and shall be payable in a single cash lump sum amount to each
Participant.
5. DEFINITIONS. For purposes of the Plan, the following terms have the
indicated meanings when used herein:
"Applicable Percentage" shall mean, as to each Participant, the
percentage shown for such Participant on Schedule A attached hereto and made
a part hereof for all purposes.
"Performance Bonus Pool" shall mean a cash amount based on the
Equivalent Share Price, determined as follows:
<TABLE>
<S> <C>
IF THE EQUIVALENT SHARE PRICE IS: THEN THE PERFORMANCE BONUS POOL AMOUNT IS:
At least $12.00 but less than The product of (i) the excess of the
$13.00 Equivalent Share Price over $10.00 multiplied
by (ii) 100,000.
At least $13.00 but less than The product of (i) the excess of the
$14.00 Equivalent Share Price over $10.00 multiplied
by (ii) 200,000.
At least $14.00 but less than The product of (i) the excess of the
$15.00 Equivalent Share Price over $10.00 multiplied
by (ii) 300,000.
$15.00 and above The product of (i) the excess of the
Equivalent Share Price over $10.00 multiplied
by (ii) 400,000.
</TABLE>
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<PAGE>
Each equivalent share price in the above table shall be adjusted and
increased or decreased, as the case may be, in an amount that is
commensurate with any increases or decreases in the Equivalent Share Number,
as provided herein.
"Equivalent Share Price" shall mean a dollar amount which is the
quotient of (A) divided by (B) where "(A)" is the quotient of (i) the value
of the consideration (as reasonably determined by the Committee) paid or
given for the stock or assets of the Company sold or transferred pursuant to
the Sale Transaction divided by (ii) the decimal representing the percentage
of the Common Stock or assets of the Company that is sold or transferred
pursuant to the Sale Transaction, and "(B)" is the Equivalent Share Number.
"Equivalent Share Number" shall mean the number of outstanding shares of
common stock of the Company on the Effective Date of the Plan increased or
decreased in the discretion of the Committee as necessary to reflect any
changes in the outstanding Common Stock of the Company by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the Effective Date of the Plan.
"Sale Transaction" shall mean any one of the following events: (i) the
merger, consolidation or other reorganization of the Company in which the
outstanding Common Stock of the Company is converted into or exchanged for a
class of securities of any other issuer (except a direct or indirect
subsidiary of the Company), cash or other property; and (ii) the sale, lease
or exchange of all or substantially all of the assets of the Company to any
other corporation or entity (except a direct or indirect subsidiary of the
Company).
6. APPROVAL OF COMMITTEE. By executing this Plan below, the Committee
thereby approves, ratifies and establishes the Performance Goals and the
compensation payable with respect to such goals that are set forth in the Plan
for purposes of Code Section 162(m).
7. NO PROMISE OF EMPLOYMENT. Nothing in this Plan or any other writing
executed pursuant to or in connection with the Plan shall be construed to
promise or guarantee future employment of any person.
8. WITHHOLDING. The foregoing provisions of the Plan notwithstanding, the
Company shall withhold from any amounts payable under the Plan all amounts that
are required to be withheld under federal, state and local law, and all amounts
payable hereunder shall be paid net of such withheld amounts, if any.
9. NO TAX GUARANTY. Nothing in this Plan or in any writing executed
pursuant to or in connection with the Plan shall be construed to promise or
guarantee any particular federal or state income or excise tax treatment of any
amounts payable hereunder.
10. APPLICABLE LAW. This Plan shall be governed by the law of the State of
Texas, exclusive of the conflict of law provisions thereof. Venue for any court
action arising out of this Plan or the interpretation of this Plan shall lie
exclusively in the courts of the State of Texas.
11. BINDING EFFECT. This agreement shall be binding upon the parties
hereto, and the assigns of, and the successors to, the interest of any party
hereto in and to the Company or the business or assets of Company. It is
specifically provided that this Plan shall apply to and be binding upon the
transferee of any interest in the Company and any interest in the business or
assets of the Company.
12. EFFECTIVE DATE. The effective date of the Plan shall be August 21,
1995 (the "Effective Plan"), subject to shareholder approval. The Plan or,
alternatively, its material terms, as per the regulations promulgated under
Section 162(m) of the Code, shall be submitted to the shareholders of the
Company for their approval and adoption. The Plan shall not be effective and no
amount shall be payable hereunder, unless and until the Plan has been so
approved and adopted at a meeting of the Company's shareholders.
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<PAGE>
13. TERM. Unless extended in a manner as may be required by all applicable
law, the Plan shall terminate on August 20, 1997, and only those bonuses or
other compensation shall be payable pursuant to the Plan with respect to a Sale
Transaction that is effective, or as to which a definitive binding agreement is
in effect, on or before such date.
14. AMENDMENT. The Plan may be amended by the Board of Directors subject
to any shareholder approval as may be required by Code Section 162(m) or other
applicable law.
IN WITNESS WHEREOF, the Company and the Committee have indicated their
approval of the Plan as of the Effective Date by signing in the spaces provided
below.
<TABLE>
<S> <C> <C>
COMPANY: DUAL DRILLING COMPANY,
a Delaware corporation
By: /s/ L.H. Dick Robertson
------------------------------------------
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
COMMITTEE: COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
DUAL DRILLING COMPANY
By: /s/ Frank Junger
------------------------------------------
Title: CHAIRMAN OF THE COMPENSATION COMMITTEE
---------------------------------------------
</TABLE>
C-4
<PAGE>
SCHEDULE A
TO THE
DUAL SPECIAL PERFORMANCE UNIT PLAN
<TABLE>
<S> <C>
L. H. Robertson..................................... 27.0%
W. A. Parks......................................... 15.6%
D. M. Haralson...................................... 15.6%
R. C. McCoy......................................... 13.2%
L. W. Kreps......................................... 12.0%
W. R. Dudark........................................ 12.0%
R. F. Chrone........................................ 4.5%
</TABLE>
C-5
<PAGE>
APPENDIX D
PRINCIPAL STOCKHOLDER AGREEMENT
D-1
<PAGE>
AGREEMENT
This Agreement, dated as of March 21, 1996, is between ENSCO International
Incorporated, a Delaware corporation ("ENSCO"), and Dual Invest AS, a Norwegian
corporation (the "Stockholder").
WHEREAS, concurrently herewith, ENSCO, ENSCO Acquisition Company, a Delaware
corporation and a wholly-owned subsidiary of ENSCO ("Acquiror Sub"), and DUAL
DRILLING COMPANY, a Delaware corporation (the "Company"), are entering into an
Agreement and Plan of Merger (the "Merger Agreement"; capitalized terms used
without definition herein having the meanings ascribed thereto in the Merger
Agreement);
WHEREAS, the Stockholder is the record and beneficial owner of 9,382,354
shares of Target Common Stock (the "Block Shares");
WHEREAS, approval of the Merger Agreement and the Merger by the Company's
stockholders is a condition to the consummation of the Merger; and
WHEREAS, as a condition to its entering into the Merger Agreement, ENSCO has
required that the Stockholder agree, and the Stockholder has agreed, to enter
into this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
Section 1. VOTING AGREEMENT AND GRANT OF PROXY. From the date of this
Agreement until July 31, 1996:
(a) The Stockholder hereby agrees that at any meeting of the stockholders of
the Company, however called, and any action by consent of the stockholders of
the Company, the Stockholder shall vote the Block Shares, and any other voting
securities of the Company, whether issued heretofore or hereafter, which are
held of record or beneficially by the Stockholder, (i) in favor of the Merger
and the Merger Agreement, (ii) in favor of adoption and approval of the Dual
Special Performance Unit Plan, effective August 21, 1995, as amended as
contemplated by the Merger Agreement, and (iii) against any proposal for any
recapitalization, merger (other than the Merger), sale of assets or other
business combination between the Company and any person or entity (other than
ENSCO or Acquiror Sub) or any other action or agreement that ENSCO notifies the
Stockholder in writing before any vote would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which could result in any of the conditions to the
Merger Agreement not being fulfilled.
(b) Except as provided in this Section 1 and except for transfers to the
Stockholder from an affiliate, the Stockholder hereby agrees that it shall not,
and shall not offer or agree to, sell, transfer, tender, assign, hypothecate or
otherwise dispose of, or create or permit to exist any pledge, lien, security
interest, mortgage, charge, claim, option, proxy, voting restriction, right of
first refusal, limitation on disposition, or encumbrance of any kind on or with
respect to the Block Shares or other voting securities of the Company, whether
issued heretofore or hereafter, which are held of record or beneficially by the
Stockholder.
(c) The Stockholder, by this Agreement, with respect to the Block Shares and
any other voting securities of the Company, whether issued heretofore or
hereafter, which are held of record by the Stockholder, does hereby constitute
and appoint ENSCO and Acquiror Sub, or any nominee of ENSCO and Acquiror Sub,
with full power of substitution, from the date hereof to the earlier to occur of
July 31, 1996 or the Effective Time, as its true and lawful attorney and proxy
(its "Proxy"), for and in its name, place and stead, to demand that the
Secretary of the Company call a special meeting of the stockholders of the
Company for the purpose of considering any actions related to the Merger
Agreement and to vote each of the Block Shares and any other voting securities
of the Company, whether issued heretofore or hereafter, which are held of record
by the Stockholder, at every annual,
D-2
<PAGE>
special or adjourned meeting of the stockholders of the Company, including the
right to sign its name (as stockholder) to any consent, certificate or other
document relating to the Company that the law of the State of Delaware may
permit or require:
(i) in favor of the Merger and the Merger Agreement;
(ii) in favor of adoption and approval of the Dual Special Performance
Unit Plan, effective August 21, 1995, as amended as contemplated by the
Merger Agreement; and
(iii) against any proposal for any recapitalization, merger (other than
the Merger), sale of assets or other business combination between the
Company and any person or entity (other than ENSCO or Acquiror Sub) or any
other action or agreement that ENSCO notifies the Stockholder in writing
before any vote would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the
Merger Agreement or could result in any of the conditions to the Merger
Agreement not being fulfilled.
THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST.
The Stockholder acknowledges receipt and review of a copy of the Merger
Agreement. The Stockholder hereby revokes all proxies heretofore made by it that
are inconsistent with this Section 1.
(d) The Stockholder shall perform such further acts and execute such further
documents and instruments as may reasonably be required to vest in ENSCO and
Acquiror Sub the power to carry out and give effect to the provisions of this
Agreement.
(e) The Company will cause each certificate of the Stockholder evidencing
the Block Shares outstanding during the period that this Section 1 is in effect
to bear a legend in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, EXCHANGED OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS
AND CONDITIONS OF AN AGREEMENT DATED MARCH 21, 1996, AS IT MAY BE
AMENDED, AMONG DUAL DRILLING COMPANY, ENSCO INTERNATIONAL INCORPORATED
AND THE REGISTERED HOLDER OF THIS CERTIFICATE, A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
Upon the expiration of the period during which this Section 1 is in effect or in
the event that the Block Shares otherwise cease to be subject to the
restrictions on transfer set forth in this Agreement, the Company shall, upon
the written request of the Stockholder, issue to the Stockholder a new
certificate evidencing such shares without the legend required by this Section
1(e).
(f) The Stockholder agrees that until July 31, 1996 it will not vote any of
the Block Shares at any annual, special or adjourned meeting of the stockholders
of the Company, including the right to sign its name (as stockholder) to any
consent, certificate or other document relating to the Company that the law of
the State of Delaware may permit or require, (i) to approve of the adoption and
approval of the Dual Special Performance Unit Plan, effective August 21, 1995 in
any manner except as contemplated by the Merger Agreement, or (ii) in any manner
that is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially adversely affect the transactions contemplated by
the Merger Agreement.
Section 2. SECURITIES ACT COVENANTS AND REPRESENTATIONS. Subject to
ENSCO's obligations under Section 3.1, the Stockholder hereby agrees and
represents to ENSCO as follows:
(a) The Stockholder has been advised that the offer, sale and delivery of
the Acquiror Common Stock to the Stockholder pursuant to the Merger may not be
registered under the Securities Act, despite ENSCO's obligations to use
commercially reasonable efforts to effect such registration. The Stockholder has
been advised that if the offer, sale and delivery of the Acquiror Common Stock
to the Stockholder pursuant to the Merger has not been registered under the
Securities Act, then such
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shares (the "Merger Shares") may not be offered, sold, pledged, hypothecated or
otherwise transferred unless subsequently registered under the Securities Act or
an exemption from such registration is available. The Stockholder has also been
advised that even if the sale and delivery to the stockholder of the Merger
Shares is registered under the Securities Act, to the extent the Stockholder is
considered an "affiliate" of the Company at the time the Merger Agreement is
submitted for a vote of the stockholders of the Company, any public offering or
sale by the Stockholder of the Merger Shares will, under current law, require
either (i) the further registration under the Securities Act of the Merger
Shares, which ENSCO is obligated under Section 3.1 to use commercially
reasonable efforts to effect, (ii) compliance with Rule 145 promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
or (iii) the availability of another exemption from such registration under the
Securities Act.
(b) The Stockholder has read this Agreement and the Merger Agreement and has
discussed their requirements and other applicable limitations upon its ability
to sell, transfer or otherwise dispose of the Merger Shares, to the extent the
Stockholder believed necessary, with its counsel or counsel for the Company.
(c) The Stockholder also understands that stop transfer instructions will be
given to ENSCO's transfer agents with respect to the Merger Shares and that a
legend will be placed on the certificates for the Merger Shares issued to the
Stockholder, to the extent the Stockholder is considered an "affiliate" of the
Company at the time the Merger Agreement is submitted for a vote of the
stockholders of the Company.
Section 3. REGISTRATION OF MERGER SHARES.
(a) ENSCO shall use all commercially reasonable efforts on or before the
Effective Time to effect the registration under the Securities Act, on an
appropriate form, of the transfer of the Merger Shares to the Stockholder and
the Stockholder's subsequent transfer of such Merger Shares to the security
holders of the Stockholder in the manner contemplated on Exhibit A and the
resale of the Merger Shares by the Stockholder or by B. Skaugen Shipping AS and
its affiliates (collectively, "Skaugen")(all persons who receive Merger Shares
and whose resales are covered by this Section 3(a) shall be referred to herein
as the "Selling Stockholders") unless ENSCO shall have provided to Skaugen a
no-action letter, or opinion of counsel reasonably acceptable to Skaugen,
concluding that Skaugen will not be restricted in any way in its ability absent
such registration to resell Merger Shares received by Skaugen from the
Stockholder. ENSCO shall be required to file only one such registration
statement and shall keep such registration continuously effective until such
time as the Merger Shares have been disposed of by the Selling Stockholders but
in no event for a period of longer than twelve months after the date of the
Effective Time. For purposes of this Section 3, "Registration Statement" means
the registration statement covering the Merger Shares filed pursuant hereto,
including, to the extent applicable, the prospectus (the "Prospectus") included
in any such registration statement, all amendments and supplements to any such
registration statement (including post-effective amendments), all exhibits to
any such registration statement and all material incorporated by reference in
any such registration statement.
(b) In connection with ENSCO's registration obligations pursuant to Section
3(a) and, except as provided in Section 3(b)(i), ENSCO shall keep continuously
effective the Registration Statement for the period of time provided in Section
3(a), to permit the sale of the Merger Shares pursuant to the Registration
Statement in accordance with the intended method or methods of distribution
thereof specified by the Stockholder in Section 3(a) above and in Exhibit A, and
shall:
(i) notify the Selling Stockholders, promptly (A) when a new
Registration Statement, Prospectus or supplement thereto or post-effective
amendment has been filed, and, with respect to a new Registration Statement
or post-effective amendment when it has become effective, (B) of any request
by the Commission for amendments or supplements to any Registration
Statement or Prospectus or for additional information, (C) of the issuance
by the Commission of any comments with respect to any filing and of any stop
order suspending the effectiveness of any Registration
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Statement or the initiation of any proceedings for that purpose, (D) of the
receipt by ENSCO of any notification with respect to the suspension of the
qualification of the Merger Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (E) of the
happening of any event that makes any statement made in any Registration
Statement, Prospectus or any document incorporated therein by reference
untrue or that requires the making of any changes in any Registration
Statement, Prospectus or any document incorporated therein by reference in
order to make the statements therein not misleading, and (F) of ENSCO's
determination that a post-effective amendment to a Registration Statement
would be appropriate;
(ii) furnish to the Selling Stockholders, without charge, as many
conformed copies of the Registration Statement and any amendments thereto as
may reasonably be requested by the Selling Stockholders;
(iii) deliver to the Selling Stockholders, without charge, as many copies
of the Prospectus covering the Merger Shares and any amendments or
supplements thereto as the Stockholder or the Selling Stockholders may
reasonably request;
(iv) register, qualify, or obtain an exemption therefrom, in connection
with the registration or qualification or exemption therefrom of the Merger
Shares for offer and sale under the securities or blue sky laws of New York
and, as the Stockholder reasonably requests, any other jurisdictions within
the United States and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Merger
Shares covered by the Registration Statement; PROVIDED, HOWEVER, that ENSCO
shall not be required to qualify as a dealer in securities or as a foreign
corporation, or otherwise subject itself to taxation in connection with such
activities, or to execute a general consent to service of process in any
jurisdiction;
(v) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission relating to such registration and the
distribution of the securities being offered, and make generally available
to its securities holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act no later than 90 days after the end of
any 12-month period (or 120 days if such period is a fiscal year) beginning
with the first month of the first fiscal quarter commencing after the
effective date of such Registration Statement, which earning statements
shall cover such 12-month periods;
(vi) in no event later than ten business days before filing any
Registration Statement or Prospectus, or any amendment or supplement (other
than any amendment or supplement made solely as a result of incorporation by
reference of documents) to any thereof (or, in the case of any Prospectus
supplement or post-effective amendment relating to a proposed shelf
"draw-down," three Business Days before the filing thereof), furnish to the
Stockholder copies of all such documents proposed to be filed, which
documents shall be subject to the reasonable review of the Stockholder;
(vii) promptly after the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the Stockholder; and
(viii) use all commercially reasonable efforts to take all action
necessary or advisable to effect such registration in the manner
contemplated by this Agreement.
(c) The Stockholder and each Selling Stockholder shall furnish to ENSCO such
information regarding the Stockholder and each Selling Stockholder and the plan
of distribution of the Merger Shares as ENSCO may from time to time reasonably
request.
(d) The Stockholder and each Selling Stockholder agrees that upon receipt of
any notice from ENSCO of the happening of any event of the kind described in
Sections 3(b)(i)(B), 3(b)(i)(C), 3(b)(i)(D), 3(b)(i)(E) or 3(b)(i)(F), it shall
forthwith discontinue disposition of the Merger Shares pursuant to the
Prospectus until (A) it is advised in writing by ENSCO that a new Registration
Statement covering the offer of the Merger Shares has become effective under the
Securities Act or
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<PAGE>
(B) it receives copies of a supplemented or amended Prospectus, or (C) until it
is advised in writing by ENSCO that the use of the Prospectus may be resumed.
ENSCO shall promptly take all such action as may be necessary or appropriate,
including, without limitation, the filing of a new Registration Statement or an
amendment to the then current Registration Statement and/or the filing of an
amended Prospectus, to limit the duration of any discontinuance with respect to
the disposition of the Merger Shares pursuant to this Section 3(d).
(e) The Stockholder and each Selling Stockholder shall cooperate with ENSCO
in all reasonable respects in connection with the preparation and filing of the
Registration Statement; provided, however, that the Stockholder and each Selling
Stockholder shall not be required to incur any material out-of-pocket cost or
expense when providing such cooperation.
(f) The Stockholder and any Selling Stockholder agrees at any time beginning
not earlier than six (6) months after the Effective Time not to effect any
public sale or distribution of any of ENSCO's securities during the period
beginning 10 days prior to and ending 90 days after, the closing of an
underwritten offering of securities by ENSCO if the managing underwriter in such
offering determines the sale of the Merger Shares would have an adverse effect
on an orderly public distribution of securities in the underwritten offering or
would have an adverse effect on the price of the securities offered in the
underwritten offering; provided that if the Stockholder or any Selling
Stockholder is prevented from selling or distributing ENSCO's securities during
any period pursuant to this Section 3(f), then the registration provided for in
Section 3(a) shall be kept continuously effective for at least 90 days after the
end of any such period notwithstanding the limitation provided in Section 3(a)
that such registration shall in no event be required to be kept effective for a
period of longer than 12 months after the date of the Effective Time;
(g) All expenses incident to ENSCO's performance of or compliance with this
Agreement, including without limitation all registration and filing fees, fees
and expenses for compliance with securities or blue sky laws (including fees and
disbursements of ENSCO's counsel in connection with blue sky qualifications or
registrations (or the obtaining of exemptions therefrom) of the Merger Shares),
printing expenses (including expenses of printing Prospectuses), messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), fees and disbursements of its counsel and its independent
certified public accountants, fees and expenses of any special experts retained
by ENSCO in connection with any registration hereunder, and fees and expenses of
other persons retained by ENSCO, but excluding fees and disbursements of counsel
retained by the Stockholder, any fees and expenses of any underwriters and
transfer taxes, if any, relating to the Merger Shares, shall be borne by ENSCO.
(h) ENSCO shall indemnify and hold harmless, to the full extent permitted by
law, the Stockholder, its officers, directors, employees, representatives and
agents, and each Person who controls (within the meaning of the Securities Act)
the Stockholder, and each other Selling Stockholder against all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation
and legal expenses) resulting from any untrue or alleged untrue statement of a
material fact contained in any Registration Statement or any Prospectus, or any
amendment or supplement thereto, or any omission or alleged omission to state in
any thereof a material fact required to be stated therein or necessary to make
the statements therein not misleading, except in each case insofar, but only
insofar, as the same arises out of or is based upon an untrue statement or
alleged untrue statement of a material fact or an omission or alleged omission
to state a material fact in such Registration Statement, Prospectus, amendment
or supplement, as the case may be, made or omitted, as the case may be, in
reliance upon and in conformity with written information furnished to ENSCO by a
Selling Stockholder expressly for use therein.
(i) The Stockholder and each Selling Stockholder each with respect only to
written information furnished by it to ENSCO expressly for use in any
Registration Statement, any Prospectus, or any amendment or supplement thereto
shall indemnify and hold harmless, to the full extent permitted by law, ENSCO,
its officers, directors, employees, representatives and agents, and each Person
who
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controls (within the meaning of the Securities Act) ENSCO, against all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation and legal expenses) resulting from any untrue or alleged untrue
statement of a material fact contained in such Registration Statement, any
Prospectus, or any amendment or supplement thereto, or any omission or alleged
omission to state in any thereof a material fact required to be stated therein
or necessary to make the statements therein not misleading, as the same arises
out of or is based upon an untrue statement or alleged untrue statement of a
material fact or an omission or alleged omission to state a material fact in
such Registration Statement, Prospectus, amendment or supplement, as the case
may be, made or omitted, as the case may be, in reliance upon and in conformity
with such written information.
(j) Each party entitled to indemnification under this Section 3 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED, that counsel for the Indemnifying
Party, who will conduct the defense of such claim or litigation, is approved by
the Indemnified Party (whose approval will not be unreasonably withheld or
delayed); and PROVIDED, FURTHER, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations except to the extent that its defense of the claim or litigation
involved is prejudiced by such failure. The Indemnified Party may participate in
such defense at such party's expense; PROVIDED, HOWEVER, that the Indemnifying
Party shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential conflicts of interest between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of any claim or litigation, and no Indemnified Party will
consent to entry of any judgment or settle any claim or litigation without the
prior written consent of the Indemnifying Party. Each Indemnified Party shall
furnish such information regarding himself or itself and the claim in question
as the Indemnifying Party may reasonably request and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(k) If for any reason the indemnification provided for in this Section 3
from an Indemnifying Party is unavailable to an Indemnified Party hereunder or
insufficient to hold it harmless as contemplated by this Section 3, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of an Indemnifying Party and
Indemnified Party in connection with the actions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact, has been made by, or relates to information supplied by, an
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 3(j), any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding. The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 3(k) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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Section 4. TAX REPRESENTATION. The Stockholder represents and warrants to
ENSCO that, except as set forth on Exhibit A hereto, it has no present plan or
intention to sell, exchange, transfer by gift, or otherwise dispose of the
Merger Shares.
Section 5. HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976. In
connection with the Merger, to the extent required by applicable law, the
Stockholder agrees promptly and timely to file, or cause to be filed, all
notifications, including responses to requests for information, required to be
filed by it by the HSR Act. The Stockholder agrees to cooperate with ENSCO,
Acquiror Sub and the Company to the extent necessary to permit them to prepare
their separate filings and to supply any additional information that may be
submitted to the Federal Trade Commission or the Department of Justice relating
to the transactions contemplated by the Merger Agreement under the antitrust
laws.
Section 6. DISCLOSURE. The Stockholder will consult with ENSCO and allow
ENSCO a reasonable time to consider and comment on any press release or public
disclosure by the Stockholder of matters related to this Agreement, the Merger
Agreement or the Merger, except to the extent required by applicable law and
based on the advice of counsel. ENSCO agrees to provide the Stockholder a copy
of any press release or public disclosure of any matters relating to this
Agreement, the Merger Agreement or the Merger. ENSCO will consult with the
Stockholder and allow it a reasonable time to consider and comment on any press
release or public disclosure by ENSCO of matters related to this Agreement, the
Merger Agreement or the Merger, except to the extent required by applicable law
and based on the advice of counsel.
Section 7. NO SOLICITATION. The Stockholder agrees that until July 31,
1996, it will not negotiate with any person other than ENSCO with respect to the
acquisition of the Company or the Target Common Stock owned by the Stockholder
and it will not, and will not permit any of its officers, directors, employees,
agents or representatives (including without limitation, investment bankers,
attorneys and accountants) to (a) initiate contact with, (b) make, solicit or
encourage any inquiries or proposals, (c) enter into or participate in any
discussions or negotiations with, (d) disclose, directly or indirectly, any
information not customarily disclosed concerning the business and properties of
the Company or Stockholder's interest in the Company under the control of
Stockholder to or (e) afford any access to the Company's properties, books and
records in its possession or under its control to any person in connection with
any possible proposal relating to (i) the disposition of the Company's or the
Stockholder's businesses or substantially all of their respective assets, (ii)
the acquisition of equity or debt securities of the Company or the Stockholder,
including equity or debt securities in the Company owned by the Stockholder, or
(iii) the merger, share exchange or business combination, or similar acquisition
transaction of or involving the Company or the Stockholder with any person other
than ENSCO. Until July 31, 1996, the Stockholder will immediately notify ENSCO
orally, and subsequently confirm in writing, all the relevant details relating
to all inquiries and proposals which it may receive relating to any such
matters. Until July 31, 1996, the Stockholder will not, and will not permit any
of its representatives, at any time, to enter into or participate in any
discussions or negotiations regarding, or accept, any proposal for such a
transaction received by them from a third party or that a third party expresses
a desire to communicate to it.
Section 8. FURTHER ASSURANCES. Each party shall execute and deliver such
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of their obligations under this Agreement. Without limiting the generality of
the foregoing, none of the parties hereto shall enter into any agreement or
arrangement (or alter, amend or terminate any existing agreement or arrangement)
if such action would materially impair the ability of any party to effectuate,
carry out or comply with all the terms of this Agreement. If requested by ENSCO,
the Stockholder and each Selling Stockholder agrees to execute a letter to ENSCO
representing that the Stockholder and/or Selling Stockholder executing such
letter has complied with its obligations hereunder as of the date of such
letter.
Section 9. REPRESENTATIONS AND WARRANTIES OF ENSCO. ENSCO represents and
warrants to the Stockholder as follows: Each of this Agreement and the Merger
Agreement has been approved by the
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Board of Directors of ENSCO, and the Merger Agreement has been approved by the
Board of Directors of Acquiror Sub and by ENSCO as the sole stockholder of
Acquiror Sub, in each case representing all necessary corporate action on the
part of ENSCO and Acquiror Sub (no action by the stockholders of ENSCO being
required). Each of this Agreement and the Merger Agreement has been duly
executed and delivered by a duly authorized officer of ENSCO and, in the case of
the Merger Agreement, Acquiror Sub. Each of this Agreement and the Merger
Agreement constitutes a valid and binding agreement of ENSCO and, in the case of
the Merger Agreement, Acquiror Sub, enforceable against ENSCO and, in the case
of the Merger Agreement, Acquiror Sub in accordance with its terms.
Section 10. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder represents and warrants to ENSCO as follows: This Agreement has been
duly executed and delivered by the Stockholder and constitutes the valid and
binding agreement of the Stockholder, enforceable against the Stockholder in
accordance with its terms. The Block Shares are the only voting securities of
the Company owned (beneficially or of record) by the Stockholder, and, except as
provided in this Agreement, the Block Shares are not subject to any voting
trust, voting agreement or similar arrangement whatsoever.
Section 11. EFFECTIVENESS AND TERMINATION. It is a condition precedent to
the effectiveness of this Agreement that the Merger Agreement shall have been
executed and delivered. In the event the Merger Agreement is terminated in
accordance with its terms, this Agreement shall automatically terminate and be
of no further force or effect. Upon such termination, except for any rights any
party may have in respect of any breach by any other party of its obligations
hereunder, none of the parties hereto shall have any further obligation or
liability hereunder.
Section 12. MISCELLANEOUS.
(a) NOTICES, ETC. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party when delivered personally
(by courier service or otherwise), when delivered by telecopy and confirmed by
return telecopy, or seven days after being mailed by first-class mail, postage
prepaid, in each case to the applicable addresses set forth below:
<TABLE>
<S> <C>
If to ENSCO: with a copy to:
ENSCO International Incorporated Daniel W. Rabun, Esq.
2700 Fountain Place Baker & McKenzie
1445 Ross Avenue 2001 Ross Avenue, Suite 4500
Dallas, TX 75202-2792 Dallas, TX 75201
Attn: C. Christopher Gaut Telecopy: (214) 978-3099
Telecopy: (214) 855-0300
If to the Stockholder: with a copy to:
Dual Invest AS Martin B. McNamara
P. O. Box 1611 Gibson, Dunn & Crutcher
Vika 0119 1717 Main Street, Suite 5400
Oslo, Norway Dallas, TX 75201-4605
</TABLE>
or to such other address as such party shall have designated by notice so given
to each other party.
(b) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated except by an instrument
in writing signed by ENSCO and the Stockholder.
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(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns, including without limitation in the case of any
corporate party hereto any corporate successor by merger or otherwise.
(d) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding among the parties relating to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter. There are no representations, warranties or covenants by the parties
hereto relating to such subject matter other than those expressly set forth in
this Agreement. Notwithstanding the foregoing, in no event shall this Agreement
or the execution and delivery of the Merger Agreement affect the Stockholder's
obligations under Section 2 of that certain letter agreement between ENSCO and
the Stockholder dated January 25, 1996.
(e) SEVERABILITY. If any term of this Agreement or the application thereof
to any party or circumstance shall be held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such term to the
other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law, provided that in
such event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
(f) REMEDIES CUMULATIVE. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
(g) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(h) THIRD PARTY BENEFICIARIES. Except for the Selling Stockholders and
those persons for whom indemnification is provided, this Agreement is not
intended to be for the benefit of and shall not be enforceable by any person or
entity which is not a party hereto. The Selling Stockholders and those persons
for whom indemnification is provided, however, may enforce this Agreement.
(i) GOVERNING LAW. This Agreement is governed by and construed in
accordance with the laws of the State of Delaware (without regard to conflict of
laws principles).
(j) ARBITRATION.
(i) Any dispute arising out of or related to this Agreement shall be
finally settled by arbitration in accordance with the Rules of the London
Court of International Arbitration ("LCIA"), which rules are deemed to be
incorporated by reference into this clause. Unless the parties otherwise
agree, the arbitration shall take place in London, England. The parties
hereby agree to exclude any right of application or appeal to the courts of
said jurisdiction in connection with any question of law arising in the
course of reference out of the award, in particular the right of appeal
under Section 1 of the Arbitration Act 1979 in relation to any award made by
the arbitrators and the right to apply to the High Court under Section 2 of
the Arbitration Act 1979 for the determination of any question of law
arising in the course of any arbitration proceedings hereunder. Each of the
parties shall appoint one arbitrator and the two so nominated shall in turn
choose a third arbitrator. If the arbitrators chosen by the parties cannot
agree on the choice of the third arbitrator within a period of fourteen (14)
days after their nomination, then the third arbitrator shall be appointed by
the Court of the LCIA.
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(ii) The arbitration shall be conducted in the English language.
Relevant documents in other languages shall be translated into English if
the arbitrators so direct. In arriving at their award, the arbitrators shall
give effect insofar as possible to the desire of the parties that the
dispute or controversy be resolved in accordance with good commercial
practice and principles of fairness and equity, and shall make every effort
to find a solution to the dispute in the provisions of this Agreement and
shall give full effect to all parts hereof. In particular, the parties
acknowledge that money damages are not an adequate remedy for violations of
Section 1 of this Agreement and ENSCO may, in its sole discretion, apply to
the arbitral tribunal for specific performance in order to enforce Section 1
of this Agreement and, to the extent permitted by applicable law, each party
waives any objection to the imposition of such relief.
(iii) To the extent a solution cannot be found in the provisions of this
Agreement, the arbitrators shall apply the law of Delaware.
(iv) The parties agree that after either has filed a Request for
Arbitration, they shall, upon request, make discovery and disclosure of all
written materials relevant to the subject of the dispute. The arbitrators
shall make the final determination as to any discovery disputes between the
parties. Examination of witnesses at the hearings by the parties, their
legal counsel and by the arbitrators shall be permitted. A written
transcript of the hearing may be ordered by either of the parties at its own
expense.
(v) The award of a majority of the arbitrators shall be final and
binding upon the parties, and shall be the exclusive remedy of the parties
for all claims, counterclaims, issues or accountings presented or pled to
the arbitrators. Any award (other than specific performance) shall be
granted and paid in U.S. Dollars exclusive of any deduction or offset and
shall include interest from the date of breach or other violations of this
Agreement until the award is fully paid, computed at the prime commercial
lending rate announced from time to time by Citibank, N.A., adjusted daily.
The arbitrators shall have the authority to order that all or a part of the
legal or other costs, fees and expenses of a party, including fees paid to
the LCIA and the arbitrators and the reasonable attorneys' fees, be paid by
another party. Judgment upon the award may be entered in any court having
jurisdiction. An application may be made to any such court for a judicial
acceptance of the award and an order for enforcement.
(vi) Nothing in this section shall be construed to preclude any party
from seeking provisional remedies at any stage of the negotiation,
conciliation or arbitration proceedings, including but not limited to
temporary restraining orders or preliminary injunctions from any court of
competent jurisdiction which such party in good faith deems reasonably
necessary for the protection of its rights. Such preliminary relief shall
not be sought as a means of avoiding conciliation or arbitration.
(l) NAME, CAPTIONS, GENDER. The name assigned this Agreement and the
section captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms.
(m) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together constitute an instrument. Each counterpart may consist of a number of
copies each signed by less that all, but together signed by all, the parties
hereto.
D-11
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
ENSCO INTERNATIONAL INCORPORATED
By: /s/ C. CHRISTOPHER GAUT
-----------------------------------
C. Christopher Gaut, Vice President
and
Chief Financial Officer
DUAL INVEST AS
By: /s/ MAGNE KRISTIANSEN
-----------------------------------
Magne Kristiansen, Managing
Director
The Company by execution of this Agreement acknowledges that the execution,
delivery and performance of this Agreement, as it may be amended from time to
time, has been approved by its Board of Directors, and agrees to perform all of
its obligations under Section 1(e) of this Agreement.
DUAL DRILLING COMPANY
By: /s/ DAVID W. SKARKE
-----------------------------------
David W. Skarke, Chairman
B. Skaugen Shipping AS by execution of this Agreement agrees to perform all of
its obligations as a Selling Stockholder under this Agreement.
B. SKAUGEN SHIPPING AS
By: /s/ RICHARD ARNESEN
-----------------------------------
Richard Arnesen, Managing
Director
D-12
<PAGE>
EXHIBIT A
(1) The Stockholder may dispose of the Block Shares in the following manner:
(a) Sale of the Block Shares, from time to time, directly or through
broker-dealers or underwriters who may act solely as agents or may acquire
shares of Common Stock as principals, in all cases as designated by the
Stockholder.
(b) Distributions of the Block Shares to the stockholders of the
Stockholder, including Skaugen.
(2) Skaugen may dispose of the Block Shares acquired from the
Stockholder, from time to time, directly or through broker-dealers or
underwriters who may act solely as agents or may acquire shares of Common
Stock as principals, in all cases as designated by Skaugen.
D-13
<PAGE>
REVOCABLE PROXY
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF DUAL DRILLING COMPANY
The undersigned stockholder of DUAL DRILLING COMPANY, a Delaware corporation
(the "Company"), hereby appoint(s) W. Allen Parks and Robert F. Chrone, and each
of them, each with full power of substitution and resubstitution, proxies and
attorneys-in-fact of the undersigned, with all of the powers that the
undersigned would possess if personally present, to attend and act for the
undersigned at the Special Meeting of Stockholders (the "Special Meeting") of
the Company to be held on June 12, 1996 at Park City Club, 5956 Sherry Lane,
Suite 1700, Dallas, Texas 75225 commencing at 10:00 a.m., Central time, and any
and all adjournments and postponements thereof, and (without limiting the
generality of the foregoing) in connection therewith to vote and represent all
of the shares of common stock of the Company that the undersigned would be
entitled to vote.
Said proxies and attorneys, and each of them, shall have all of the powers
that the undersigned would have if voting in person. The undersigned hereby
revokes any other proxies to vote at such meeting and hereby ratifies and
confirms all that said proxies and attorneys, and each of them, may lawfully do
by virtue hereof. Said proxies, without hereby limiting their several authority,
are specifically authorized to vote in accordance with their best judgment with
respect to all matters incident to the conduct of the Special Meeting and all
matters presented at the meeting but which are not known to the Board of
Directors of the Company at the time of the solicitation of this proxy.
The Board of Directors of the Company recommends a vote FOR the following
Proposals:
1. Proposal to approve and adopt the Agreement and Plan of Merger, dated as of
March 21, 1996, among ENSCO International Incorporated, DDC Acquisition
Company and the Company, as amended.
/ / FOR / / AGAINST / / ABSTAIN
2. Proposal to approve the adoption of the DUAL Special Performance Unit Plan.
/ / FOR / / AGAINST / / ABSTAIN
Each of the above named proxies present at the Special Meeting, either in person
or by substitute, shall have and exercise all the powers of said proxies
hereunder.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AT THE SPECIAL MEETING OR ANY
ADJOURNMENT OR POSTPONEMENT THEREOF IN ACCORDANCE WITH THE INSTRUCTIONS SET
FORTH ABOVE OR, IN THE EVENT NO INSTRUCTIONS ARE SET FORTH, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL.
The undersigned acknowledges receipt of a copy of the Notice of Special
Meeting and Prospectus/Proxy Statement (with all Appendices and annexes) dated
May 9, 1996 relating to the Special Meeting.
<TABLE>
<S> <C>
Date Signature
Date
Signature
IMPORTANT: Please date this Proxy and sign exactly as your name
appears above. If shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give title as such. If a
corporation, please sign in full corporate name by the
president or other authorized officer. If a partnership, please
sign in partnership name by an authorized person.
</TABLE>
