sv4za
As filed with
the Securities and Exchange Commission on April 22,
2011
Registration
No. 333-172587
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 3
to
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Ensco plc
(Exact name of registrant as
specified in its charter)
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England and Wales
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1381
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98-0635229
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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6 Chesterfield Gardens
London England W1J 5BQ
+44 (0) 20 7659
4660
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Cary A. Moomjian, Jr.
Vice President, General Counsel and Secretary
Ensco plc
500 N. Akard Street, Suite 4300
Dallas, Texas 75201
(214) 397-3000
(Name, address,
including zip code, and telephone number, including area code,
of agent for service)
Copies
To:
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Alan G. Harvey
Baker & McKenzie LLP
2001 Ross Avenue,
Suite 2300
Dallas, Texas 75201
+1
(214) 978-3047
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Helen Bradley
Baker & McKenzie LLP
100 New Bridge Street
London EC4V 6JA
United Kingdom
+44 (0) 20 7919 1819
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Brady K. Long
Vice President, General
Counsel and Secretary
Pride International, Inc.
5847 San Felipe, Suite 3300
Houston, Texas 77057
+1 (713) 789-1400
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J. David Kirkland, Jr.
Tull R. Florey
Baker Botts L.L.P.
910 Louisiana Street
One Shell Plaza
Houston, Texas 77002
+1 (713) 229-1234
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David A. Katz
Wachtell, Lipton, Rosen
& Katz
51 West
52nd
Street
New York, New York 10019
+1 (212) 403-1000
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effectiveness of this registration statement and the
satisfaction or waiver of all other conditions to the closing of
the merger described herein.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box. o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
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Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer)
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o
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Exchange Act
Rule 14d-(d)
(Cross-Border Third-Party Tender Offer)
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o
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this joint proxy statement/prospectus is not
complete and may be changed. Ensco plc may not sell the
securities offered by this joint proxy statement/prospectus
until the registration statement filed with the Securities and
Exchange Commission is effective. This joint proxy
statement/prospectus is not an offer to sell these securities
nor should it be considered a solicitation of an offer to buy
these securities in any jurisdiction where the offer or sale is
not permitted.
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SUBJECT TO COMPLETION, DATED
APRIL 22, 2011
JOINT PROXY
STATEMENT/PROSPECTUS
To the Shareholders of Ensco plc and the Stockholders of Pride
International, Inc.:
The boards of directors of Ensco plc, referred to as Ensco, and
Pride International, Inc., referred to as Pride, have each
unanimously approved an agreement and plan of merger, which
provides for a merger in which Pride will become a wholly owned
subsidiary of Ensco. If the merger is completed, with exceptions
for certain U.K. residents, for each share of Pride common
stock, Ensco will issue and deliver to Pride stockholders 0.4778
American depositary shares, or ADSs, each whole ADS representing
one Class A ordinary share of Ensco, nominal value $0.10
per share, and will pay $15.60 in cash. This exchange ratio and
cash amount are fixed and will not be adjusted to reflect stock
price changes prior to closing of the merger. Based on the
closing price of Ensco ADSs on the New York Stock Exchange,
referred to as the NYSE, on February 4, 2011, the last
trading day before public announcement of the merger, the merger
consideration represented approximately $41.60 in aggregate
value for each share of Pride common stock. Based on the closing
price of Ensco ADSs on the NYSE on April 21, 2011, the
latest practicable trading day before the date of this joint
proxy statement/prospectus, the merger consideration represented
approximately $43.44 in aggregate value for each share of Pride
common stock. The merger will be a taxable transaction for Pride
stockholders for U.S. federal income tax purposes. A
composite copy of the merger agreement, as amended, is attached
as Annex A to this joint proxy statement/prospectus.
Holders of Pride common stock who are unable or fail to timely
certify that they either are not U.K. residents or, if so, are
U.K. resident qualified investors (within the
meaning of Section 86(7) of the U.K. Financial Services and
Markets Act 2000) will not receive Ensco ADSs as part of the
merger consideration but will instead receive for each share of
Pride common stock an amount of cash equal to the $15.60 cash
component of the merger consideration plus an additional amount
equal to the net proceeds of the sale by the exchange agent,
Citibank, N.A., of 0.4778 Ensco ADSs.
Ensco and Pride will each hold a meeting of its shareholders or
stockholders on May 24, 2011 in connection with the
proposed merger. At the Ensco general meeting, Ensco
shareholders will be asked to consider and vote on a proposal to
approve the issuance and delivery of Ensco ADSs pursuant to the
merger agreement. At the Pride special meeting, Pride
stockholders will be asked to consider and vote on a proposal to
adopt the merger agreement.
Ensco ADSs trade on the NYSE under the symbol ESV.
We estimate that, based on the outstanding shares of Pride
common stock and equity awards on March 31, 2011,
immediately after the effective time of the merger former Pride
stockholders will hold Ensco ADSs representing approximately 38%
of the then-outstanding Ensco ADSs.
Your vote is very important. The merger cannot be
completed unless (i) Ensco shareholders approve by ordinary
resolution the issuance and delivery of Ensco ADSs pursuant to
the merger agreement by the affirmative vote of the holders of
at least a majority of the votes cast at a meeting at which one
or more shareholders are present in person or by proxy who
represent and vote at least a majority of the Class A
ordinary shares (represented by ADSs) and are entitled to vote
on April 11, 2011, the record date for the Ensco general
meeting, and (ii) Pride stockholders adopt the merger
agreement by the affirmative vote of the holders of at least a
majority of the shares of Pride common stock outstanding and
entitled to vote on April 11, 2011, the record date for the
Pride special meeting. In addition, the obligations of Ensco and
Pride to complete the merger are subject to the satisfaction or
waiver of several other conditions set forth in the merger
agreement.
The Ensco board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement and recommends that Ensco shareholders vote
FOR the proposal to issue and deliver Ensco ADSs
pursuant to the merger agreement. The Pride board of directors
has unanimously approved the merger agreement and the
transactions contemplated by the merger agreement and recommends
that Pride stockholders vote FOR the proposal to
adopt the merger agreement.
The accompanying joint proxy statement/prospectus contains
important information about the merger, the merger agreement and
the meetings of shareholders. This document is also a
U.S. prospectus for the Ensco ADSs representing
Class A ordinary shares that will be delivered pursuant to
the merger agreement. We encourage you to read this joint
proxy statement/prospectus carefully before voting, including
the section entitled Risk Factors beginning on
page 28.
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Daniel W. Rabun
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Louis A. Raspino
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Chairman, President and Chief Executive Officer
Ensco plc
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President and Chief Executive Officer
Pride International, Inc.
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None of the Securities and Exchange Commission, any state
securities regulatory authority or the U.K. Financial Services
Authority, or FSA, has approved or disapproved of the merger or
the securities to be issued under this joint proxy
statement/prospectus or has passed upon the adequacy or accuracy
of the disclosure in this joint proxy statement/prospectus. Any
representation to the contrary is a criminal offense.
For the avoidance of doubt, this joint proxy
statement/prospectus is not intended to be and is not a
prospectus for the purposes of the Prospectus Rules made under
Part 6 of the U.K. Financial Services and Markets Act 2000
(as set out in the U.K. FSAs Handbook).
This joint proxy statement/prospectus is dated
April , 2011, and is first
being mailed to Ensco shareholders and Pride stockholders on or
about April , 2011.
Ensco
plc
6 Chesterfield Gardens
London England W1J 5BQ
+44 (0) 20 7659 4660
NOTICE OF
GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 24, 2011
To the Shareholders of Ensco plc:
A general meeting of the shareholders of Ensco plc
(Ensco) will be held at the registered office and
headquarters of Ensco, 6 Chesterfield Gardens, London, W1J 5BQ,
United Kingdom at 8:30 a.m. London time on May 24, 2011,
for the following purposes:
1. to consider and vote on the proposal to approve the
issuance and delivery of Ensco American depositary shares, or
ADSs, pursuant to the Agreement and Plan of Merger, dated as of
February 6, 2011 and as amended on March 1, 2011
(referred to as the merger agreement), by and among Ensco, ENSCO
International Incorporated, a Delaware corporation and an
indirect, wholly owned subsidiary of Ensco, ENSCO Ventures LLC,
a Delaware limited liability company and an indirect, wholly
owned subsidiary of Ensco, and Pride International, Inc., a
Delaware corporation, as it may be amended from time to time (a
composite copy of the merger agreement is attached as
Annex A to the joint proxy statement/prospectus
accompanying this notice); and
2. to transact any other business that may properly come
before the general meeting or any adjournment or postponement of
the general meeting.
Each resolution will be proposed as an ordinary resolution. Only
Ensco shareholders of record at the close of business in London
on April 11, 2011, the record date for the Ensco general
meeting, are entitled to receive notice of, attend and vote at
the Ensco general meeting or, subject to the Ensco Articles of
Association, any adjournments or postponements of the Ensco
general meeting.
The Ensco board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement and recommends that you vote FOR the
proposal to approve the issuance and delivery of Ensco ADSs
pursuant to the merger agreement, which is described in detail
in the joint proxy statement/prospectus accompanying this
notice.
YOUR VOTE
IS IMPORTANT
Whether or not you plan to attend the general meeting, please
submit a proxy or voting instruction card as soon as
possible. Shareholders of record as of the close of business
in London on April 11, 2011 are entitled to receive notice
of, attend and vote at the Ensco general meeting or, subject to
the Ensco Articles of Association, any adjournment or
postponement of the Ensco general meeting. A list of all
shareholders of record entitled to vote at the Ensco general
meeting is on file at the registered office and headquarters of
Ensco, 6 Chesterfield Gardens, London, W1J 5BQ, United Kingdom,
and will be available for inspection at the Ensco general
meeting. Changes to entries on the register after this time will
be disregarded in determining the rights of any person to attend
or vote at the Ensco general meeting. In accordance with
provisions in the U.K. Companies Act 2006 and in accordance with
the Ensco Articles of Association, a shareholder of record is
entitled to appoint another person as his or her proxy to
exercise all or any of his or her rights to attend and to speak
and vote at the Ensco general meeting and to appoint more than
one proxy in relation to the Ensco general meeting (provided
that each proxy is appointed to exercise the rights attached to
a different share or shares held by him or her). Such proxy need
not be a shareholder of record.
If you received a proxy card or voting instruction card by mail,
you may submit your proxy or voting instructions by completing,
signing, dating and returning your proxy card or voting
instruction card in the envelope provided. Holders of record and
street name holders of Ensco ADSs may also instruct
the ADS depositary
c/o Broadridge
how to vote by telephone at
1-800-690-6903
or via the Internet at www.proxyvote.com by following the
instructions shown on the voting instruction card. Any
shareholder of record attending the Ensco general meeting may
vote in person. If you have returned a proxy card or voting
instruction card or otherwise voted, you may revoke prior
instructions and cast your vote by following the procedures
described in the joint proxy statement/prospectus.
For holders of record and street name holders of
Ensco ADSs, voting instructions must be received by the ADS
depositary at Vote Processing
c/o Broadridge
51 Mercedes Way, Edgewood, NY 11717 by
11:59 p.m. New York City time on May 15, 2011 for
employees and directors holding shares in Ensco benefit plans,
and on May 18, 2011 for all other holders.
Please review the joint proxy statement/prospectus accompanying
this notice for more complete information regarding the merger
and the Ensco general meeting.
By Order of the Board of Directors of Ensco plc
Cary A. Moomjian, Jr.
Vice President, General Counsel and Secretary
London, England
April 25, 2011
Pride
International, Inc.
5847 San Felipe,
Suite 3300
Houston, Texas 77057
+1
(713) 789-1400
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2011
To the Stockholders of Pride International, Inc.:
A special meeting of the stockholders of Pride International,
Inc., a Delaware corporation (Pride), will be held
at the Hotel Granduca located at 1080 Uptown Park Blvd.,
Houston, Texas on May 24, 2011, at 9:00 a.m. Houston
time for the following purposes:
1. to consider and vote on the proposal to adopt the
Agreement and Plan of Merger, dated as of February 6, 2011
and as amended on March 1, 2011 (referred to as the merger
agreement), by and among Ensco plc (Ensco), ENSCO
International Incorporated, a Delaware corporation and an
indirect, wholly owned subsidiary of Ensco, ENSCO Ventures LLC,
a Delaware limited liability company and an indirect, wholly
owned subsidiary of Ensco, and Pride, as it may be amended from
time to time (a composite copy of the merger agreement is
attached as Annex A to the joint proxy statement/prospectus
accompanying this notice);
2. to consider and vote on any proposal to adjourn the
special meeting to a later date or dates if necessary to solicit
additional proxies if there are insufficient votes at the time
of the special meeting to adopt the merger agreement; and
3. to transact any other business that may properly come
before the special meeting or any adjournment or postponement of
the special meeting by or at the direction of the board.
Only Pride stockholders of record at the close of business on
April 11, 2011, the record date for the Pride special
meeting, are entitled to notice of, and to vote at, the Pride
special meeting and any adjournments or postponements of the
Pride special meeting. For a period of 10 days prior to the
special meeting, a complete list of stockholders of record
entitled to vote at the special meeting will be available at our
executive offices for inspection by stockholders during ordinary
business hours for proper purposes.
The Pride board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement and unanimously recommends that you vote
FOR the proposal to adopt the merger agreement,
which is described in detail in the joint proxy
statement/prospectus accompanying this notice, and
FOR any proposal to adjourn the special meeting if
necessary to solicit additional proxies.
YOUR VOTE
IS IMPORTANT
Whether or not you plan to attend the special meeting, please
submit a proxy as soon as possible.
If you received a proxy card by mail, you may submit your proxy
by completing, signing, dating and returning your proxy card in
the envelope provided. Submitting a proxy will assure that your
vote is counted at the meeting if you do not attend in person.
If your shares of Pride common stock are held in street
name by your broker or other nominee, only that holder can
vote your shares of Pride common stock and the vote cannot be
cast unless you provide instructions to your broker or obtain a
legal proxy from your broker. You should follow the directions
provided by your broker regarding how to instruct your broker to
vote your shares of Pride common stock. If you have returned a
proxy card or otherwise voted, you may revoke prior instructions
and cast your vote by following the procedures described in the
joint proxy statement/prospectus.
Please review the joint proxy statement/prospectus accompanying
this notice for more complete information regarding the merger
and the Pride special meeting.
By Order of the Board of Directors of
Pride International, Inc.
Brady K. Long
Vice President, General Counsel and Secretary
Houston, Texas
April 25, 2011
ADDITIONAL
INFORMATION
This joint proxy statement/prospectus incorporates by reference
important business and financial information about Ensco and
Pride from other documents filed with the SEC that are not
included or delivered with this joint proxy
statement/prospectus. See Where You Can Find More
Information; Incorporation by Reference.
Documents incorporated by reference are available to Ensco
shareholders and Pride stockholders without charge upon written
or oral request. You can obtain any of these documents by
requesting them in writing or by telephone from D.F.
King & Co., Inc., Enscos proxy solicitor, or
Innisfree M&A Incorporated, Prides proxy solicitor,
at the following addresses and telephone numbers.
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D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Shareholders Call Toll-Free at:
1-800-859-8509
Banks and Brokers Call Collect at:
1-212-269-5550
Email: ensco@dfking.com
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Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Shareholders Call Toll-Free at:
1-877-825-8772
Banks and Brokers Call Collect at:
1-212-750-5833
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To receive timely delivery of the requested documents in
advance of the applicable general or special meeting, you should
make your request no later than May 17, 2011.
ABOUT
THIS DOCUMENT
This document, which forms part of a registration statement on
Form S-4
filed with the SEC by Ensco plc (File
No. 333-172587),
constitutes a prospectus of Ensco under Section 5 of the
Securities Act of 1933, as amended, which we refer to as the
Securities Act, with respect to the Class A ordinary shares
represented by Ensco ADSs to be delivered pursuant to the merger
agreement and certain sales of Ensco ADSs by an affiliate of the
exchange agent for the merger and covers the effect of any
failure to timely deliver certifications as to non-U.K.
residency or qualified investor status within the
meaning of Section 86(7) of the U.K. Financial Services and
Markets Act 2000 by any record or beneficial owner of shares of
Pride common stock. For the avoidance of doubt, this joint proxy
statement/prospectus is not intended to be and is not a
prospectus for the purposes of the Prospectus Rules made under
Part 6 of the U.K. Financial Services and Markets Act 2000
(as set out in the U.K. FSAs Handbook). This document also
constitutes a notice of meeting and a proxy statement under
Section 14(a) of the Securities Exchange Act of 1934, as
amended, which we refer to as the Exchange Act, with respect to
the general meeting of Ensco shareholders, at which Ensco
shareholders will be asked to consider and vote on a proposal to
approve the issuance and delivery of Ensco ADSs pursuant to the
merger agreement, and with respect to the special meeting of
Pride stockholders, at which Pride stockholders will be asked to
consider and vote on a proposal to adopt the merger agreement.
You should rely only on the information contained or
incorporated by reference into this document. Neither Ensco nor
Pride has authorized anyone to provide you with information that
is different from that contained in, or incorporated by
reference into, this document. This document is dated
April 25, 2011. You should not assume that the information
contained in this document is accurate as of any date other than
that date. You should not assume that the information
incorporated by reference into this document is accurate as of
any date other than the date of such incorporated document.
Neither our mailing of this document to Ensco shareholders or
Pride stockholders nor the delivery by Ensco of its ADSs
pursuant to the merger agreement will create any implication to
the contrary.
Unless otherwise stated herein, for purposes of determinations
with respect to the number of Ensco ADSs to be issued in the
merger and information derived therefrom, references to the
number of outstanding shares of Pride common stock include
shares subject to stock options and restricted stock units
awarded under Pride incentive plans and shares subject to
outstanding purchase rights under Prides Employee Stock
Purchase Plan as of March 31, 2011, and are based on the
assumption that all Pride stock option awards are exercised
prior to or contemporaneously with completion of the merger.
TABLE OF
CONTENTS
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EX-23.2 |
EX-23.3 |
EX-99.4 |
EX-99.5 |
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Annexes
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Annex A
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Agreement and Plan of Merger (composite as amended)
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Annex B
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Opinion of Deutsche Bank Securities Inc.
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Annex C
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Opinion of Goldman, Sachs & Co.
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Annex D
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Section 262 of the General Corporation Law of the State of
Delaware
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ii
QUESTIONS
AND ANSWERS ABOUT THE MEETINGS
The following are some questions that Ensco shareholders and
Pride stockholders may have regarding the proposals being
considered at the Ensco general meeting and the Pride special
meeting and brief answers to those questions. Ensco and Pride
urge you to read carefully this entire joint proxy
statement/prospectus, including the annexes, and the other
documents to which this joint proxy statement/prospectus refers
or incorporates by reference because the information in this
section does not provide all the information that might be
important to you. Unless stated otherwise, all references in
this joint proxy statement/prospectus to Ensco are to Ensco plc,
an English public limited company; all references to Pride are
to Pride International, Inc., a Delaware corporation; all
references to Merger Sub are to ENSCO Ventures LLC, a Delaware
limited liability company and an indirect wholly owned
subsidiary of Ensco; all references to Delaware Sub are to ENSCO
International Incorporated, a Delaware corporation and an
indirect wholly owned subsidiary of Ensco; and all references to
the merger agreement are to the Agreement and Plan of Merger,
dated as of February 6, 2011 and as amended on
March 1, 2011, by and among Ensco, Delaware Sub, Merger Sub
and Pride, a composite copy of which is attached as Annex A
to this joint proxy statement/prospectus and is incorporated
herein by reference, as it may be amended from time to time.
References to wholly owned subsidiaries include a
reference to subsidiaries owned directly or indirectly.
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Q:
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What is the proposed transaction?
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A:
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Ensco and Pride have entered into a merger agreement pursuant to
which Merger Sub will merge with and into Pride, with Pride
surviving the merger as an indirect wholly owned subsidiary of
Ensco. Each issued and outstanding share of Pride common stock
will be converted into the right to receive (i) 0.4778
Ensco ADSs and (ii) $15.60 in cash, with exceptions
applicable to shares of Pride common stock held or deemed to be
held by certain U.K. residents, as described under The
Merger Agreement Merger Consideration.
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Q:
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Why are Ensco and Pride proposing the merger?
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A:
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The boards of directors of Ensco and Pride believe that the
merger will benefit Enscos shareholders and Prides
stockholders by creating a top-tier global offshore drilling
company given the complementary fleet composition, geographic
scope and customer bases of the two companies. To review the
reasons for the merger in greater detail, see The
Merger Recommendation of the Ensco Board of
Directors and Its Reasons for the Merger beginning on
page 63 and The Merger Recommendation of
the Pride Board of Directors and Its Reasons for the
Merger beginning on page 66.
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Q:
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Why am I receiving this joint proxy statement/prospectus?
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A:
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Ensco shareholders are being asked to approve the issuance and
delivery of Ensco ADSs pursuant to the merger agreement.
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Pride stockholders are being asked to adopt the merger agreement.
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Q: |
When and where is the general meeting of the Ensco
shareholders?
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A: |
The Ensco general meeting will be held at the registered office
and headquarters of Ensco, 6 Chesterfield Gardens, London W1J
5BQ, United Kingdom at 8:30 a.m. London time on May 24,
2011.
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Q: |
When and where is the special meeting of the Pride
stockholders?
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A: |
The Pride special meeting will be held on May 24, 2011 at
9:00 a.m. Houston time at the Hotel Granduca, located at
1080 Uptown Park Blvd., Houston, Texas 77056.
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Q: |
Who can attend and vote at the Ensco general meeting or the
Pride special meeting?
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A: |
You are qualified to receive notice of, attend and vote at the
Ensco general meeting if you owned Ensco Class A ordinary
shares at the close of business in London on April 11,
2011, the record date for the Ensco general meeting. If you own
Ensco ADSs representing Class A ordinary shares at the
close of business in New York City on such date, whether
directly or in street name, as described below, you
are entitled to instruct the depositary for the Ensco ADSs on
how to vote the Class A ordinary shares
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represented by your Ensco ADSs, which for purposes of this joint
proxy statement/prospectus we refer to as voting your shares.
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If you wish to attend the Ensco general meeting in person,
representatives of the ADS depositary will be present at the
Ensco general meeting to verify your right to attend, but you
may not speak or vote at the Ensco general meeting unless you
hold a valid proxy from the ADS depositary or you are a
shareholder of record of Class A ordinary shares. Please
bring the proxy and proof of your identity to the Ensco general
meeting. If you are a street name holder of Ensco
ADSs, you will need to bring evidence of your share ownership in
the form of a currently-dated letter from your broker, bank,
trust or other nominee and proof of your identity. On
verification of such evidence, you will be admitted to the Ensco
general meeting at the invitation of the Chairman, but may not
speak or vote at the Ensco general meeting unless you hold a
valid proxy from the ADS depositary.
All Pride stockholders of record as of the close of business on
April 11, 2011, the record date for the Pride special
meeting, are entitled to receive notice of, attend and vote at
the Pride special meeting. If you are a street name
holder of shares of Pride common stock and wish to attend the
Pride special meeting, you will need to bring evidence of your
share ownership in the form of a currently-dated letter from
your broker, bank, trust or other nominee and proof of your
identity. On verification of such evidence, you will be admitted
to the Pride special meeting, but may not vote at the Pride
special meeting unless you hold a proxy from the stockholder of
record.
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Q:
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What vote is required to approve the proposals at the Ensco
general meeting and the Pride special meeting?
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A:
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The approval by the Ensco shareholders of the issuance and
delivery of Ensco ADSs pursuant to the merger agreement and the
adoption by the Pride stockholders of the merger agreement are
required for the consummation of the merger.
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The approval of the Ensco shareholders for the issuance and
delivery of Ensco ADSs pursuant to the merger agreement is being
proposed as an ordinary resolution, which means that, assuming a
quorum is present, the resolution will be approved for the
purposes of the U.K. Companies Act 2006 if a majority of the
votes cast are cast in favor of the resolution. Further, under
the New York Stock Exchange, or NYSE, rules, the total amount of
votes cast on the resolution must represent over 50% in interest
of all securities entitled to vote.
Adoption of the merger agreement requires the affirmative vote
of the holders of at least a majority of the outstanding shares
of Pride common stock entitled to vote, and approval of the
proposal to adjourn the special meeting if necessary to solicit
additional proxies requires the affirmative vote of the holders
of a majority of the shares present in person or represented by
proxy at the special meeting and entitled to vote on the
adjournment. Each share of Pride common stock is entitled to one
vote on (1) the adoption of the merger agreement and
(2) the approval of any proposal to adjourn the special
meeting if necessary to solicit additional proxies.
Your vote is very important. You are encouraged to submit a
proxy or voting instruction card as soon as possible.
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Q:
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What is the difference between a shareholder of
record, a holder of record of Ensco ADSs and a
street name holder?
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A:
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These terms describe how your shares are held. Holders of Ensco
Class A ordinary shares registered directly in the
holders name with Computershare Investor Services plc, its
share registrar, and holders of Pride common stock registered
directly in the holders name with BNY Mellon Shareowner
Services, its transfer agent, are referred to as
shareholders of record or stockholders of
record, as applicable. Citibank, N.A. (London Branch) (or
its nominee) is the registered holder of all outstanding Ensco
Class A ordinary shares as of the date of this joint proxy
statement/prospectus. Citibank, N.A. acts as the depositary with
respect to the Ensco ADSs, each representing one Ensco
Class A ordinary share on
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deposit with the depositary, pursuant to the terms and
conditions of the deposit agreement among Citibank, Ensco and
the holders of Ensco ADSs.
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If you hold Ensco ADSs directly and your name appears on the
register of the depositary, you are referred to as a
holder of record of Ensco ADSs, and Citibank will,
insofar as practicable and permitted under applicable law, the
provisions of the deposit agreement and Enscos Articles of
Association, vote Class A ordinary shares underlying your
Ensco ADSs in accordance with your voting instructions if
received timely.
If your shares are held in the name of a broker, bank, trust or
other nominee as a custodian, you are a street name
holder. Almost all Ensco shareholders are street
name holders of Ensco ADSs, and almost all Pride
stockholders are street name holders of shares of
Pride common stock.
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Q:
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If my Ensco ADSs or shares of Pride common stock are held in
street name by my broker or other nominee, will my
broker or other nominee vote my Ensco ADSs or Pride common stock
for me?
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A:
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Unless you instruct your broker how to vote your Ensco ADSs or
Pride common stock, as applicable, your shares will NOT
be voted.
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Q:
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What are the effects of abstentions and broker non-votes at
the meetings?
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A:
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In connection with the Ensco general meeting, abstentions and
broker non-votes will be considered in determining the presence
of a quorum. However, because abstentions and broker non-votes
are not considered votes cast under U.K. Companies Act 2006,
they will not have any effect on the outcome of the vote with
respect to the proposal to approve the issuance and delivery of
Ensco ADSs pursuant to the merger agreement (assuming a quorum
is present). Under NYSE rules, abstentions, but not broker
non-votes, will be considered as votes cast for determining
whether a sufficient number of votes have been cast on the
resolution.
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In connection with the Pride special meeting, abstentions and
broker non-votes will be considered as present at the meeting
for purposes of determining a quorum and will have the same
effect as votes cast AGAINST the adoption of the
merger agreement. Abstentions will have the same effect as votes
cast AGAINST approval of any proposal to adjourn the
special meeting if necessary to solicit additional proxies.
Broker non-votes will have no effect on approval of that
proposal.
An abstention occurs when a shareholder or stockholder abstains
from voting (either in person or by proxy) on one or more of the
proposals. Broker non-votes occur when a bank, broker or other
nominee returns a proxy but does not have authority to vote on a
particular proposal. You should therefore provide your broker or
other nominee with instructions as to how to vote your Ensco
ADSs or Pride common stock.
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Q:
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What happens if the merger is not completed?
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A:
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If the merger agreement is not adopted by Prides
stockholders, if the issuance and delivery of Ensco ADSs
pursuant to the merger agreement is not approved by Enscos
shareholders or if the merger is not completed for any other
reason, you will not receive any payment for your shares of
Pride common stock in connection with the merger. Instead, Pride
will remain an independent public company and Pride common stock
will continue to be listed and traded on the NYSE. Under the
merger agreement, Delaware Sub may be required to pay to Pride a
termination fee of $260 million (less any fee previously
paid by Delaware Sub) if the merger agreement is terminated
under certain circumstances, and Pride may be required to pay to
Ensco a termination fee of $260 million (less any fee
previously paid by Pride) if the merger agreement is terminated
under certain circumstances. In addition, the merger agreement
requires each of Delaware Sub and Pride to pay a fee of
$50 million in certain circumstances where the merger
agreement is terminated by a party and the $260 million
termination fee is not then payable to the other party, such as
a failure to obtain shareholder approval under certain
circumstances. See The Merger Agreement
Termination Fees beginning on page 128.
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Q:
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Does Pride intend to hold a 2011 annual meeting of
stockholders?
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A:
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In light of the special meeting, Pride has cancelled the 2011
annual meeting of stockholders scheduled for May 19, 2011,
and the 2011 annual meeting may not be held if the merger is
completed in 2011. If the merger agreement is terminated or the
proposal to adopt the merger agreement is not approved by Pride
stockholders at the Pride special meeting, Pride intends to call
an annual meeting of stockholders promptly thereafter. For a
description of the procedures for submitting stockholder
proposals to be included in the proxy materials for Prides
2011 annual meeting of stockholders, if held, see
Shareholder Proposals Pride 2011 Annual
Stockholder Meeting and Stockholder Proposals beginning on
page 191.
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Q:
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Are there risks associated with the merger that I should
consider in deciding how to vote?
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A:
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Yes. There are a number of risks related to the merger that are
discussed in this joint proxy statement/prospectus and in other
documents incorporated by reference. You should read carefully
the detailed description of the risks associated with the merger
and the operations of Ensco after the merger described in
Risk Factors beginning on page 28.
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Q:
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If I am a Pride stockholder, should I send in my stock
certificates with my proxy card?
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A:
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NO. Please DO NOT send your Pride stock
certificates with your proxy card. If the merger is approved,
you will be sent written instructions for exchanging your stock
certificates.
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Q:
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Are Pride stockholders entitled to appraisal rights?
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A:
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Yes. Holders of Pride common stock who do not vote in favor of
the merger and who properly demand appraisal of their shares
will be entitled to exercise appraisal rights in connection with
the merger, and, if such rights are properly demanded and
perfected and not withdrawn or lost and the merger is completed,
such stockholders will be entitled to obtain payment for the
judicially determined fair value of their shares of Pride common
stock. For a detailed description of the exercise of appraisal
rights, see Appraisal Rights beginning on
page 130.
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Q:
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How does the Ensco board of directors recommend that Ensco
shareholders vote?
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A:
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The Ensco board of directors has unanimously determined that
the execution and delivery of the merger agreement is advisable
and the transactions contemplated by the merger agreement,
including the issuance and delivery of Ensco ADSs pursuant to
the merger agreement, are in the best interests of Ensco and
unanimously recommends that Ensco shareholders vote
FOR the proposal to approve the issuance and
delivery of Ensco ADSs pursuant to the merger agreement. For
a more complete description of the recommendation of the Ensco
board of directors, see The Merger
Recommendation of the Ensco Board of Directors and Its Reasons
for the Merger beginning on page 63.
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Q:
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How does the Pride board of directors recommend that Pride
stockholders vote?
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A:
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The Pride board of directors has unanimously determined that
the merger agreement and the transactions contemplated by the
merger agreement are advisable and in the best interests of
Pride and its stockholders and unanimously recommends that Pride
stockholders vote FOR the proposal to adopt the
merger agreement and FOR any proposal to adjourn the
special meeting if necessary to solicit additional proxies.
For a more complete description of the recommendation of the
Pride board of directors, see The Merger
Recommendation of the Pride Board of Directors and Its Reasons
for the Merger beginning on page 66.
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Q:
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How will Ensco shareholders be affected by the merger and
share issuance?
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A:
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After the merger, each Ensco shareholder will have the same
number of Class A ordinary shares represented by Ensco ADSs
that the shareholder held immediately prior to the merger.
However, because Ensco will be delivering new Ensco ADSs to
Pride stockholders in the merger, each outstanding Class A
ordinary share represented by an Ensco ADS immediately prior to
the merger will represent a smaller percentage of the aggregate
number of Class A ordinary shares outstanding after the
merger. As a result of the merger, each Ensco shareholder will
own shares in a larger company with more assets and more
outstanding shares.
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Q:
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What do I need to do now?
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A:
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After you have carefully read this joint proxy
statement/prospectus, please respond by completing, signing and
dating your proxy card or voting instruction card, as applicable
and returning it in the enclosed postage-paid envelope or, if
available, by submitting your proxy or voting instructions by
telephone or through the Internet as soon as possible so that
the Class A ordinary shares represented by your Ensco ADSs
or your shares of Pride common stock will be represented and
voted at the Ensco general meeting or Pride special meeting, as
applicable.
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Please refer to your proxy card, voting instruction card or the
information forwarded by your broker or other nominee to see
which voting options are available to you.
The Internet and telephone proxy submission procedures are
designed to verify your holdings and to allow you to confirm
that your instructions have been properly recorded.
The method by which you submit a proxy or voting instructions
will in no way limit your right to vote at the Ensco general
meeting or the Pride special meeting if you later decide to
attend the meeting in person. If your shares of Pride common
stock are held in the name of a broker or other nominee, you
must obtain a proxy, executed in your favor, from the holder of
record, to be able to vote at the Pride special meeting. If your
Ensco ADSs are held in the name of a broker or other nominee,
you must either cause the Class A ordinary shares
represented by your Ensco ADSs to be withdrawn from the ADS
depositary or obtain a proxy, executed in your favor, from the
holder of record of your Ensco ADSs and obtain a proxy, executed
in your favor from the ADS depositary, to be able to appear,
speak and vote at the Ensco general meeting, although
street name holders of Ensco ADSs are permitted to
attend the Ensco general meeting at the invitation of the
Chairman as described above.
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Q:
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How will my Ensco ADSs be voted?
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A:
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If you are a holder of record of Ensco ADSs, your name
will appear on the register of Citibank as the ADS depositary,
and Citibank, N.A. (London Branch) (or its nominee), as the
registered holder of the Class A ordinary shares underlying
your Ensco ADSs, will, insofar as practicable and permitted
under applicable law, the provisions of the deposit agreement
and the Ensco Articles of Association, vote the Class A
ordinary shares underlying your Ensco ADSs in accordance with
your voting instructions.
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If you want the ADS depositary to vote your Ensco ADSs at the
Ensco general meeting, you may provide your voting instructions
to the ADS depositary c/o Broadridge via the Internet, by
telephone or by sending in a completed voting instruction card,
as described on the voting instruction card.
Voting instructions for Ensco ADSs must be received by the
ADS depositary c/o Broadridge by the ADS voting cutoff time.
If the ADS depositary timely receives voting instructions that
fail to specify the manner in which the ADS depositary is to
vote the Class A ordinary shares represented by ADSs, the
ADS depositary will vote as the Ensco board of directors
recommends and, therefore, FOR the approval of the
issuance and delivery of Ensco ADSs pursuant to the merger
agreement.
If you are a shareholder of record of Ensco
Class A ordinary shares, which as of the date of this
joint proxy statement/prospectus is only Citibank as ADS
depositary, you may vote your shares in person at the Ensco
general meeting (any resolution put to vote at a general meeting
shall be decided on a poll) or, in accordance with provisions in
the U.K. Companies Act 2006 and in accordance with the
Ensco Articles of Association, you are entitled to appoint
another person as your proxy to exercise all or any of your
rights to attend and to speak and vote at the Ensco general
meeting and to appoint more than one proxy in relation to the
Ensco general meeting (provided that each proxy is appointed to
exercise the rights attached to a different share or shares held
by you). Such proxy need not be a shareholder of record.
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Q:
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How will my shares of Pride common stock be voted?
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A:
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All shares of Pride common stock entitled to vote and
represented by properly completed proxies received prior to the
Pride special meeting, and not revoked, will be voted at the
Pride special meeting as
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instructed on the proxies. If you properly complete, sign and
return a proxy card, but do not indicate how your shares of
Pride common stock should be voted on a matter, the shares of
Pride common stock represented by your proxy will be voted as
the Pride board of directors recommends and, therefore,
FOR the adoption of the merger agreement and
FOR any proposal to adjourn the special meeting if
necessary to solicit additional proxies.
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Q:
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What if I am a street name holder of Ensco ADSs
or shares of Pride common stock?
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A:
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If you are a street name holder of Ensco ADSs or
shares of Pride common stock, you must provide the record holder
of your shares with instructions on how to vote your shares.
Please follow the voting instructions provided by your bank or
broker. Please note that you may not vote shares held in street
name by returning a proxy card or voting instruction directly to
Ensco or Pride or by voting in person at the respective general
or special meetings unless you provide a legal
proxy, which you must obtain from your bank or broker.
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If you are a street name holder of shares of Pride
common stock and you do not instruct your broker on how to vote
your shares, your broker may not give a proxy on or vote your
shares on the proposal to adopt the merger agreement, which will
have the same effect as a vote AGAINST adoption of
the merger agreement.
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Q: |
When do holders of record and street name holders
of Ensco ADSs have to submit their voting instructions to the
ADS depositary?
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A: |
Voting instructions must be received by the ADS depositary by
11:59 p.m. New York City time on May 15, 2011 for employees
and directors holding shares in Ensco benefit plans, and on
May 18, 2011 for all other holders (the ADS voting
cutoff time).
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If the ADS depositary timely receives voting instructions that
fail to specify the manner in which the ADS depositary is to
vote the Class A ordinary shares represented by Ensco ADSs,
the ADS depositary will vote in favor of the items set forth in
such voting instructions. Class A ordinary shares
represented by Ensco ADSs for which no timely voting
instructions are received by the ADS depositary will not be
voted.
If you are a street name holder, your broker,
bank, trust or other nominee will arrange to provide materials
and instructions for voting your Ensco ADSs. To allow sufficient
time for voting by your broker, bank, trust or other nominee,
your voting instructions must be received by the time specified
in the materials provided by your broker, bank, trust or other
nominee.
If you are a current or former Ensco employee who holds Ensco
ADSs in the Ensco Savings Plan, you will receive voting
instructions from the trustee of the plan for Ensco ADSs
allocated to your account. If you fail to give voting
instructions to the trustee, your Ensco ADSs will be voted by
the trustee in the same proportion and direction as shares held
by the trustee for which voting instructions were received. To
allow sufficient time for voting by the trustee and
administrator of the Ensco Savings Plan, your voting
instructions for Ensco ADSs held in the plan must be received by
the trustee and administrator by 11:59 p.m. New York City time
on May 15, 2011.
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Q:
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Can I revoke my proxy or voting instructions or change my
vote after I have delivered my proxy or voting instructions?
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A:
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Yes.
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If you are a holder of record of Ensco ADSs, you may revoke your
voting instructions or change your vote at any time before the
ADS voting cutoff date.
If your Ensco ADSs are held in an account at a broker or other
nominee and you desire to change your vote, you should contact
your broker or other nominee for instructions on how to do so
before the applicable deadline.
6
If you are a holder of record of Ensco ADSs, you may revoke your
voting instructions or otherwise change your vote by doing one
of the following:
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sending a written notice of revocation to the ADS depositary
c/o Broadridge
that must be received before the ADS voting cutoff time, stating
that you revoke your voting instructions;
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signing and submitting a later-dated voting instruction card
that must be received by the ADS depositary
c/o Broadridge
before the ADS voting cutoff time in accordance with the
instructions included in the voting instruction card; or
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if you voted electronically, by returning to
www.proxyvote.com and changing your vote before the ADS
voting cutoff time. Follow the same voting process, and your
original vote will be superseded.
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If you are a shareholder of record of Ensco Class A
ordinary shares, you can do this in any of the three following
ways:
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by sending a written notice to the Company Secretary of Ensco at
the address set forth below, in time to be received before the
Ensco general meeting, stating that you would like to revoke
your proxy;
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by completing, signing and dating another proxy card and
returning it by mail in time to be received before the Ensco
general meeting, or by submitting a later dated proxy by the
Internet in which case your later-submitted proxy will be
recorded and your earlier proxy revoked; or
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by attending the meeting and voting in person. Simply attending
the Ensco general meeting without voting will not revoke your
proxy or change your vote.
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If you are a stockholder of record of shares of Pride common
stock, you can do this in any of the three following ways:
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by sending a written notice to the Secretary of Pride at the
address set forth on the Pride notice of special meeting, in
time to be received before the Pride special meeting, stating
that you would like to revoke your proxy;
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by completing, signing and dating another proxy card and
returning it by mail in time to be received before the Pride
special meeting, or by submitting a later dated proxy via the
Internet or telephone in which case your later-submitted proxy
will be recorded and your earlier proxy revoked; or
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by attending the meeting and voting in person. Simply attending
the Pride special meeting without voting will not revoke your
proxy or change your vote.
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If your shares of Pride common stock are held in an account at a
broker or other nominee and you desire to change your vote, you
should contact your broker or other nominee for instructions on
how to do so.
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Q:
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What should I do if I receive more than one set of voting
materials for the Ensco general meeting or the Pride special
meeting?
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A:
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You may receive more than one set of materials for the Ensco
general meeting or the Pride special meeting, including multiple
copies of this joint proxy statement/prospectus and multiple
proxy cards or voting instruction cards. For example, if you
hold your Ensco ADSs or Pride common stock in more than one
brokerage account, you will receive a separate proxy or voting
instruction card for each brokerage account in which you hold
Ensco ADSs or Pride common stock. If you are a holder of record
and your Ensco ADSs or Pride common stock are registered in more
than one name, you will receive more than one proxy or voting
instruction card. Please complete, sign, date and return each
proxy card and voting instruction card that you receive.
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Q:
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What happens if I hold both Ensco ADSs and shares of Pride
common stock?
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A:
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You will receive separate proxy or voting instruction cards for
each company and must complete, sign and date each proxy or
voting instruction card and return each proxy or voting
instruction card in the appropriate postage-paid envelope or, if
available, by submitting a proxy or voting instructions by
telephone or through the Internet for each company.
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Q:
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Who can answer my questions?
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A:
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If you have any questions about the merger or how to submit your
proxy or voting instructions, or if you need additional copies
of this joint proxy statement/prospectus, the enclosed proxy or
voting instructions card, you should contact:
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If you are an Ensco shareholder:
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If you are a Pride stockholder:
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Proxy Solicitor:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, New York 10005
Shareholders Call Toll-Free at:
1-800-859-8509
Banks and Brokers Call Collect at:
1-212-269-5550
Email: ensco@dfking.com
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Proxy Solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, NY 10022
Shareholders Call Toll-Free at:
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The following is a summary that highlights information
contained in this joint proxy statement/prospectus. This summary
may not contain all of the information that is important to you.
For a more complete description of the merger agreement and the
transactions contemplated by the merger agreement, Ensco and
Pride encourage you to carefully read this entire joint proxy
statement/prospectus, including the attached annexes. In
addition, Ensco and Pride encourage you to read the information
incorporated by reference into this joint proxy
statement/prospectus, which includes important business and
financial information about Ensco and Pride that has been filed
with the SEC. You may obtain the information incorporated by
reference into this joint proxy statement/prospectus without
charge by following the instructions in the section entitled
Where You Can Find More Information; Incorporation by
Reference.
The
Companies
Ensco
plc
Ensco plc is an English public limited company formed in 2009 in
connection with its redomestication from Delaware to England.
Its predecessor, ENSCO International Incorporated, was formed as
a Texas corporation in 1975 and reincorporated in Delaware in
1987. In connection with its redomestication to England, each
issued and outstanding share of common stock of ENSCO
International Incorporated was converted into the right to
receive one American depositary share (ADS), each
representing one Class A ordinary share, nominal value
$0.10 per share, of Ensco plc.
Ensco is a global offshore contract drilling company. As of
March 15, 2011, its offshore rig fleet included 40 jackup
rigs, five ultra-deepwater semisubmersible rigs and one barge
rig. Additionally, it has three ultra-deepwater semisubmersible
rigs under construction and recently announced that it has
ordered the construction of two new ultra-premium, harsh
environment jackup rigs. Ensco is one of the leading providers
of offshore contract drilling services to the international oil
and gas industry. Its customers include major integrated oil and
natural gas companies, state-owned national oil companies and
independent oil and natural gas companies. Its operations are
concentrated in the geographic regions of Asia Pacific (which
includes Asia, the Middle East and Australia), Europe and
Africa, and North and South America.
Enscos ADSs are listed on the NYSE and trade under the
symbol ESV.
Enscos registered office and principal executive offices
are located at 6 Chesterfield Gardens, London, England W1J 5BQ
and its telephone number is +44 (0) 20 7659 4660.
ENSCO Ventures LLC, referred to as Merger Sub, is a Delaware
limited liability company and a wholly owned subsidiary of Ensco
which was formed for the purpose of entering into the merger
agreement. ENSCO International Incorporated, referred to as
Delaware Sub, is Enscos predecessor and a wholly owned
subsidiary of Ensco, which entered into the merger agreement for
the purpose of agreeing to pay certain termination fees upon the
occurrence of specified events in order to induce Pride to enter
into the merger agreement for the benefit of Ensco.
Pride
International, Inc.
Pride International, Inc. is a Delaware corporation formed in
2001 in connection with its reincorporation from Louisiana to
Delaware as part of its acquisition of Marine Drilling
Companies, Inc. Its predecessor, Pride Petroleum Services, Inc.,
was originally formed as a Louisiana corporation.
Pride operates a fleet of 26 mobile offshore drilling units,
consisting primarily of floating rigs (semisubmersibles and
drillships) that address deepwater drilling programs around the
world. Pride has one of the youngest and most technologically
advanced deepwater drilling fleets in the offshore industry,
with five drillships, including three delivered since the
beginning of 2010, six semisubmersible rigs and two managed,
third party-owned deepwater rigs. Two additional Pride deepwater
drillships are currently under construction with expected
deliveries in 2011 and 2013. Prides fleet also includes
six other semisubmersible rigs and seven
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jackup rigs. Prides floating rig fleet operates primarily
offshore Brazil and West Africa where the company has a
long-standing presence.
Pride common stock is listed on the NYSE and trades under the
symbol PDE.
Prides executive offices are located at 5847
San Felipe, Suite 3300, Houston, Texas 77057. Its
telephone number at that address is
(713) 789-1400.
The
Merger (page 48)
Ensco and Pride have entered into the merger agreement pursuant
to which Merger Sub will merge with and into Pride, with Pride
surviving the merger as a wholly owned subsidiary of Ensco. As a
result of the merger, each share of Pride common stock (other
than dissenting shares as described in Appraisal
Rights, shares held by Ensco, Pride or their respective
subsidiaries and shares deemed to be held by or on behalf of
certain U.K. residents as described in The Merger
Agreement Merger Consideration Effect on
Securities) will be converted into the right to receive
0.4778 Ensco ADSs and $15.60 in cash, as described under
The Merger Agreement Merger
Consideration. On March 31, 2011, Ensco had
outstanding approximately 143 million ADSs. Immediately
following the completion of the merger, Ensco expects to have
approximately 231 million ADSs outstanding based on the
number of outstanding shares of Pride common stock. Ensco
shareholders and Pride stockholders are expected to hold
approximately 62% and 38%, respectively, of the Ensco ADSs
outstanding immediately after the merger.
Based on the closing price of $54.41 per Ensco ADS on
February 4, 2011, the last trading day before the public
announcement of the execution and delivery of the merger
agreement by Ensco and Pride, and $58.27 per Ensco ADS on
April 21, 2011, the latest practicable trading day before
the date of this joint proxy statement/prospectus, the aggregate
value of the merger consideration to be received by Pride
stockholders was approximately $7.6 billion and
$8.0 billion, respectively. The $8.0 billion consists
of approximately $2.9 billion to be paid in cash and
approximately $5.1 billion to be paid through the issuance
and delivery of approximately 87 million Ensco ADSs based
on the number of outstanding shares of Pride common stock. The
market value of the merger consideration ultimately received by
Pride stockholders will depend on the closing price of Ensco
ADSs on the day that the merger is consummated. See Risk
Factors Risk Factors Relating to the
Merger Because the merger consideration is fixed and
the market price of Ensco ADSs will fluctuate, Pride
stockholders cannot be sure of the value of the merger
consideration they will receive.
A composite copy of the merger agreement, as amended, is
attached as Annex A to this joint proxy
statement/prospectus and is incorporated herein by reference.
Ensco and Pride encourage you to read the merger agreement in
its entirety because it is the legal document that governs the
merger.
Recommendation
of the Ensco Board of Directors (page 63)
The Ensco board of directors has unanimously determined that the
execution and delivery of the merger agreement is advisable and
the transactions contemplated by the merger agreement, including
the issuance and delivery of Ensco ADSs pursuant to the merger
agreement, are in the best interests of the Ensco shareholders,
and has unanimously approved the merger agreement and the
transactions contemplated by the merger agreement. The Ensco
board of directors unanimously recommends that Ensco
shareholders vote FOR the proposal to approve the
issuance and delivery of Ensco ADSs pursuant to the merger
agreement.
Recommendation
of the Pride Board of Directors (page 66)
The Pride board of directors has unanimously determined that the
merger agreement and the transactions contemplated by the merger
agreement are advisable and in the best interests of Pride and
its stockholders, and has unanimously approved the merger
agreement and the transactions contemplated by the merger
agreement. The Pride board of directors unanimously
recommends that Pride stockholders vote FOR the
proposal to adopt the merger agreement and FOR any
proposal to adjourn the special meeting if necessary to solicit
additional proxies.
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Stockholders
Entitled to Vote; Vote Required (pages 185 and
188)
Ensco
Ensco shareholders who owned Class A ordinary shares at the
close of business on April 11, 2011, which is referred to
as the Ensco record date, are qualified to receive notice of,
attend and vote at the Ensco general meeting. On the Ensco
record date, there were 143,429,203 Ensco Class A ordinary
shares (represented by Ensco ADSs) outstanding and entitled to
vote at the Ensco general meeting. Citibank, as the ADS
depositary (or its nominee), is the registered holder of all
outstanding Ensco Class A ordinary shares as of the date of
this joint proxy statement/prospectus. If you own Ensco ADSs
representing Class A ordinary shares at the close of
business in New York City on the Ensco record date, whether
directly or in street name, you are entitled to
instruct the ADS depositary on how to vote the Class A
ordinary shares represented by your Ensco ADSs, which for
purposes of this joint proxy statement/prospectus we refer to as
voting your shares.
Voting instructions must be received by the ADS depositary by
11:59 p.m. New York City time on May 15, 2011 for employees
and directors holding shares in Ensco benefit plans, and on
May 18, 2011 for all other holders (the ADS voting
cutoff time).
Each Ensco Class A ordinary share is entitled to one vote
on each matter to be voted on at the Ensco general meeting.
The approval of the issuance and delivery of Ensco ADSs pursuant
to the merger agreement is being proposed as an ordinary
resolution, which means that, assuming a quorum is present, the
resolution will be approved for purposes of the U.K. Companies
Act 2006 if a majority of the votes cast are cast in favor of
the resolution. Further, under NYSE rules, the total amount of
votes cast on the resolution must represent over 50% in interest
of all securities entitled to vote. The chairman of the Ensco
general meeting may also adjourn or postpone the meeting without
notice other than announcement at the meeting for any purpose
including to solicit additional proxies or voting instructions.
At the Ensco general meeting, holders of a majority of the
outstanding Ensco Class A ordinary shares entitled to vote
must be present, either in person or represented by proxy, to
constitute a quorum. Abstentions and broker non-votes will be
counted in determining whether a quorum is present at the Ensco
general meeting. However, because abstentions and broker
non-votes are not considered votes cast under English law, they
will not have any effect on the outcome of the vote with respect
to the proposal to approve the issuance and delivery of Ensco
ADSs pursuant to the merger agreement (assuming a quorum is
present). Under NYSE rules, abstentions, but not broker
non-votes, will be considered as votes cast for determining
whether a sufficient number of votes have been cast on the
resolution.
An abstention occurs when a stockholder abstains from voting
(either in person or by proxy) on one or more of the proposals.
Broker non-votes occur when a bank, broker or other nominee
returns a proxy but does not have authority to vote on a
particular proposal.
Your vote is very important. You are encouraged to submit your
proxy or voting instructions as soon as possible and in any
event before the ADS voting cutoff time. If the ADS depositary
timely receives voting instructions that fail to specify the
manner in which the ADS depositary is to vote the Class A
ordinary shares represented by Ensco ADSs, the ADS depositary
will vote in favor of the items set forth in such voting
instructions. Class A ordinary shares represented by Ensco
ADSs for which no timely voting instructions are received by the
ADS depositary will not be voted.
Pride
Pride stockholders who owned shares of Pride common stock at the
close of business on April 11, 2011, which is referred to
as the Pride record date, are entitled to vote at the Pride
special meeting. On the Pride record date, there were
177,961,390 shares of Pride common stock outstanding and
entitled to vote at the Pride special meeting, held by
approximately 1,000 holders of record. Pride stockholders may
cast one vote for each share of Pride common stock owned on the
Pride record date.
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At the Pride special meeting, holders of a majority of the total
number of outstanding shares of Pride common stock entitled to
vote must be present, either in person or represented by proxy,
to constitute a quorum. Abstentions and broker non-votes will be
counted in determining whether a quorum is present at the Pride
special meeting.
The adoption of the merger agreement requires the affirmative
vote of the holders of at least a majority of the outstanding
shares of Pride common stock entitled to vote. The approval of
any proposal to adjourn the special meeting if necessary to
solicit additional proxies requires the affirmative vote of the
holders of a majority of the shares present in person or
represented by proxy at the special meeting and entitled to vote
on the adjournment. Abstentions and broker non-votes will be
considered as present at the meeting for purposes of determining
a quorum and will have the same effect as votes cast
AGAINST the adoption of the merger agreement.
Abstentions will have the same effect as votes cast
AGAINST approval of any proposal to adjourn the
special meeting if necessary to solicit additional proxies.
Broker non-votes will have no effect on approval of that
proposal.
An abstention occurs when a stockholder abstains from voting
(either in person or by proxy) on one or more of the proposals.
A broker non-vote occurs when a bank, broker or other nominee
returns a proxy but does not have authority to vote on a
particular proposal.
Your vote is very important. You are encouraged to submit your
proxy or voting instructions as soon as possible. If you do not
indicate how your shares of Pride common stock should be voted
on a matter, the shares of Pride common stock represented by
your properly completed proxy will be voted as the Pride board
of directors recommends and therefore FOR the
adoption of the merger agreement and FOR the
approval of any proposal to adjourn the special meeting if
necessary to solicit additional proxies.
Opinions
of Financial Advisors (pages 70 and 80)
Opinion
of Deutsche Bank Securities Inc.
On February 5, 2011, Deutsche Bank Securities Inc.,
referred to as Deutsche Bank, financial advisor to Ensco,
delivered to the board of directors of Ensco an oral opinion,
subsequently confirmed in writing on February 6, 2011, to
the effect that, as of the date of such opinion, and based upon
and subject to the assumptions, limitations, qualifications and
conditions described in Deutsche Banks opinion, the merger
consideration comprised of $15.60 in cash and 0.4778 Ensco ADSs,
each whole ADS representing one Ensco Class A ordinary
share, to be paid in respect of each share of Pride common stock
in the merger was fair, from a financial point of view, to Ensco.
The full text of Deutsche Banks written opinion, dated
February 6, 2011, which sets forth, among other matters,
the assumptions made, matters considered, and limitations,
qualifications and conditions of the review undertaken by
Deutsche Bank in connection with the opinion, is attached as
Annex B to this proxy statement/prospectus and is
incorporated herein by reference. The summary of the Deutsche
Bank opinion set forth in this proxy statement/prospectus is
qualified in its entirety by reference to the full text of the
opinion. Deutsche Banks opinion was addressed to, and for
the use and benefit of, the Ensco board of directors. The
Deutsche Bank opinion is not a recommendation as to how any
holder of Ensco ADSs or Ensco Class A ordinary shares
should vote with respect to the merger. Deutsche Banks
opinion is limited to the fairness, from a financial point of
view, of the merger consideration to be paid in respect of each
share of Pride common stock and does not address any other
aspect of the merger. Deutsche Bank was not asked to, and
Deutsche Banks opinion did not, address the fairness of
the merger to the holders of any class of securities, creditors
or other constituencies of Ensco. Deutsche Bank expressed no
opinion as to the merits of the underlying decision by Ensco to
engage in the merger or the relative merits of the merger as
compared to any alternative transactions or business strategies.
Nor did Deutsche Bank express an opinion as to how any holder of
Enscos ADSs or Ensco Class A ordinary shares should
vote with respect to the merger. Deutsche Bank did not express
any view or opinion as to the fairness, financial or otherwise,
of the amount or nature of any compensation payable to or to be
received by any of the officers, directors, or employees of any
party to the merger, or any class of such persons, in connection
with the merger relative to the merger consideration.
Deutsche Bank
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expects to receive a transaction fee of $15 million, of
which $3.75 million became payable upon the delivery of
Deutsche Banks opinion (or would have become payable upon
Deutsche Bank advising Ensco that it was unable to render an
opinion) and the remainder is contingent upon consummation of
the merger. Ensco may also pay Deutsche Bank an additional
discretionary fee of up to $5 million, determined in
Enscos sole discretion, to compensate Deutsche Bank based
on the complexity of the transaction. For a more complete
description, see The Merger Opinion of
Deutsche Bank Securities Inc. See also Annex B to
this joint proxy statement/prospectus.
Opinion
of Goldman, Sachs & Co.
At the meeting of the board of directors of Pride on
February 6, 2011, Goldman, Sachs & Co, referred
to as Goldman Sachs, delivered its oral opinion, subsequently
confirmed in writing, that, as of February 6, 2011 and
based upon and subject to the limitations and assumptions set
forth therein, the per share consideration of $15.60 in cash and
0.4778 Ensco ADSs, each duly and validly issued against the
deposit of an equal number of Ensco Class A ordinary
shares, to be paid to the holders (other than Ensco and its
affiliates) of the outstanding shares of Pride common stock
pursuant to the merger agreement, dated February 6, 2011, was
fair from a financial point of view to such holders. The full
text of the written opinion of Goldman Sachs, dated
February 6, 2011, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C to this joint proxy statement/prospectus. Goldman
Sachs provided its advisory services and its opinion for the
information and assistance of the board of directors of Pride in
connection with its consideration of the merger. The Goldman
Sachs opinion does not constitute a recommendation as to how any
holder of Pride common stock should vote with respect to the
merger or any other matter. Goldman Sachs expects to receive
a transaction fee currently estimated to be approximately
$42 million (which is based on the closing price of Ensco
ADSs and Pride net debt as of March 31, 2011), of which
$5 million became payable upon execution of the engagement
letter and the remainder is contingent upon consummation of the
merger. For a more complete description, see The
Merger Opinion of Goldman, Sachs &
Co. See also Annex C to this joint proxy
statement/prospectus.
Directors
and Executive Officers of Ensco After the Merger
(page 94)
The directors and executive officers of Ensco prior to the
merger will continue as the directors and executive officers of
Ensco immediately after the merger, except that the merger
agreement provides that Ensco shall take such actions as are
necessary to expand the size of the Ensco board of directors and
to appoint two non-employee members of the current Pride board
of directors designated by Pride and reasonably acceptable to
Ensco to fill such vacancies effective as of the effective time
of the merger. Pride has not yet determined which of its current
directors will be its designees on the Ensco board of directors
as of the date of this joint proxy statement/prospectus. Upon
determination of such designees by Pride, the Ensco Nominating,
Governance and Compensation Committee will review the
independence and qualifications of such candidates in accordance
with Enscos Corporate Governance Policy and make a
recommendation to the Ensco board of directors. Assuming a
favorable recommendation, the Ensco board of directors will
increase the size of the board by two and appoint the Pride
designees to the newly-created vacancies in such classes of
directors as the Ensco board may determine and provide that such
directors shall stand for election for the remaining portion of
the term of office for such classes at the next annual general
meeting of shareholders for which a notice of the meeting has
not been sent at the time of appointment.
In addition, it is currently expected that certain executive
officers of Pride will become members of the Ensco executive
management team following the merger. As of the date of this
joint proxy statement/prospectus, it has not been determined
which executive officers of Pride will join the Ensco executive
management team, or what positions such executive officers will
hold, following the merger.
Ownership
of Ensco After the Merger (page 94)
Ensco will issue approximately 87 million Class A
ordinary shares represented by Ensco ADSs pursuant to the merger
based on the number of outstanding shares of Pride common stock.
Immediately following the completion of the merger, Ensco
expects to have approximately 231 million ADSs outstanding.
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Ensco shareholders and Pride stockholders are expected to hold
approximately 62% and 38%, respectively, of the Ensco ADSs
outstanding immediately after the merger based on the same
assumptions. Consequently, Pride stockholders, as a general
matter, will have less influence over the management and
policies of Ensco than they currently exercise over the
management and policies of Pride.
Share
Ownership of Directors and Executive Officers of Ensco
At the close of business on March 31, 2011, the directors
and executive officers of Ensco and their affiliates
beneficially owned and were entitled to vote 1,307,715
Ensco ADSs, collectively representing approximately less than 1%
of the Ensco ADSs outstanding and entitled to vote on that date.
The directors and executive officers of Ensco have each
indicated that they expect to vote FOR the
proposal to approve the issuance and delivery of Ensco ADSs in
the merger.
Share
Ownership of Directors and Executive Officers of Pride
At the close of business on March 31, 2011 the directors
and executive officers of Pride and their affiliates
beneficially owned and were entitled to
vote 744,520 shares of Pride common stock,
collectively representing less than 1% of the shares of Pride
common stock outstanding and entitled to vote on that date. The
directors and executive officers of Pride have each indicated
that they expect to vote FOR the proposal to
adopt the merger agreement and FOR any
proposal to authorize the Pride board of directors, in its
discretion, to adjourn the special meeting if necessary to
solicit additional proxies.
Interests
of the Pride Directors and Executive Officers in the Merger
(page 90)
In considering the recommendation of the Pride board of
directors with respect to the merger, Pride stockholders should
be aware that the executive officers and directors of Pride have
certain interests in the merger that may be different from, or
in addition to, the interests of Pride stockholders generally.
The Pride board of directors was aware of these interests and
considered them, among other matters, in approving the merger
agreement and making its recommendation that the Pride
stockholders adopt the merger agreement.
These interests include certain Pride executive officers being
entitled to receive specified severance and other benefits,
following the effective time of the merger, including the
following:
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Prides long-term incentive plans and applicable employment
and award agreements generally provide for vesting of
outstanding equity awards upon consummation of the merger;
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Prides executive officer employment agreements provide
severance and other benefits in the case of qualifying
terminations of employment in connection with or following the
merger;
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Prides annual incentive plan provides for a payment of the
pro-rated maximum bonus for the year in which the merger is
completed; and
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certain of Prides executive officers participate in the
Pride Supplemental Executive Retirement Plan, which provides for
a lump sum cash payment in the event of termination of
employment within two years after a change in control, including
the merger; further, upon termination in certain circumstances,
the executive and his spouse are entitled to retiree medical and
dental benefits.
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The merger agreement provides that Ensco will take such actions
as are necessary to expand the size of the Ensco board of
directors and to appoint two current non-employee members of the
Pride board of directors designated by Pride and reasonably
acceptable to Ensco to fill such vacancies effective as of the
effective time of the merger. Such Pride designees will stand
for election for the remaining portion of the term of office for
their respective classes at the next annual general meeting of
the shareholders of Ensco for which a notice of the meeting has
not been sent at the time of the appointment. Pride has not yet
determined which of its current directors will be its designees
on the Ensco board of directors as of the date of this joint
proxy statement/prospectus.
The merger agreement also provides for indemnification in favor
of the current and former directors and officers of Pride and
its subsidiaries and for the purchase of directors and
officers liability insurance and
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fiduciary liability insurance tail policies with respect to
matters existing or occurring at or prior to the effective time
of the merger.
Listing
of Ensco ADSs; Delisting and Deregistration of Shares of Pride
Common Stock (page 104)
Approval of the listing on the NYSE of the Ensco ADSs issuable
pursuant to the merger agreement, subject to official notice of
issuance, is a condition to each partys obligation to
complete the merger. Ensco has agreed to cause the Ensco ADSs
issuable pursuant to the merger agreement to be approved for
listing on the NYSE at or prior to the effective time of the
merger, subject to official notice of issuance. If the merger is
completed, shares of Pride common stock will be delisted from
the NYSE and deregistered under the Exchange Act.
Appraisal
Rights in the Merger (page 130)
Holders of Pride common stock who do not vote in favor of the
merger will be entitled to exercise appraisal rights under the
General Corporation Law of the State of Delaware, or DGCL, in
connection with the merger, and, if such rights are properly
demanded and perfected and not withdrawn or lost, such
stockholders will be entitled to obtain payment for the
judicially-determined fair value of their shares of Pride common
stock if the merger is completed. See Appraisal
Rights.
Conditions
to the Completion of the Merger (page 114)
A number of conditions must be satisfied or, where legally
permissible, waived before the proposed merger can be
consummated. These include, among others:
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the approval by Ensco shareholders of the issuance and delivery
of the Ensco ADSs pursuant to the merger agreement;
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the adoption of the merger agreement by Pride stockholders;
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the expiration or termination of the waiting period (and any
extension thereof) applicable to the consummation of the merger
under the HSR Act (which was satisfied on March 30, 2011);
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the absence of (a) any pending or threatened in writing
claim, proceeding or action by an agency of the government of
the United States seeking to restrain, prohibit or rescind any
transactions contemplated by the merger agreement as an actual
or threatened violation of any antitrust law or seeking to
penalize a party for completing any such transaction and
(b) any final or preliminary administrative order that
remains in effect denying approval of or prohibiting the merger
issued by a governmental entity with jurisdiction to enforce any
applicable
non-U.S. antitrust
laws of a specified jurisdiction, in each case which is
reasonably likely to require any competition actions, which are
described in The Merger Agreement Additional
Agreements Efforts Related to Consents and Approvals
of Governmental Entities and Third Parties;
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the absence of any decree, order or injunction of a U.S. or
non-U.S. court
of competent jurisdiction prohibiting the merger;
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the effectiveness of the
Form S-4
registration statement, of which this joint proxy
statement/prospectus is a part, the effectiveness of a
Form F-6
registration statement with respect to the Ensco ADSs, the
absence of any stop order suspending the effectiveness of the
Form S-4
or
Form F-6,
and the U.K. Listing Authority having approved a prospectus for
residents of the United Kingdom, if such prospectus is required;
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the approval for listing on the NYSE of the Ensco ADSs to be
delivered to the Pride stockholders pursuant to the merger
agreement, subject to official notice of issuance; and
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the performance in all material respects of the covenants and
agreements in the merger agreement by Ensco, Merger Sub,
Delaware Sub and Pride, and the accuracy of the representations
and warranties in
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the merger agreement of Ensco, Merger Sub, Delaware Sub and
Pride, subject to the material adverse effect standard described
below, with specified exceptions.
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For more information regarding the conditions to the
consummation of the merger and a complete list of such
conditions, see The Merger Agreement
Conditions to the Completion of the Merger.
Regulatory
Approvals Required for the Merger (page 94)
The merger is subject to review by the Antitrust Division of the
U.S. Department of Justice, which is referred to as the
Antitrust Division, under the HSR Act. Under the HSR Act, Ensco
and Pride are required to make premerger notification filings
and to await the expiration or early termination of the
statutory waiting period (and any extension of the waiting
period) prior to completing the merger. On February 28,
2011, Ensco and Pride each filed a Premerger Notification and
Report Form with the Antitrust Division and the Federal Trade
Commission, which is referred to as the FTC. On March 30,
2011, Ensco and Pride received notice from the Antitrust
Division and the FTC granting early termination of the waiting
period under the HSR Act.
The merger is also subject to antitrust review by government
authorities in Brazil, which does not require governmental
approval prior to the closing of the transaction.
No
Solicitation and Change in Recommendation
(page 118)
Under the merger agreement, Pride has agreed not to (and to not
permit any of its officers, directors, employees, financial
advisors, attorneys or other authorized representatives to)
solicit, initiate, knowingly and intentionally encourage or
facilitate, or negotiate, any competing acquisition proposal of
Pride, provide information regarding Pride to a third party in
connection with a competing acquisition proposal or release any
such third party from any confidentiality or standstill
agreement. However, before the adoption of the merger agreement
by the Pride stockholders, Pride may, under certain
circumstances, engage in negotiations with and provide
information regarding Pride to a third party making an
unsolicited, written acquisition proposal. Under the merger
agreement, Pride is required to notify Ensco if it receives any
competing acquisition proposal or request for information in
connection with such a proposal.
Further, under the merger agreement, Ensco has agreed not to
(and to not permit any of its officers, directors, employees,
financial advisors, attorneys or other authorized
representatives to) solicit, initiate, knowingly and
intentionally encourage or facilitate, or negotiate, any
competing acquisition proposal of Ensco, provide information
regarding Ensco to a third party in connection with a competing
acquisition proposal or release any such third party from any
confidentiality or standstill agreement. However, before the
approval of the issuance and delivery of Ensco ADSs pursuant to
the merger agreement by the Ensco shareholders, Ensco may, under
certain circumstances, engage in negotiations with and provide
information regarding Ensco to a third party making an
unsolicited, written acquisition proposal. Under the merger
agreement, Ensco is required to notify Pride if it receives any
competing acquisition proposal or request for information in
connection with such a proposal.
Before receipt of the respective shareholder and stockholder
approvals, after two business days prior notice to the
other party and consideration of any proposed adjustments to the
terms and conditions of the merger agreement, the board of
directors of either Pride or Ensco may withdraw its
recommendation or declaration of advisability of the merger
agreement if a majority of the board of directors of such
company determines in good faith that a failure to change its
recommendation would reasonably be expected to be inconsistent
with their fiduciary duties.
Termination
of the Merger Agreement (page 126)
In general, the merger agreement may be terminated at any time
prior to the effective time of the merger in the following ways:
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|
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|
|
by mutual written consent of Ensco and Pride;
|
16
|
|
|
|
|
by either Ensco or Pride if:
|
|
|
|
|
|
the merger is not completed on or before February 3, 2012
(subject to certain exceptions in connection with the
performance of obligations under the merger agreement);
|
|
|
|
the Pride stockholders fail to adopt the merger agreement at the
Pride special meeting, except that Pride will not be able to
terminate the merger agreement if the failure to obtain
stockholder approval is proximately caused by certain Pride
breaches of the merger agreement; or
|
|
|
|
the Ensco shareholders fail to approve the issuance and delivery
of Ensco ADSs pursuant to the merger agreement at the Ensco
general meeting, except that Ensco will not be able to terminate
the merger agreement if the failure to obtain shareholder
approval is proximately caused by certain Ensco breaches of the
merger agreement;
|
|
|
|
any injunction, order or decree of a court of competent
jurisdiction or a governmental entity prohibiting or permanently
enjoining the closing of the merger is in effect and has become
final and nonappealable, provided that the party seeking to
terminate the merger agreement shall have used its reasonable
best efforts to remove such injunction, order or decree;
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|
|
|
|
Ensco, Delaware Sub or Merger Sub has breached or failed to
perform its representations, warranties, covenants or other
agreements in the merger agreement, which would give rise to the
failure of a condition to Prides obligation to close the
merger and is incapable of being cured prior to the termination
date or is not cured by Ensco within 30 days following
notice from Pride;
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|
prior to the adoption by Pride stockholders of the merger
agreement, the Pride board of directors has received a competing
superior proposal and has not violated the no solicitation
provisions of the merger agreement with respect to such
proposal, and Pride terminates the merger agreement in
accordance with its terms (including considering any adjustments
proposed by Ensco to amend the merger agreement during the three
business day notice period prior to such termination and payment
of the termination fee described below); or
|
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|
the Ensco board of directors withdraws or adversely changes its
recommendation to its shareholders.
|
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|
Pride has breached or failed to perform its representations,
warranties, covenants or other agreements in the merger
agreement, which would give rise to the failure of a condition
to Enscos obligation to close the merger and is incapable
of being cured prior to the termination date or is not cured by
Pride within 30 days following notice from Ensco;
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|
prior to the approval by Ensco shareholders of the issuance and
delivery of Ensco ADSs pursuant to the merger agreement, the
Ensco board of directors has received a competing superior
proposal and Ensco terminates the merger agreement in accordance
with its terms (including considering any adjustments proposed
by Pride to amend the merger agreement during the three business
day notice period prior to such termination and payment of the
termination fee described below); or
|
|
|
|
the Pride board of directors withdraws or adversely changes its
recommendation to its stockholders.
|
Termination
Fees (page 128)
Under the merger agreement, Delaware Sub may be required to pay
to Pride a termination fee of $260 million (less any fee
previously paid by Delaware Sub) if the merger agreement is
terminated under certain circumstances, and Pride may be
required to pay to Ensco a termination fee of $260 million
(less any fee previously paid by Pride) if the merger agreement
is terminated under certain circumstances. In addition, the
merger agreement requires each of Delaware Sub and Pride to pay
a fee of $50 million, in certain circumstances where the
merger agreement is terminated by a party and the
$260 million termination fee is not then payable to the
other party, such as a failure to obtain shareholder approval in
certain circumstances.
17
Material
U.S. Federal Income Tax Consequences of the Merger
(page 95)
None of Ensco, the Ensco shareholders or Pride should be subject
to the U.S. federal income tax as a result of the merger.
Therefore, the discussion herein of the material
U.S. federal income tax consequences of the merger is
limited to the U.S. federal income tax consequences of the
merger to the Pride stockholders.
For U.S. federal income tax purposes, the conversion of
each issued and outstanding share of the Pride common stock into
the right to receive Ensco ADSs and cash upon the consummation
of the merger generally will be treated as an exchange of such
share for the Ensco ADSs and cash. Therefore, the discussion of
the material U.S. federal income tax consequences of the
merger contained herein refers to an exchange rather
than a conversion in describing the
U.S. federal income tax consequences of the merger.
U.S.
Holders
The exchange of shares of Pride common stock for Ensco ADSs and
cash generally will be a taxable transaction for
U.S. federal income tax purposes. A U.S. holder (as
defined in The Merger Material
U.S. Federal Income Tax Consequences of the Merger)
exchanging shares of Pride common stock in the merger will
generally recognize gain or loss in an amount equal to the
difference, if any, between (i) the sum of the value of the
Ensco ADSs and cash received in the merger, including any cash
received in lieu of fractional Ensco ADSs, and (ii) such
holders adjusted tax basis in its Pride common stock
exchanged therefor. Generally, such gain or loss will be capital
gain or capital loss, respectively.
Non-U.S.
Holders
Subject to certain exceptions, which are described below in
The Merger Material U.S. Federal Income
Tax Consequences of the Merger Tax Consequences of
the Merger to Pride Stockholders, a
non-U.S. holder
(as defined below) generally will not be subject to
U.S. federal income tax on gain realized, if any, on the
exchange of shares of Pride common stock for Ensco ADSs and
cash, including cash received in lieu of fractional Ensco ADSs.
Material
U.K. Tax Consequences of the Merger (page 100)
Taxation
of U.K. Pride Stockholders
Generally, U.K. resident Pride stockholders may realize a
chargeable gain or an allowable loss for U.K. corporation
tax or capital gains tax purposes (as the case may be) as a
result of the merger, which will be treated as a disposal of
their common stock in Pride for a consideration equal to the
cash and the market value of the Ensco ADSs received by such
Pride stockholders at that time.
Taxation
of Non-U.K. Pride Stockholders
Generally, non-U.K. resident Pride stockholders should not be
subject to either U.K. corporation tax or capital gains tax on a
chargeable gain or allowable loss arising on a disposal of their
common stock in Pride as a result of the merger, unless they
carry on a trade in the U.K. through a permanent establishment
in the U.K. or through a branch or agency in the U.K. for the
purposes of U.K. corporation tax or capital gains tax
respectively, and the stock is attributable to that permanent
establishment, branch or agency. In those circumstances, the
non-U.K. resident Pride stockholders may realize a chargeable
gain or an allowable loss for U.K. corporation tax or capital
gains tax purposes (as the case may be) as a result of the
merger, which will be treated as giving rise to a disposal of
their common stock in Pride for a consideration equal to the
cash and the market value of the Ensco ADSs received by such
Pride stockholders at that time.
No stamp duty or stamp duty reserve tax will be payable by Pride
stockholders as a consequence of the merger.
18
Accounting
Treatment (page 104)
Ensco will account for the merger using the acquisition method
of accounting under U.S. generally accepted accounting
principles, which are referred to as GAAP. As the accounting
acquirer, Enscos assets and liabilities will remain at
historical amounts.
In applying purchase accounting, Ensco will record the assets
and liabilities of Pride at their estimated fair values at the
closing date of the merger with the excess of the purchase price
over the sum of such fair values recorded as goodwill. The
purchase price is calculated using the estimated number of Ensco
ADSs to be issued in the merger using the market price on the
closing date of the merger, plus estimated cash consideration to
be paid to Pride stockholders based on the number of shares of
Pride common stock outstanding at the time of the merger and
cash consideration of $15.60 per share and plus the estimated
fair value of Pride stock options to be assumed by Ensco.
Payment
of Dividends
Ensco
Ensco has paid regular quarterly cash dividends of $0.35 per
share since the second quarter of 2010. Under the terms of the
merger agreement, during the period before the closing of the
merger, Ensco is prohibited from paying any dividends other than
its regular quarterly dividends.
Pride
Pride does not currently pay quarterly cash dividends. Under the
terms of the merger agreement, during the period before the
closing of the merger, Pride is prohibited from paying any
dividends.
Description
of Debt Financing (page 134)
Enscos obligation to complete the merger is not
conditioned upon its obtaining financing. Ensco anticipates that
approximately $2.9 billion will be required to pay the
aggregate cash portion of the merger consideration to the Pride
stockholders. On February 6, 2011, Ensco entered into a
bridge commitment letter with Deutsche Bank AG Cayman Islands
Branch, or DBCI, Deutsche Bank Securities Inc. and Citigroup
Global Markets Inc., or Citi. Pursuant to the commitment letter,
DBCI and Citi committed to provide a $2.75 billion
unsecured bridge term loan facility to fund a portion of the
cash consideration in the merger. On March 17, 2011, in
connection with its financing of the merger, Ensco issued two
series of senior notes in a public offering: $1.0 billion
aggregate principal amount of 3.25% senior notes due 2016
and $1.5 billion aggregate principal amount of
4.70% senior notes due 2021. Due to the issuance of the
senior notes and the availability of cash on hand, which totaled
approximately $3.4 billion as of March 31, 2011, Ensco
terminated the bridge commitment letter on March 23, 2011.
Ensco may seek additional sources of debt financing in the
future to fund future operating and capital expenditures and for
general corporate purposes. There can be no assurance that any
additional sources of debt financing may be completed on
commercially acceptable terms if at all.
Comparison
of Rights of Pride Stockholders and Ensco Shareholders
(page 160)
As a result of the merger, holders of Pride common stock will
become holders of Ensco ADSs. Following the merger, Pride
stockholders will have different rights as holders of Ensco ADSs
than as stockholders of Pride due to the differences between
English law and the DGCL and the different provisions of the
governing documents of Pride and Ensco.
Litigation
Relating to the Merger (page 105)
Following the announcement of the merger agreement, a number of
putative stockholder class action complaints or petitions were
filed against various combinations of Pride, Prides
directors, Ensco, Delaware Sub, and Merger Sub in the Delaware
Court of Chancery, the U.S. District Court for the Southern
District of Texas, and in the state courts of Harris County,
Texas. These lawsuits challenge the proposed merger and
19
generally allege, among other matters that the individual
members of the Pride board of directors have breached their
fiduciary duties owed to Prides stockholders by approving
the proposed merger, failing to take steps to maximize value to
Prides stockholders and failing to disclose material
information concerning the proposed merger in the registration
statement on
Form S-4;
that Pride, Ensco, Delaware Sub and Merger Sub aided and abetted
such breaches of fiduciary duties; and that the merger agreement
improperly favors Ensco and unduly restricts Prides
ability to negotiate with rival bidders. These lawsuits
generally seek, among other remedies, compensatory damages,
declaratory and injunctive relief concerning the alleged
fiduciary breaches, and injunctive relief prohibiting the
defendants from consummating the merger. In addition, the
plaintiffs in a derivative class action lawsuit related to
Prides previously disclosed FCPA investigation filed an
amendment to their petition adding claims related to the merger.
In the amendment, the plaintiffs contend that the proposed
merger was motivated by a desire to extinguish Prides
alleged liability related to the derivative action, as well as
other claims similar to those described above relating to the
merger. The derivative class action lawsuit, as amended, has
been consolidated with the other lawsuits in the state courts of
Harris County, Texas.
Pride, Prides directors, Ensco, Delaware Sub and Merger
Sub believe that the claims stated in the complaints relating to
the merger are all without merit, and they intend to defend such
actions vigorously.
20
Selected
Historical Financial Data of Ensco
The following tables show Enscos selected historical
consolidated financial data as of and for each of the fiscal
years ended December 31, 2010, 2009, 2008, 2007 and 2006
and were derived from Enscos financial statements. You
should read the following data in connection with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements and the related notes thereto set forth in
Enscos Annual Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
herein by reference. See also the pro forma information set
forth elsewhere in this joint proxy statement/prospectus
regarding the proposed merger. Enscos historical results
are not necessarily indicative of results to be expected in
future periods.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions, except per share amounts)
|
|
|
Statement of Income Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,696.8
|
|
|
$
|
1,888.9
|
|
|
$
|
2,242.6
|
|
|
$
|
1,899.3
|
|
|
$
|
1,632.6
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling (exclusive of depreciation)
|
|
|
768.1
|
|
|
|
709.0
|
|
|
|
736.3
|
|
|
|
613.4
|
|
|
|
519.8
|
|
Depreciation
|
|
|
216.3
|
|
|
|
189.5
|
|
|
|
172.6
|
|
|
|
165.5
|
|
|
|
155.0
|
|
General and administrative
|
|
|
86.1
|
|
|
|
64.0
|
|
|
|
53.8
|
|
|
|
59.5
|
|
|
|
44.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
626.3
|
|
|
|
926.4
|
|
|
|
1,279.9
|
|
|
|
1,060.9
|
|
|
|
913.2
|
|
Other income (expense), net
|
|
|
18.2
|
|
|
|
8.8
|
|
|
|
(4.2
|
)
|
|
|
37.8
|
|
|
|
(5.9
|
)
|
Provision for income taxes
|
|
|
96.0
|
|
|
|
180.0
|
|
|
|
222.4
|
|
|
|
235.1
|
|
|
|
225.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
548.5
|
|
|
|
755.2
|
|
|
|
1,053.3
|
|
|
|
863.6
|
|
|
|
681.6
|
|
Income from discontinued operations, net
|
|
|
37.4
|
|
|
|
29.3
|
|
|
|
103.4
|
|
|
|
135.3
|
|
|
|
93.6
|
|
Cumulative effect of accounting change, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
585.9
|
|
|
|
784.5
|
|
|
|
1,156.7
|
|
|
|
998.9
|
|
|
|
775.8
|
|
Net income attributable to noncontrolling interests
|
|
|
(6.4
|
)
|
|
|
(5.1
|
)
|
|
|
(5.9
|
)
|
|
|
(6.9
|
)
|
|
|
(6.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Ensco
|
|
$
|
579.5
|
|
|
$
|
779.4
|
|
|
$
|
1,150.8
|
|
|
$
|
992.0
|
|
|
$
|
769.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
3.80
|
|
|
$
|
5.28
|
|
|
$
|
7.32
|
|
|
$
|
5.80
|
|
|
$
|
4.42
|
|
Discontinued operations
|
|
|
.26
|
|
|
|
.20
|
|
|
|
.72
|
|
|
|
.91
|
|
|
|
.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4.06
|
|
|
$
|
5.48
|
|
|
$
|
8.04
|
|
|
$
|
6.71
|
|
|
$
|
5.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
3.80
|
|
|
$
|
5.28
|
|
|
$
|
7.31
|
|
|
$
|
5.78
|
|
|
$
|
4.40
|
|
Discontinued operations
|
|
|
.26
|
|
|
|
.20
|
|
|
|
.71
|
|
|
|
.91
|
|
|
|
.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4.06
|
|
|
$
|
5.48
|
|
|
$
|
8.02
|
|
|
$
|
6.69
|
|
|
$
|
5.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Ensco shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
572.1
|
|
|
$
|
769.7
|
|
|
$
|
1,138.2
|
|
|
$
|
984.7
|
|
|
$
|
765.4
|
|
Diluted
|
|
$
|
572.1
|
|
|
$
|
769.7
|
|
|
$
|
1,138.2
|
|
|
$
|
984.7
|
|
|
$
|
765.4
|
|
Weighted-average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
141.0
|
|
|
|
140.4
|
|
|
|
141.6
|
|
|
|
146.7
|
|
|
|
152.2
|
|
Diluted
|
|
|
141.0
|
|
|
|
140.5
|
|
|
|
141.9
|
|
|
|
147.2
|
|
|
|
152.8
|
|
Cash dividends per share
|
|
$
|
1.075
|
|
|
$
|
.10
|
|
|
$
|
.10
|
|
|
$
|
.10
|
|
|
$
|
.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
1,087.7
|
|
|
$
|
1,167.9
|
|
|
$
|
973.0
|
|
|
$
|
625.8
|
|
|
$
|
602.3
|
|
Total assets
|
|
|
7,051.5
|
|
|
|
6,747.2
|
|
|
|
5,830.1
|
|
|
|
4,968.8
|
|
|
|
4,334.4
|
|
Long-term debt, net of current portion
|
|
|
240.1
|
|
|
|
257.2
|
|
|
|
274.3
|
|
|
|
291.4
|
|
|
|
308.5
|
|
Ensco shareholders equity
|
|
|
5,959.5
|
|
|
|
5,499.2
|
|
|
|
4,676.9
|
|
|
|
3,752.0
|
|
|
|
3,216.0
|
|
21
Selected
Historical Financial Data of Pride
The selected historical financial data of Pride as of
December 31, 2010 and 2009, and for the years ended
December 31, 2010, 2009 and 2008, were derived from
Prides audited consolidated financial statements included
in Prides Annual Report on
Form 10-K
for the year ended December 31, 2010. The selected
historical financial data of Pride as of December 31, 2008,
2007 and 2006 and for the years ended December 31, 2007 and
2006 were derived from Prides consolidated financial
information included in prior annual reports on
Form 10-K.
Pride has previously reclassified the historical results of
operations of its former Latin America Land and E&P
Services segments, three tender assist rigs, Prides former
Eastern Hemisphere land rig operations, and Prides former
mat-supported jackup business, to discontinued operations. See
Note 2 to Prides audited consolidated financial
statements in Prides Annual Report on
Form 10-K
for the year ended December 31, 2010. The selected
historical financial data of Pride below should be read together
with Managements Discussion and Analysis of
Financial Condition and Results of Operations and
Prides audited consolidated financial statements and
related notes included in Prides Annual Report on
Form 10-K
for the year ended December 31, 2010. See also the pro
forma information set forth elsewhere in this joint proxy
statement/prospectus regarding the proposed merger. Prides
historical results are not necessarily indicative of results to
be expected in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions, except per share amounts)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, excluding reimbursable revenues
|
|
$
|
1,431.5
|
|
|
$
|
1,563.5
|
|
|
$
|
1,664.7
|
|
|
$
|
1,294.2
|
|
|
$
|
885.9
|
|
Reimbursable revenues
|
|
|
28.6
|
|
|
|
30.7
|
|
|
|
37.9
|
|
|
|
34.8
|
|
|
|
22.7
|
|
Operating costs, excluding depreciation and amortization
|
|
|
871.9
|
|
|
|
828.3
|
|
|
|
766.5
|
|
|
|
618.6
|
|
|
|
587.9
|
|
Reimbursable costs
|
|
|
24.9
|
|
|
|
27.3
|
|
|
|
34.9
|
|
|
|
30.8
|
|
|
|
19.4
|
|
Depreciation and amortization
|
|
|
184.0
|
|
|
|
159.0
|
|
|
|
147.3
|
|
|
|
153.1
|
|
|
|
129.4
|
|
General and administrative, excluding depreciation and
amortization
|
|
|
103.9
|
|
|
|
110.5
|
|
|
|
126.7
|
|
|
|
138.1
|
|
|
|
105.8
|
|
Department of Justice and Securities and Exchange Commission
fines
|
|
|
|
|
|
|
56.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss(gain) on sales of assets, net
|
|
|
0.2
|
|
|
|
(0.4
|
)
|
|
|
0.1
|
|
|
|
(29.8
|
)
|
|
|
(27.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
275.2
|
|
|
|
413.3
|
|
|
|
627.1
|
|
|
|
418.2
|
|
|
|
94.0
|
|
Interest expense, net of amounts capitalized
|
|
|
(13.4
|
)
|
|
|
(0.1
|
)
|
|
|
(20.0
|
)
|
|
|
(83.1
|
)
|
|
|
(89.0
|
)
|
Refinancing charges
|
|
|
(16.7
|
)
|
|
|
|
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
2.9
|
|
|
|
3.0
|
|
|
|
16.8
|
|
|
|
14.3
|
|
|
|
4.2
|
|
Other income(expense), net
|
|
|
4.0
|
|
|
|
(4.1
|
)
|
|
|
20.6
|
|
|
|
(2.7
|
)
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
|
252.0
|
|
|
|
412.1
|
|
|
|
642.2
|
|
|
|
346.7
|
|
|
|
11.7
|
|
Income taxes
|
|
|
(8.6
|
)
|
|
|
(71.8
|
)
|
|
|
(133.5
|
)
|
|
|
(86.9
|
)
|
|
|
(13.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of tax
|
|
$
|
243.4
|
|
|
$
|
340.3
|
|
|
$
|
508.7
|
|
|
$
|
259.8
|
|
|
$
|
(1.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.37
|
|
|
$
|
1.93
|
|
|
$
|
2.95
|
|
|
$
|
1.54
|
|
|
$
|
(0.03
|
)
|
Diluted
|
|
$
|
1.37
|
|
|
$
|
1.92
|
|
|
$
|
2.89
|
|
|
$
|
1.51
|
|
|
$
|
(0.03
|
)
|
Shares used in per share calculations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
175.6
|
|
|
|
173.7
|
|
|
|
170.6
|
|
|
|
165.6
|
|
|
|
162.8
|
|
Diluted
|
|
|
176.2
|
|
|
|
174.0
|
|
|
|
175.2
|
|
|
|
178.1
|
|
|
|
162.8
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
463.1
|
|
|
$
|
661.8
|
|
|
$
|
849.6
|
|
|
$
|
888.0
|
|
|
$
|
293.1
|
|
Property and equipment, net
|
|
|
5,961.2
|
|
|
|
4,890.3
|
|
|
|
4,592.9
|
|
|
|
4,021.4
|
|
|
|
4,000.3
|
|
Total assets
|
|
|
6,871.7
|
|
|
|
6,142.9
|
|
|
|
6,069.0
|
|
|
|
5,615.6
|
|
|
|
5,097.6
|
|
Long-term debt, net of current portion
|
|
|
1,833.4
|
|
|
|
1,161.7
|
|
|
|
692.9
|
|
|
|
1,111.9
|
|
|
|
1,280.2
|
|
Stockholders equity
|
|
|
4,516.3
|
|
|
|
4,257.8
|
|
|
|
4,400.0
|
|
|
|
3,474.0
|
|
|
|
2,643.5
|
|
23
Selected
Unaudited Pro Forma Condensed Combined Financial
Information
The following selected unaudited pro forma condensed combined
statement of income data for the year ended December 31,
2010 have been prepared to give effect to the merger as if the
merger had occurred on January 1, 2010. The unaudited pro
forma condensed combined balance sheet data as of
December 31, 2010 have been prepared to give effect to the
merger as if the merger had occurred on December 31, 2010.
The following selected unaudited pro forma condensed combined
financial information is not necessarily indicative of the
results that might have occurred had the merger taken place on
January 1, 2010 for statement of income purposes, and on
December 31, 2010 for balance sheet purposes, and is not
intended to be a projection of future results. Future results
may vary significantly from the results reflected because of
various factors, including those discussed in Risk
Factors. The following selected unaudited pro forma
condensed combined financial information should be read in
conjunction with the Unaudited Pro Forma Condensed
Combined Financial Statements and related notes included
in this joint proxy statement/prospectus on page 135.
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31, 2010
|
|
|
(In millions,
|
|
|
except per share data)
|
|
Pro Forma Condensed Combined Statement of Income Data:
|
|
|
|
|
Revenues
|
|
$
|
3,205
|
|
Contract drilling expense
|
|
|
1,665
|
|
Gross profit(1)
|
|
|
1,109
|
|
Income from continuing operations
|
|
|
774
|
|
Diluted earnings per share from continuing operations
|
|
$
|
3.35
|
|
|
|
|
(1) |
|
Represents operating revenues less contract drilling expense and
depreciation expense. |
|
|
|
|
|
|
|
As of
|
|
|
December 31, 2010
|
|
|
(In millions)
|
|
Pro Forma Condensed Combined Balance Sheet Data:
|
|
|
|
|
Working capital
|
|
$
|
982
|
|
Total assets
|
|
|
17,628
|
|
Long-term debt, net of current portion
|
|
|
4,844
|
|
Shareholders equity
|
|
|
10,630
|
|
24
Unaudited
Comparative Per Share Data
The following table summarizes earnings per share data for Ensco
and Pride for and as of the year ended December 31, 2010 on
a historical basis and on a pro forma condensed combined basis
giving effect to the merger. It has been assumed that the merger
was completed on January 1, 2010 for statement of income
purposes, and on December 31, 2010 for the book value per
share data. The following information should be read in
conjunction with the Unaudited Pro Forma Condensed
Combined Financial Statements and related notes included
elsewhere in this joint proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pride
|
|
|
Ensco
|
|
|
|
Pro Forma
|
|
|
|
|
Pro Forma
|
|
|
|
Combined
|
|
|
Historical
|
|
Combined
|
|
Historical
|
|
Equivalent(1)
|
|
Basic earnings per share from continuing operations
|
|
$
|
3.80
|
|
|
$
|
3.36
|
|
|
$
|
1.37
|
|
|
$
|
1.61
|
|
Diluted earnings per share from continuing operations
|
|
|
3.80
|
|
|
|
3.35
|
|
|
|
1.37
|
|
|
|
1.60
|
|
Book value per share at period end(2)
|
|
|
41.68
|
|
|
|
46.42
|
|
|
|
25.69
|
|
|
|
22.18
|
|
Cash dividends declared per share
|
|
|
1.075
|
|
|
|
NA
|
|
|
|
|
|
|
|
NA
|
|
|
|
|
(1) |
|
Pride pro forma combined equivalent data are calculated by
multiplying the combined pro forma amounts by the stock exchange
ratio of 0.4778. This calculation does not take into account the
$15.60 cash portion of the merger consideration. |
|
(2) |
|
Historical book value per share is computed by dividing
shareholders equity by the number of Ensco ADSs or Pride
common shares outstanding. Ensco pro forma book value per share
is computed by dividing pro forma shareholders equity by
the pro forma number of Ensco ADSs outstanding. |
25
Comparative
Ensco and Pride Market Price and Dividend Data
Ensco ADSs are listed on the NYSE under the symbol
ESV. Pride common stock is listed on the NYSE under
the symbol PDE.
The following table presents closing prices for Ensco ADSs and
Pride common stock on February 4, 2011, the last trading
day before the public announcement of the execution of the
merger agreement by Ensco and Pride, and April 21, 2011,
the latest practicable trading day before the date of this joint
proxy statement/prospectus. This table also presents the
equivalent market value per share of Pride common stock on
February 4, 2011 and April 21, 2011, as determined by
multiplying the closing prices of Ensco ADSs on those dates by
the stock exchange ratio of 0.4778, plus $15.60 in cash, without
interest.
Although the stock exchange ratio is fixed, the market prices of
Ensco ADSs and Pride common stock will fluctuate before the
Ensco general meeting and the Pride special meeting and before
the merger is completed and the market value of the merger
consideration ultimately received by Pride stockholders will
depend on the closing price of Ensco ADSs on the day the merger
is consummated. See Risk Factors Risk Factors
Relating to the Merger Because the merger
consideration is fixed and the market price of Ensco ADSs will
fluctuate, Pride stockholders cannot be sure of the value of the
merger consideration they will receive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ensco
|
|
Pride
|
|
Equivalent Per Share of
|
|
|
ADSs
|
|
Common Stock
|
|
Pride Common Stock
|
|
February 4, 2011
|
|
$
|
54.41
|
|
|
$
|
34.39
|
|
|
$
|
41.60
|
|
April 21, 2011
|
|
|
58.27
|
|
|
|
43.19
|
|
|
|
43.44
|
|
The table below sets forth, for the calendar quarters indicated,
the high and low sale prices per Ensco ADS and per share of
Pride common stock on the NYSE. The table also shows the amount
of cash dividends declared on Ensco ADSs and Pride common stock
for the calendar quarters indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ensco Common Stock /ADSs
|
|
|
|
|
|
|
Cash Dividends
|
|
|
High
|
|
Low
|
|
Declared
|
|
Fiscal Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter (through April 21, 2011)
|
|
$
|
59.90
|
|
|
$
|
54.54
|
|
|
$
|
|
(1)
|
First Quarter
|
|
|
59.61
|
|
|
|
49.70
|
|
|
|
0.35
|
|
Fiscal Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
53.93
|
|
|
|
43.08
|
|
|
|
0.35
|
|
Third Quarter
|
|
|
47.28
|
|
|
|
38.91
|
|
|
|
0.35
|
|
Second Quarter
|
|
|
52.32
|
|
|
|
33.33
|
|
|
|
0.35
|
|
First Quarter
|
|
|
46.98
|
|
|
|
37.45
|
|
|
|
0.025
|
|
Fiscal Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
51.30
|
|
|
|
39.73
|
|
|
|
0.025
|
|
Third Quarter
|
|
|
43.14
|
|
|
|
32.26
|
|
|
|
0.025
|
|
Second Quarter
|
|
|
42.47
|
|
|
|
25.05
|
|
|
|
0.025
|
|
First Quarter
|
|
|
32.37
|
|
|
|
22.04
|
|
|
|
0.025
|
|
|
|
|
(1) |
|
As of April 21, 2011, the Ensco board of directors had not
yet declared its regular quarterly cash dividend of $0.35 per
share for the second quarter 2011. |
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pride Common Stock
|
|
|
|
|
|
|
Cash Dividends
|
|
|
High
|
|
Low
|
|
Declared
|
|
Fiscal Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter (through April 21, 2011)
|
|
$
|
44.00
|
|
|
$
|
41.38
|
|
|
$
|
|
|
First Quarter
|
|
|
43.78
|
|
|
|
31.07
|
|
|
|
|
|
Fiscal Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
33.72
|
|
|
|
29.31
|
|
|
|
|
|
Third Quarter
|
|
|
30.45
|
|
|
|
21.62
|
|
|
|
|
|
Second Quarter
|
|
|
33.52
|
|
|
|
21.51
|
|
|
|
|
|
First Quarter
|
|
|
34.36
|
|
|
|
27.12
|
|
|
|
|
|
Fiscal Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
34.67
|
|
|
|
28.31
|
|
|
|
|
|
Third Quarter
|
|
|
32.01
|
|
|
|
22.29
|
|
|
|
|
|
Second Quarter
|
|
|
27.11
|
|
|
|
17.10
|
|
|
|
|
|
First Quarter
|
|
|
20.90
|
|
|
|
14.40
|
|
|
|
|
|
The information in the preceding tables is historical only.
Ensco and Pride recommend that Ensco shareholders and Pride
stockholders obtain current market quotations for Ensco ADSs and
Pride common stock before making any decision regarding the
issuance and delivery of Ensco ADSs pursuant to the merger
agreement or the approval and adoption of the merger agreement,
as applicable.
27
RISK
FACTORS
In addition to the other information included or incorporated
by reference in this joint proxy statement/prospectus, including
the matters addressed under Cautionary Statement
Concerning Forward-Looking Statements, Ensco shareholders
and Pride stockholders should carefully consider the following
risks before deciding how to vote. You also should consider the
other information in this joint proxy statement/prospectus and
the other documents incorporated by reference in this joint
proxy statement/prospectus. See Where You Can Find More
Information; Incorporation by Reference.
Risk
Factors Relating to the Merger
Because
the merger consideration is fixed and the market price of Ensco
ADSs will fluctuate, Pride stockholders cannot be sure of the
value of the merger consideration they will
receive.
Upon consummation of the merger, each outstanding share of Pride
common stock will be converted into the right to receive 0.4778
Ensco ADSs and $15.60 in cash. The number of Ensco ADSs to be
issued pursuant to the merger agreement for each share of Pride
common stock is fixed and will not change to reflect changes in
the market price of Ensco ADSs. The market price of Ensco ADSs
at the time of the merger may vary significantly from the market
prices of Ensco ADSs on the date the merger agreement was
executed, the date of this joint proxy statement/prospectus and
the date on which Ensco shareholders or Pride stockholders vote
on the merger.
In addition, the merger may not be completed until a significant
period of time has passed after the shareholder meetings.
Because the merger consideration will not be adjusted to reflect
any changes in the market value of Ensco ADSs or Pride common
stock, the market value of the Ensco ADSs issued in the merger
and the Pride common stock surrendered in the merger cannot be
determined at this time and may be higher or lower than the
values of those shares on those earlier dates.
Stock price changes may result from a variety of factors that
are beyond the control of Ensco and Pride, including:
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market reaction to the announcement of the merger and market
assessment of the likelihood of the merger being consummated;
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changes in the respective businesses, operations or prospects of
Ensco or Pride, including Enscos and Prides ability
to meet earnings estimates;
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governmental or litigation developments or regulatory
considerations affecting Ensco or Pride in particular or the
offshore drilling industry in general;
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general business, market, industry or economic conditions;
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the worldwide supply/demand balance for oil and gas and the
prevailing commodity price environment;
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the level of drilling and contracting activity of customers of
Ensco and Pride; and
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other factors beyond the control of Ensco and Pride, including
those described elsewhere in this Risk Factors
section.
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Neither party is permitted to walk away from the
merger, terminate the merger agreement or resolicit the vote of
its shareholders or stockholders solely because of changes in
the market price of either partys ADSs or common stock.
Directors
and executive officers of Pride have certain interests that are
different from those of Pride stockholders
generally.
The executive officers of Pride who negotiated the terms of the
merger agreement and the members of the Pride board of directors
who approved the merger agreement have certain interests in the
merger that may
28
be different from, or in addition to, the interests of Pride
stockholders generally. These interests include the following:
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Prides long-term incentive plans and applicable employment
and award agreements generally provide for vesting of
outstanding equity awards upon consummation of the merger;
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Prides executive officer employment agreements provide
severance and other benefits in the case of qualifying
terminations of employment in connection with or following the
merger;
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Prides annual incentive plan provides for a payment of the
pro-rated maximum bonus for the year in which the merger is
completed; and
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certain of Prides executive officers participate in the
Pride Supplemental Executive Retirement Plan, which provides for
a lump sum cash payment in the event of termination of
employment within two years after a change in control, including
the merger; further, upon termination in certain circumstances,
the executive and his spouse are entitled to retiree medical and
dental benefits.
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The merger agreement provides that Ensco will take such actions
as are necessary to expand the size of the Ensco board of
directors and to appoint two current non-employee members of the
Pride board of directors designated by Pride and reasonably
acceptable to Ensco to fill such vacancies effective as of the
effective time of the merger. Such Pride designees will stand
for election for the remaining portion of the term of office for
their respective classes at the next annual general meeting of
the shareholders of Ensco. Pride has not yet determined which of
its current directors will be its designees on the Ensco board
of directors as of the date of this joint proxy
statement/prospectus.
The merger agreement also provides for indemnification in favor
of the current and former directors and officers of Pride and
its subsidiaries and for the purchase of directors and
officers liability insurance and fiduciary liability
insurance tail policies with respect to matters existing or
occurring at or prior to the effective time of the merger.
For a discussion of the interests of directors and executive
officers in the merger, see The Merger
Interests of the Pride Directors and Executive Officers in the
Merger.
The
merger agreement contains provisions that limit each
partys ability to pursue alternatives to the merger, could
discourage a potential competing acquirer of either Pride or
Ensco from making a favorable alternative transaction proposal
and, in certain circumstances, could require Delaware Sub or
Pride to pay a termination fee of $260 million to the
other.
Under the merger agreement, Delaware Sub or Pride may be
required to pay to Pride or Ensco, respectively, a termination
fee of $260 million if the merger agreement is terminated
under certain circumstances. If such a termination fee is
payable, the payment of this fee could have material and adverse
consequences to the financial condition and operations of the
company making such payment.
Under the merger agreement, Ensco and Pride are restricted from
entering into alternative transactions. Unless and until the
merger agreement is terminated, subject to specified exceptions
(which are discussed in more detail in The Merger
Agreement Termination of the Merger
Agreement), both Ensco and Pride are restricted from
soliciting, initiating, knowingly and intentionally encouraging
or facilitating, or negotiating, any inquiry, proposal or offer
for a competing acquisition proposal with any person.
Additionally, under the merger agreement, in the event of a
potential change by the board of directors of either party of
its recommendation with respect to the merger, such party must
provide the other with two business days to propose an
adjustment to the terms and conditions of the merger agreement.
Ensco and Pride may terminate the merger agreement and enter
into an agreement with respect to a superior proposal only if
specified conditions have been satisfied, including compliance
with the no solicitation and termination provisions of the
merger agreement. These provisions could discourage a third
party that may have an interest in acquiring all or a
significant part of Ensco or Pride from considering or proposing
that acquisition, even if such third party were prepared to pay
consideration with a higher per share cash or market value than
the market value proposed to be received or realized in the
merger, or might result in a potential competing acquirer
proposing
29
to pay a lower price than it would otherwise have proposed to
pay because of the added expense of the termination fee that may
become payable in certain circumstances. As a result of these
restrictions, neither Ensco nor Pride may be able to enter into
an agreement with respect to a more favorable alternative
transaction without incurring potentially significant liability
to the other.
Ensco
and Pride may be unable to obtain the regulatory clearances and
approvals required to complete the merger or, in order to do so,
Ensco and Pride may be required to comply with material
restrictions or conditions.
The merger is subject to review by governmental entities under
non-U.S. antitrust
or competition merger control statutes. Ensco and Pride have
also filed the required notices with antitrust and competition
authorities in Brazil. The closing of the merger is also subject
to the condition that there be no pending or threatened claim,
proceeding or action by a U.S. governmental entity seeking
to restrain, prohibit or rescind any transactions contemplated
by the merger agreement as an actual or threatened violation of
antitrust law or seeking to penalize a party for completing any
such transaction, and no final or preliminary administrative
order denying approval or prohibiting the merger issued by
antitrust and competition authorities in Brazil, in each case
that would require either Ensco or Pride to dispose of assets or
limit its freedom of action, except for such dispositions or
limits that, in the reasonable good faith judgment of both Ensco
and Pride, do not and are not reasonably likely to have a
material adverse effect on Ensco or Pride, respectively. Ensco
and Pride can provide no assurance that all required regulatory
approvals will be obtained or that these approvals will not
contain terms, conditions or restrictions, such as the
disposition of assets or limitations on freedom of action, that
would be detrimental to the combined company after the effective
time of the merger.
Additionally, notwithstanding the parties receiving early
termination of the statutory waiting period under the HSR Act,
governmental authorities could seek to block or challenge the
merger as they deem necessary or desirable in the public
interest at any time, including after completion of the merger.
In addition, in some jurisdictions, a competitor, customer or
other third party could initiate a private action under such
jurisdictions antitrust laws challenging or seeking to
enjoin the merger, before or after it is completed. Ensco or
Pride may not prevail and may incur significant costs in
defending or settling any action under the antitrust laws.
Any
delay in completing the merger may substantially reduce the
benefits expected to be obtained from the merger.
In addition to obtaining the required governmental clearances
and approvals, the merger is subject to a number of other
conditions beyond the control of Pride and Ensco that may
prevent, delay or otherwise materially adversely affect its
completion. See The Merger Agreement
Conditions to the Completion of the Merger. Ensco and
Pride cannot predict whether or when the conditions required to
complete the merger will be satisfied. The requirements for
obtaining the required clearances and approvals could delay the
effective time of the merger for a significant period of time or
prevent it from occurring. Any delay in completing the merger
may materially adversely affect the synergies and other benefits
that Ensco and Pride expect to achieve if the merger and the
integration of their respective businesses are completed within
the expected timeframe.
Enscos
future results of operations could be adversely affected if the
goodwill recorded in the merger subsequently requires
impairment.
When Ensco acquires a business, generally goodwill is recorded
as an asset on its balance sheet and is equal to the excess
amount it pays for the business, including the fair value of
liabilities assumed, over the fair value of the tangible and
identified intangible assets of the business it acquires.
Financial Accounting Standards Board Accounting Standards
Codification, or FASB ASC, Topic 350 requires that goodwill
and other intangible assets that have indefinite useful lives
not be amortized, but instead be tested at least annually for
impairment, and that intangible assets that have finite useful
lives be amortized over their useful lives. FASB ASC
Topic 350 provides specific guidance for testing goodwill
and other indefinite lived intangible assets for impairment.
FASB ASC Topic 350 requires management to make certain
estimates, judgments and assumptions when allocating goodwill to
reporting units and determining the fair value of those
reporting units, including, among other things, appropriate
risk-adjusted discount rates, as well as future industry
30
conditions and operations, expected utilization, day rates,
expense levels, capital requirements and terminal values for
each of the rigs. Absent any impairment indicators, Ensco
performs its impairment tests annually during the fourth
quarter. Any future impairments would negatively impact its
results of operations for the period in which the impairment is
recognized.
Ensco
and Pride will incur substantial transaction and merger-related
costs in connection with the merger.
Ensco and Pride expect to incur a number of non-recurring
transaction and merger-related costs associated with completing
the merger, combining the operations of the two companies and
achieving desired synergies. These fees and costs will be
substantial. Additional unanticipated costs may be incurred in
the integration of the businesses of Ensco and Pride. Although
it is expected that the elimination of certain duplicative
costs, as well as the realization of other efficiencies related
to the integration of the two businesses, will offset the
incremental transaction and merger-related costs over time, this
net benefit may not be achieved in the near term, or at all.
The
merger agreement places certain restrictions on the conduct of
the business of each of Ensco and Pride prior to completion of
the merger or termination of the merger agreement, which could
adversely affect each companys ability to pursue
beneficial business opportunities.
The merger agreement places certain restrictions on the conduct
of each of Enscos and Prides businesses prior to the
completion of the merger or the termination of the merger
agreement. Such restrictions, the waiver of which is subject to
the consent of the other party, may prevent Ensco and Pride from
making certain acquisitions, taking certain other specified
actions or otherwise pursuing business opportunities during the
pendency of the merger (see The Merger
Agreement Conduct of Business Pending the
Merger for a description of the restrictive covenants
applicable to each of Ensco and Pride).
Enscos
shareholders and Prides stockholders will have their
ownership positions diluted by the merger.
The merger will dilute the ownership position of the current
shareholders of Ensco. Ensco will issue approximately
87 million Class A ordinary shares represented by
Ensco ADSs based on the number of outstanding shares of Pride
common stock. As a result, Ensco shareholders and Pride
stockholders are expected to hold approximately 62% and 38%,
respectively, of the combined companys ADSs outstanding
immediately after the merger.
Pride
stockholders will have a reduced ownership and voting interest
after the merger and will exercise less influence over
management.
Pride stockholders currently have the right to vote in the
election of the board of directors of Pride and on other matters
affecting Pride. When the merger occurs, each Pride stockholder
that receives Ensco ADSs will become a shareholder of Ensco with
a percentage ownership of the combined organization that is much
smaller than the stockholders percentage ownership of
Pride. It is expected that the former stockholders of Pride as a
group will own approximately 38% of the outstanding Ensco ADSs
immediately after the merger. Because of this, Pride
stockholders will have less influence on the management and
policies of Ensco than they now have on the management and
policies of Pride.
The
Ensco ADSs to be received by Pride stockholders upon the
completion of the merger will have different rights from shares
of Pride common stock.
Upon completion of the merger, Pride stockholders will no longer
be stockholders of Pride, a Delaware corporation, but will
instead become holders of ADSs of Ensco, an English public
limited company, and their rights as beneficial holders of
Class A ordinary shares will be governed by English law,
the Ensco Articles of Association and the deposit agreement
governing the terms of the Ensco ADSs. English law and the terms
of the Ensco Articles of Association and ADS deposit agreement
may be materially different than Delaware law and the terms of
Prides certificate of incorporation and bylaws, which
currently govern the rights of Pride
31
stockholders. Please see Description of Class A
Ordinary Shares of Ensco, Description of American
Depositary Shares of Ensco and Comparison of Rights
of Pride Stockholders and Ensco Shareholders for a
discussion of the different rights associated with Ensco ADSs.
Ensco
and Pride may have difficulty attracting, motivating and
retaining executives and other employees in light of the
merger.
Uncertainty about the effect of the merger on Ensco and Pride
employees may have an adverse effect on Ensco and Pride and
consequently the combined company. This uncertainty may impair
Enscos and Prides ability to attract, retain and
motivate personnel until the merger is completed. Employee
retention may be particularly challenging during the pendency of
the merger, as employees may experience uncertainty about the
move of Enscos U.S. headquarters from Dallas to
Houston and their future roles with the combined company. If
employees of Ensco or Pride depart because of issues relating to
the uncertainty and difficulty of integration or a desire not to
become employees of the combined company, the combined
companys ability to realize the anticipated benefits of
the merger could be reduced.
The
date that Pride stockholders will receive their merger
consideration is uncertain.
The completion of the merger is subject to the stockholder and
governmental approvals described in this joint proxy
statement/prospectus and the satisfaction or waiver of certain
other conditions. While we currently expect to complete the
merger during the second calendar quarter of 2011, such date
could be later than expected due to delays in receiving such
approvals. Accordingly, we cannot provide Pride stockholders a
definitive date on which they will receive the merger
consideration.
Pending
litigation against Pride and Ensco could result in an injunction
preventing the consummation of the merger or may adversely
affect Enscos business, financial condition or results of
operations following the merger.
In connection with the merger, various lawsuits have been filed
in the Delaware Court of Chancery, the U.S. District Court for
the Southern District of Texas and in the District Courts of
Harris County, Texas, against Pride, its directors and Ensco
and/or
certain of its subsidiaries alleging violations of various
fiduciary duties in approving the merger and that Ensco
and/or Pride
aided and abetted such alleged violations. Among other remedies,
the plaintiffs seek to enjoin the merger. While Ensco and Pride
believe these suits are without merit and intend to vigorously
defend against such claims, the outcome of any such litigation
is inherently uncertain. All applicable insurance policies may
not provide sufficient coverage for the cost of defense and
claims under these lawsuits, and certain of the defendants
rights of indemnification with respect to these lawsuits will
continue after the completion of the merger. The defense or
settlement of any lawsuit or claim that remains unresolved at
the time the merger closes may adversely affect Enscos
business, financial condition or results of operations.
Failure
to complete the merger could negatively affect the trading
prices of Ensco ADSs and Pride common stock and the future
business and financial results of Ensco and Pride.
Completion of the merger is not assured and is subject to risks,
including the risks that approval of the transaction by
shareholders and stockholders of Ensco and Pride or by
governmental agencies is not obtained or that certain other
closing conditions are not satisfied. If the merger is not
completed, it could negatively affect the trading prices of
Ensco ADSs and Pride common stock and the future business and
financial results of Ensco and Pride, and each of them will be
subject to several risks, including the following:
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having to pay certain significant costs relating to the merger,
including in certain circumstances a termination fee of
$260 million or $50 million as described in The
Merger Agreement Termination Fees;
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negative reactions from the financial markets, including
declines in the price of Pride common stock or Ensco ADSs due to
the fact that current prices may reflect a market assumption
that the merger will be completed;
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the attention of management of Ensco and Pride will have been
diverted to the merger rather than each companys own
operations and pursuit of other opportunities that could have
been beneficial to that company; and
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resulting negative customer perception could adversely affect
the ability of Ensco and Pride to compete for, or to win, new
and renewal business in the marketplace.
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Risk
Factors Relating to the Combined Company Following the
Merger
The existing businesses of Ensco and Pride are both subject
to significant risks. The risks affecting Enscos current
business are described in Item 1A of its Annual Report on
Form 10-K
for the year ended December 31, 2010, which are
incorporated herein by reference. The risks affecting
Prides business are described in Item 1A of its
Annual Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
herein by reference. We anticipate that these risks will
continue to apply to Enscos and Prides businesses
following the merger. In addition, the future business and
operations of the combined company may be affected by the
following additional risks.
The
success of the business of the combined company largely depends
on the level of activity in the oil and gas industry which can
be significantly affected by volatile oil and natural gas
prices.
The success of business of the combined company largely depends
on the level of activity in offshore oil and natural gas
exploration, development and production. Oil and natural gas
prices, and market expectations of potential changes in these
prices, may significantly affect the level of drilling activity.
An actual decline, or the perceived risk of a decline, in oil
and/or
natural gas prices could cause oil and gas companies to reduce
their overall level of activity or spending, in which case
demand for the services of the combined company may decline and
revenues may be adversely affected through lower rig utilization
and/or lower
day rates.
Numerous factors may affect oil and natural gas prices and the
level of demand for the services of the combined company,
including:
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demand for oil and natural gas;
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the ability of OPEC to set and maintain production levels and
pricing;
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the level of production by non-OPEC countries;
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U.S. and
non-U.S. tax
policy;
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laws and government regulations that limit, restrict or prohibit
exploration and development of oil and natural gas in various
jurisdictions;
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advances in exploration and development technology;
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disruption to exploration and development activities due to
hurricanes and other severe weather conditions and the risk
thereof;
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the worldwide military or political environment, including
uncertainty or instability resulting from civil unrest,
political demonstrations, mass strikes or an escalation or
additional outbreak of armed hostilities or other crises in oil
or natural gas producing areas of the Middle East, North Africa
or other geographic areas in which the combined company may
operate, or acts of terrorism; and
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global economic conditions.
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Continued effects of the economic recession could lead to a
decline in demand for crude oil and natural gas. Further
slowdowns in economic activity would likely reduce worldwide
demand for energy and result in an extended period of lower
crude oil and natural gas prices. In addition, continued
hostilities in the Middle East and Africa and the occurrence or
threat of terrorist attacks against the United States or other
countries could further the downturn in the economies of the
United States and those of other countries. Moreover, even
during periods of high commodity prices, customers may cancel or
curtail their drilling programs, or reduce their levels of
capital expenditures for exploration and production for a
variety of reasons, including their lack
33
of success in exploration efforts. These factors could cause the
combined companys revenues and margins to decline,
decrease daily rates and utilization of our rigs and limit our
future growth prospects. Any significant decrease in daily rates
or utilization, particularly for high-specification drillships
or semisubmersible rigs, could materially reduce the combined
companys revenues and profitability.
The
offshore contract drilling industry historically has been
cyclical, with periods of low demand and excess rig availability
that could result in adverse effects on the business of the
combined company.
Operating results in the offshore contract drilling industry
historically have been very cyclical and primarily are related
to the demand for drilling rigs and the available supply of
drilling rigs. Demand for rigs is directly related to the
regional and worldwide levels of offshore exploration and
development spending by oil and gas companies, which is beyond
the control of the combined company. Offshore exploration and
development spending may fluctuate substantially from
year-to-year
and from
region-to-region.
A decline in demand for drilling rigs or an increase in drilling
rig supply could adversely affect the financial position,
operating results and cash flows of the combined company.
The supply of offshore drilling rigs has increased in recent
years. There are 62 new jackups, 21 semisubmersible rigs
and 41 drillships, including those of Ensco and Pride,
reported to be on order or under construction with delivery
expected by the end of 2013. This represents an increase in the
respective total worldwide fleets of 13% for jackups, 10% for
semisubmersibles and 64% for drillships. Not all of the rigs
currently under construction have been contracted for future
work upon delivery. There are no assurances that the market in
general or a geographic region in particular will be able to
fully absorb the supply of new rigs in future periods.
The increase in supply of offshore drilling rigs during 2011 and
future periods could result in an oversupply of offshore
drilling rigs and could cause a decline in utilization
and/or day
rates, a situation which could be exacerbated by a decline in
demand for drilling rigs. Lower utilization
and/or day
rates in one or more of the regions in which the combined
company will operate could adversely affect the revenues,
utilization and profitability of the combined company.
Certain events, such as limited availability or non-availability
of insurance for certain perils in some geographic areas, rig
loss or damage due to hurricanes, fire, explosion, blowouts,
craterings, punchthroughs, wild wells, oil spills and leaks or
spills of hazardous materials and other operational events, may
impact the supply of rigs in a particular market and cause rapid
fluctuations in utilization and day rates.
Future periods of reduced demand
and/or
excess rig supply may require the combined company to idle
additional rigs or enter into lower day rate contracts or
contracts with less favorable terms. There can be no assurance
that the current demand for drilling rigs will not decline in
future periods. In addition, the combined companys or its
competitors rigs that are stacked (i.e.,
minimally crewed with little or no scheduled maintenance being
performed) may re-enter the market. The entry into service of
newly constructed, upgraded or reactivated units will increase
marketed supply and could reduce, or curtail a strengthening of,
dayrates in the affected markets as rigs are absorbed into the
active fleet. A decline in demand for drilling rigs or an
increase in drilling rig supply could adversely affect the
financial position, operating results and cash flows of the
combined company.
Deterioration
of the global economy and/or a decline in oil and natural gas
prices could cause the customers of the combined company to
reduce spending on exploration and development drilling. These
conditions could also cause the customers and/or vendors of the
combined company to fail to fulfill their commitments and/or
fund future operations and obligations, which could have a
material adverse effect on the business of the combined
company.
The success of the business of the combined company largely
depends on the level of activity in offshore oil and natural gas
exploration and development drilling worldwide. Oil and natural
gas prices, and market expectations of potential changes in
these prices, significantly impact the level of worldwide
drilling activity.
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A decline in oil and natural gas prices, whether caused by
economic conditions, international or national climate change
regulations or other factors, could cause oil and gas companies
to reduce their overall level of drilling activity and spending.
Disruption in the capital markets could also cause oil and gas
companies to reduce their overall level of drilling activity and
spending.
Historically, when drilling activity and spending decline,
utilization and day rates also decline and drilling activity may
be reduced or discontinued, resulting in an oversupply of
drilling rigs. The oversupply of drilling rigs could be
exacerbated by the entry of newbuild rigs into the market. When
idled or stacked, drilling rigs do not earn revenues, but
continue to require cash expenditures for crews, fuel,
insurance, berthing and associated items.
A decline in oil and natural gas prices, together with a
deterioration of the global economy, could substantially reduce
demand for drilling rigs and adversely affect the financial
position, operating results and cash flows of the combined
company.
Ensco
has incurred substantial additional indebtedness to finance the
merger and Prides existing indebtedness will remain
outstanding upon completion of the merger, which will decrease
the combined companys business flexibility and increase
its borrowing costs.
Upon completion of the merger, the level of consolidated
indebtedness of the combined company will increase by the amount
of the debt financing incurred to fund the cash component of the
merger consideration and by approximately $1.86 billion of
Prides debt that will remain outstanding after the merger.
See Description of Debt Financing. The combined
companys increased indebtedness and higher
debt-to-equity
ratio in comparison to that of Ensco on a recent historical
basis may have the effect, among other matters, of reducing the
combined companys flexibility to respond to changing
business and economic conditions, lowering credit ratings,
reducing access to capital and increasing borrowing costs for
any additional indebtedness to finance future operating and
capital expenses and for general corporate purposes. In
addition, the terms and conditions of such indebtedness may not
be favorable to the combined company, and, as such, could
further increase the overall burden of such indebtedness upon
the combined company and the combined companys business
flexibility. Unfavorable debt financing terms may also adversely
affect the combined companys financial results.
Many
of the anticipated benefits of combining Ensco and Pride may not
be realized.
Ensco and Pride entered into the merger agreement with the
expectation that the merger would result in various benefits
including, among others, synergies, cost savings, accretion to
earnings per share in 2011, maintaining business and customer
levels of activity and operating efficiencies. The success of
the merger will depend, in part, on the combined companys
ability to realize these anticipated benefits from combining the
businesses of Ensco and Pride. However, to realize these
anticipated benefits, the combined company must successfully
integrate the businesses of Ensco and Pride. If we are not able
to achieve these objectives, the anticipated benefits of the
merger may not be realized fully or at all or may take longer to
realize than expected.
Ensco and Pride have operated and, until the completion of the
merger, will continue to operate independently. It is possible
that the integration process could take longer than anticipated
and could result in the loss of valuable employees or the
disruption of each companys ongoing businesses or
inconsistencies in standards, controls, procedures, practices,
policies and compensation arrangements, which could adversely
affect the combined companys ability to achieve the
anticipated benefits of the merger. The combined companys
results of operations could also be adversely affected by any
issues attributable to either companys operations that
arise or are based on events or actions that occur prior to the
closing of the merger. Further, the size of the merger may make
integration difficult, expensive and disruptive, adversely
affecting Enscos revenues after the merger. Ensco may have
difficulty addressing possible differences in corporate cultures
and management philosophies.
Integration efforts, including the expected relocation of
Enscos U.S. headquarters to Houston from Dallas, will
also divert management attention and resources. These
integration activities could have an adverse
35
effect on the businesses of both Ensco and Pride during the
transition period. The integration process is subject to a
number of uncertainties. Although Enscos plans for
integration are focused on minimizing those uncertainties to
help achieve the anticipated benefits, no assurance can be given
that these benefits will be realized or, if realized, the timing
of their realization. Failure to achieve these anticipated
benefits could result in increased costs or decreases in the
amount of expected revenues and could adversely affect
Enscos future business, financial condition, operating
results and prospects. In addition, Ensco and Pride may not be
able to eliminate duplicative costs or realize other
efficiencies from integrating the businesses to offset part or
all of the transaction and merger-related costs incurred by
Ensco and Pride.
Business
issues currently faced by one company may be imputed to the
operations of the other company.
To the extent that either Ensco or Pride currently has or is
perceived by customers to have operational challenges, such as
timely or efficient performance, safety issues or workforce
issues, those challenges may raise concerns by existing
customers of the other company following the merger which may
limit or impede Enscos future ability to obtain additional
work from those customers.
Failure
to recruit and retain employees and skilled personnel could
adversely affect the operations and financial results of the
combined company.
The combined company will need to recruit and retain employees
and skilled personnel to operate the drilling rigs, manage the
combined business and provide technical services and support for
the combined business. Competition for skilled and other labor
has intensified as additional rigs are added to the worldwide
fleet. There are 62 new jackups, 21 semisubmersible rigs and 41
drillships, including those of Ensco and Pride, reported to be
on order or under construction with delivery expected by the end
of 2013. This represents an increase in the respective total
worldwide fleets of 13% for jackups, 10% for semisubmersibles
and 64% for drillships. These rigs will require new skilled and
other personnel to operate. In periods of high utilization, it
is more difficult and costly to recruit and retain qualified
employees. Competition for such personnel could increase future
operating expenses, with a resulting reduction in net income, or
impact our ability to fully staff and operate the rigs.
Notwithstanding current global economic conditions, the combined
company may be required to maintain or increase existing levels
of compensation to retain a skilled workforce. Much of the
skilled workforce is nearing retirement age, which may impact
the availability of skilled personnel. The combined company may
also be subject to potential further unionization of the labor
force or legislative or regulatory action that may impact
working conditions, paid time off or other conditions of
employment. If such labor trends continue, they could further
increase the costs or limit the ability of the combined company
to fully staff and operate the rigs.
The operations of the combined company will require the
successful integration of different business units and
geographic areas of operation. The loss of supervising and
management personnel could adversely affect the combined
companys ability to operate efficiently because of the
experience and knowledge of such personnel. The loss of the
services of employees and skilled personnel could adversely
affect the combined companys future operating results.
Contract
revenues of the combined company after the merger could decrease
if parties who are currently customers of both Ensco and Pride
elect to reduce their reliance on the combined company after the
merger.
Ensco and Pride currently have some customer overlap. If any of
these common customers decrease their amount of business with
the combined company following the merger to reduce their
reliance on a single company or for other reasons, such decrease
in business could adversely impact the sales and profitability
of the combined company following the merger.
36
Failure
to comply with the U.S. Foreign Corrupt Practices Act and terms
of agreements with the U.S. Department of Justice, or the DOJ,
and the SEC could result in fines, criminal penalties, contract
terminations and an adverse effect on the combined
companys business.
The DOJ and SEC and other authorities have a broad range of
civil and criminal sanctions under the U.S. Foreign Corrupt
Practices Act, referred to as the FCPA, and other laws, which
they may seek to impose in appropriate circumstances. Recent
civil and criminal settlements with a number of public
corporations, including Pride, and individuals have included
multi-million dollar fines, disgorgement, injunctive relief,
guilty pleas, deferred prosecution agreements and other
sanctions, including requirements that corporations retain a
monitor to oversee compliance with the FCPA.
During the course of an internal audit and investigation
relating to certain of Prides Latin American operations,
Prides management and internal audit department received
allegations of improper payments to foreign government
officials. In February 2006, the Audit Committee of Prides
Board of Directors assumed direct responsibility over the
investigation and retained independent outside counsel to
investigate the allegations, as well as corresponding accounting
entries and internal control issues, and to advise the Audit
Committee. Pride voluntarily disclosed information relating to
the initial allegations and other information found in the
investigation and compliance review to the DOJ and the SEC, and
cooperated with these authorities.
Pride has entered into settlements with the DOJ and the SEC
regarding the FCPA matters. The settlement with the DOJ included
a deferred prosecution agreement, or DPA, between Pride and the
DOJ and a guilty plea by Prides French subsidiary, Pride
Forasol S.A.S., to FCPA-related charges. Under the DPA, the DOJ
agreed to defer the prosecution of certain FCPA-related charges
against Pride and agreed not to bring any further criminal or
civil charges against Pride or any of its subsidiaries related
to either any of the conduct set forth in the statement of facts
attached to the DPA or any other information Pride disclosed to
the DOJ prior to the execution of the DPA. Pride agreed, among
other matters, to continue to cooperate with the DOJ, to
continue to review and maintain its anti-bribery compliance
program and to submit to the DOJ three annual written reports
regarding its progress and experience in maintaining and, as
appropriate, enhancing its compliance policies and procedures.
If Pride complies with the terms of the DPA, the deferred
charges against Pride will be dismissed with prejudice. If,
during the term of the DPA, the DOJ determines that Pride has
committed a felony under federal law, provided deliberately
false information or otherwise breached the DPA, Pride could be
subject to prosecution and penalties for any criminal violation
of which the DOJ has knowledge, including the deferred charges.
In December 2010, pursuant to a plea agreement, Pride Forasol
S.A.S. pled guilty in U.S. District Court to conspiracy and
FCPA charges. Pride Forasol was sentenced to pay a criminal fine
of $32.6 million and to serve a three-year term of
organizational probation. The SEC investigation was resolved in
November 2010. Without admitting or denying the allegations in a
civil complaint filed by the SEC, Pride consented to the entry
of a final judgment ordering disgorgement plus pre-judgment
interest totaling $23.6 million and a permanent injunction
against future violations of the FCPA. Under the terms of the
deferred prosecution agreement, as provided in the merger
agreement, upon consummation of the merger, Ensco will assume
the obligations of Pride under the deferred prosecution
agreement, which will apply to Ensco and its subsidiaries
following the merger. If there are any violations of the FCPA,
the deferred prosecution agreement or the SEC injunction, any
additional fines, sanctions or other penalties from other
governmental authorities or any third party claims by other
constituents of Pride in relation to these matters, it could
significantly and adversely affect the results of operations of
the combined company.
Further, Pride has received preliminary inquiries from
governmental authorities of certain of the countries referenced
in its settlements with the DOJ and the SEC. The combined
company could face additional fines, sanctions and other
penalties from authorities in these and other relevant foreign
jurisdictions, including prohibition of its participating in or
curtailment of business operations in those jurisdictions and
the seizure of its rigs or other assets. At this early stage of
such inquiries, neither Ensco nor Pride is able to determine
what, if any, legal liability may result. Customers of the
combined company in those jurisdictions could seek to impose
penalties or take other actions adverse to the combined
companys interests. The combined company
37
could also face other third-party claims by directors, officers,
employees, affiliates, advisors, attorneys, agents,
stockholders, debt holders, or other interest holders or
constituents of the combined company.
World
political events, terrorist attacks, piracy and military action
could affect the markets for the combined companys
services and have a material adverse effect on the combined
companys business and cost and availability of
insurance.
World political events have resulted in military action in
Afghanistan, Iraq and Libya; terrorist, pirate and other armed
attacks globally; and civil unrest, political demonstrations,
mass strikes and government responses in North Africa and the
Middle East. Military action by the United States or other
nations could escalate; further acts of terrorism, piracy,
kidnapping, extortion and acts of war may occur; and violence,
civil war and general disorder may continue in North Africa and
the Middle East. Such acts of terrorism, piracy, kidnapping,
extortion, violence, civil war, mass strikes and government
responses could be directed against companies such as the
combined company. Such developments have caused instability in
the worlds financial and insurance markets in the past. In
addition, these developments could lead to increased volatility
in prices for crude oil and natural gas and could affect the
markets for the combined companys products and services.
Insurance premiums could increase and coverages may be
unavailable in the future. Any or all of these effects could
have a material adverse effect on the combined companys
business.
The
business of the combined company will be subject to operating
hazards present in the offshore drilling industry, as well as
adverse weather conditions, and the combined company may not
have insurance to cover all these hazards.
The operations of Ensco and Pride are subject to hazards present
in the offshore drilling industry, such as hurricanes, fire,
explosion, blowouts, craterings, punchthroughs, oil spills and
leaks or spills of hazardous materials. These incidents as well
as accidents or problems in operations can cause personal injury
or death and damage to property, reservoirs or the environment.
The customers operations can also be interrupted. From
time to time, customers seek recovery for damages caused by the
activities of the offshore drilling contractors. Damage to the
customers property or interests in oil or gas production
formations could be extensive if a major problem occurred. In
addition, U.S. operations could be materially affected by
severe weather in the Gulf of Mexico. Severe weather, such as
hurricanes, may cause evacuation of personnel and curtailment of
services, damage to offshore drilling rigs resulting in
suspension of operations, and loss of or damage to equipment,
inventory, and facilities, which may not be insured in whole or
in part. If material, damage from any such operating hazards or
adverse weather conditions could adversely affect the results of
operations of the combined company and the expected benefits of
the merger. The combined company may not be able to maintain
adequate insurance at rates or on terms that we consider
reasonable or acceptable or be able to obtain insurance against
certain risks.
The
offshore drilling operations of the combined company could be
adversely impacted by the Macondo well incident and the
resulting changes in regulation of offshore oil and gas
exploration and development activity.
In May 2010, the U.S. Department of the Interior
implemented a six-month moratorium/suspension on certain
drilling activities in water depths greater than 500 feet
in the U.S. Gulf of Mexico. The U.S. Department of the
Interior subsequently issued Notices to Lessees, or NTLs,
implementing additional safety and certification requirements
applicable to drilling activities in the U.S. Gulf of
Mexico, imposed additional requirements with respect to
development and production activities in the U.S. Gulf of
Mexico and has delayed the approval of applications to drill in
both deepwater and shallow-water areas. On July 12, 2010,
the U.S. Department of the Interior issued a revised
moratorium/suspension on drilling in the U.S. Gulf of
Mexico, which was lifted on October 12, 2010 after the
adoption on September 30, 2010 of new regulations relating
to the design of wells and testing of the integrity of
wellbores, the use of drilling fluids, the functionality and
testing of well control equipment, including third-party
inspections, minimum requirements for personnel, blowout
preventers and other safety regulations.
38
As a condition to lifting of the moratorium/suspension, the
Bureau of Ocean Energy Management, Regulation and Enforcement,
or the BOEM, was directed to require that each operator
demonstrate that it has written and enforceable commitments that
ensure that containment resources are available promptly in the
event of a blowout and that the chief executive officer of each
operator certify to the BOEM that the operator has complied with
applicable regulations. The BOEM intends to conduct inspections
of each deepwater drilling operation for compliance with
regulations, including but not limited to the testing of blowout
preventers. It is unclear when these requirements will be
satisfied, due in part to the limited staffing of the BOEM.
Certain of the drilling rigs of the combined company currently
in the U.S. Gulf of Mexico have been or may be further
affected by the regulatory developments and other actions that
have or may be imposed by the U.S. Department of the
Interior, including the regulations issued on September 30,
2010. The moratoriums/suspensions (which have been lifted),
related NTLs, delays in processing drilling permits and other
actions are being challenged in litigation by Ensco and others.
Rig utilization and day rates of the combined company have been
and may be further negatively influenced due to regulatory
requirements and delays in customers ability to secure
permits. Current or future NTLs or other directives and
regulations may further impact customers ability to obtain
permits and commence or continue deep or shallow water
operations in the U.S. Gulf of Mexico.
Ensco has filed suit in the U.S. District Court for the
Eastern District of Louisiana to seek relief from these actions
which it believes violate the U.S. Administrative Procedure
Act and the Outer Continental Shelf Lands Act. On
February 17, 2011, the Court granted Ensco a preliminary
injunction compelling the BOEM to process five pending drilling
permit applications related to Ensco rigs within 30 days.
The BOEM has issued a permit to one of Enscos customers
since the Courts ruling, which is the first permit issued
by the BOEM to drill a deepwater well since the
moratorium/suspension. Ensco is not able to predict whether or
at what frequency the BOEM may issue further permits or the
outcome of these legal proceedings, whether enforcement of any
new actual or de facto moratorium/suspension and other related
restrictions and delays will be enjoined, or whether the
U.S. Department of the Interior will seek to implement
additional restrictions on or prohibitions of drilling
activities in the U.S. Gulf of Mexico.
Ensco has 12 rigs under contract in the U.S. Gulf of
Mexico, including four ultra-deepwater semisubmersible rigs such
as ENSCO 8503, which has been sublet to work in French
Guiana. Enscos customers may seek to move other rigs to
locations outside the U.S. Gulf of Mexico, perform
activities permitted under the enhanced safety requirements,
assign or suspend the contracts or attempt to terminate
contracts pursuant to their respective force majeure or other
provisions. In 2010, Pride took delivery of two of its new
ultra-deepwater drillships under construction, the Deep Ocean
Ascension and the Deep Ocean Clarion. The rigs were
originally intended for drilling operations in the
U.S. Gulf of Mexico. However, due to the moratorium on
drilling in the U.S. Gulf of Mexico and more recently due
to regulatory changes that have created delays and uncertainty
regarding the resumption of drilling in the U.S. Gulf of
Mexico, BP Exploration & Production Inc., or BP
E&P, agreed to place the Deep Ocean Ascension and
Deep Ocean Clarion on special standby day rates. The rigs
are expected to mobilize to regions outside of the
U.S. Gulf of Mexico by mid-2011. For a discussion of the
drillships and related matters, see Managements
Discussion and Analysis of Financial Condition and Results of
Operations Recent Developments Recently
Delivered Drillships and U.S. Gulf of
Mexico in Prides Annual Report on
Form 10-K
for the year ended December 31, 2010.
At this time, neither Ensco nor Pride can predict the impact of
the Macondo well incident and resulting changes in the
regulation of offshore oil and gas exploration and development
activity on their operations or contracts, the extent to which
drilling operations subsequent to the moratorium period will be
affected, the extent to which the issuance of permits for new or
continued drilling will be delayed, the effect on the cost or
availability of relevant insurance coverage, the effect on the
demand for services in or outside the U.S. Gulf of Mexico
or what actions may be taken by customers, other industry
participants or the U.S. or other governments in response
to the incident. Future legislative or regulatory enactments may
impose new requirements for well control and blowout prevention
equipment that could increase costs and cause delays in the
operations of the combined company due to unavailability of
associated equipment.
39
Prolonged actual or de facto delays, moratoria or suspensions of
drilling activity in the U.S. Gulf of Mexico and associated
new regulatory, legislative or permitting requirements in the
U.S. or elsewhere could materially adversely affect the
financial condition, operating results or cash flows of the
combined company.
Compliance
with or breach of environmental laws can be costly and could
limit the operations of the combined company.
The operations of the combined company will be subject to laws
and regulations controlling the discharge of materials into the
environment, pollution, contamination and hazardous waste
disposal or otherwise relating to the protection of the
environment. Environmental laws and regulations specifically
applicable to the business activities of the combined company
could impose significant liability for damages,
clean-up
costs, economic loss, fines and penalties in the event of oil
spills or similar discharges of pollutants or contaminants into
the environment or improper disposal of hazardous waste
generated in the course of operations. To date, such laws and
regulations have not had a material adverse effect on the
operating results of either Ensco or Pride, and neither Ensco
nor Pride has experienced an accident that has exposed it to
material liability for discharges of pollutants into the
environment. However, the legislative and regulatory response to
the Macondo well incident could substantially increase
liabilities of oil and gas companies in respect of oil spills
and also could increase the liabilities of the combined company.
In addition to potential increased liabilities, such legislative
or regulatory action could impose increased financial, insurance
or other requirements that may adversely impact the entire
offshore drilling industry.
The International Convention on Oil Pollution Preparedness,
Response and Cooperation, the U.K. Merchant Shipping Act
1995, the U.K. Merchant Shipping (Oil Pollution Preparedness,
Response and Cooperation Convention) Regulations 1998 and other
related legislation and regulations and the U.S. Oil
Pollution Act of 1990, or OPA 90, and other U.S. federal
statutes applicable to the operations of the combined company,
as well as similar statutes in Texas, Louisiana, other coastal
states and other
non-U.S. jurisdictions,
address oil spill prevention and control and significantly
expand liability, fine and penalty exposure across many segments
of the oil and gas industry. Such statutes and related
regulations impose a variety of obligations related to the
prevention of oil spills, disposal of waste and liability for
resulting damages. For instance, OPA 90 imposes strict and, with
limited exceptions, joint and several liability upon each
responsible party for oil removal costs as well as a variety of
fines, penalties and damages. Failure to comply with these
statutes and regulations, including OPA 90, may subject the
combined company to civil or criminal enforcement action, which
may not be covered by contractual indemnification or insurance
and could have a material adverse effect on the financial
position, operating results and cash flows of the combined
company.
Events in recent years, including the Macondo well incident,
have heightened governmental and environmental concerns about
the oil and gas industry. From time to time, legislative
proposals have been introduced that would materially limit or
prohibit offshore drilling in certain areas. Ensco and Pride are
adversely affected by restrictions on drilling in certain areas
of the U.S. Gulf of Mexico and elsewhere, including the
conditions for lifting the recent moratorium/suspension in the
U.S. Gulf of Mexico, the adoption of associated new safety
requirements and policies regarding the approval of drilling
permits, restrictions on development and production activities
in the U.S. Gulf of Mexico and associated NTLs that have
and may further impact the operations of the combined company.
If new laws are enacted or other government action is taken that
restrict or prohibit offshore drilling in principal areas of
operation or impose environmental protection requirements that
materially increase the liabilities, financial requirements, oil
spill response capabilities or operating or equipment costs
associated with offshore drilling, exploration, development or
production of oil and natural gas, the financial position,
operating results and cash flows of the combined company could
be materially adversely affected.
Drilling
contracts with national oil companies will expose the combined
company to greater risks than normally assumed.
Ensco currently has 12 rigs contracted with national oil
companies. Pride also has 10 rigs contracted with national oil
companies. The terms of these contracts are often non-negotiable
and may expose us to greater commercial, political and
operational risks than we assume in other contracts such as
exposure to greater
40
environmental liability, the risk that the contract may be
terminated by our customer without cause on short-term notice,
contractually or by governmental action, under certain
conditions that may not provide us an early termination payment,
collection risks and political risks. Neither Ensco nor Pride
can provide any assurance that the increased risk exposure will
not have an adverse impact on future operations or that either
will not increase the number of rigs contracted to national oil
companies with commensurate additional contractual risks.
Laws
and governmental regulations may add to costs, limit drilling
activity or reduce demand for the drilling services of the
combined company.
The operations of the combined company may be affected by
political developments and by laws and regulations that relate
directly to the oil and gas industry, including initiatives to
limit greenhouse gas emissions. The offshore contract drilling
industry is dependent on demand for services from the oil and
gas industry. Accordingly, the combined company will be directly
affected by the approval and adoption of laws and regulations
limiting or curtailing exploration and development drilling for
oil and natural gas for economic, environmental, safety and
other policy reasons. The combined company may be exposed to
risks related to new laws or regulations pertaining to climate
change, carbon emissions or energy use that could reduce the use
of oil or natural gas, thus reducing demand for
hydrocarbon-based fuel and drilling services. Governments also
may pass laws or regulations encouraging or mandating the use of
alternative energy sources, such as wind power and solar energy,
which may reduce demand for oil and natural gas and our drilling
services. Furthermore, the combined company may be required to
make significant capital expenditures or incur substantial
additional costs to comply with new governmental laws and
regulations. It is also possible that legislative and regulatory
activity could adversely affect the operations of the combined
company by limiting drilling opportunities, reducing consumption
of hydrocarbon fuels or significantly increasing the operating
costs of the combined company.
Risk
Factors Relating to Enscos Redomestication to the
U.K.
Ensco
has not requested a ruling from Her Majestys Revenue and
Customs, or HMRC, on the U.K. tax aspects of the
redomestication, and HMRC may disagree with its
conclusions.
Based on current U.K. corporation tax law and the current
U.K.-U.S. income tax treaty, as amended, Ensco expects that
its redomestication in 2009 will not result in any material U.K.
corporation tax liability to it. Further, Ensco believes that it
has satisfied all stamp duty reserve tax, or SDRT, payment and
filing obligations in connection with the issuance and deposit
of its Class A ordinary shares into the ADS depositary.
However, if HMRC disagrees with this view, it may take the
position that material U.K. corporation tax or SDRT liabilities
or amounts on account thereof are payable by Ensco as a result
of the redomestication, in which case Ensco expects that it
would contest such assessment. If Ensco were unsuccessful in
disputing the assessment, the implications could be materially
adverse to Ensco and the combined company. Ensco has not
requested an HMRC ruling on the U.K. tax aspects of the
redomestication, and there can be no assurance that HMRC will
agree with its interpretations of U.K. corporation tax law or
any related matters associated therewith.
The
IRS may disagree with Enscos conclusions on tax treatment
of certain restructuring transactions following the
redomestication.
Ensco expects that the redomestication will not result in any
material U.S. federal income tax liability to it, and the
IRS has confirmed to Ensco that it will not challenge
Enscos conclusion that the redomestication resulted in
Ensco becoming tax resident in the U.K. However, the IRS may
disagree with Enscos assessments of the effects or
interpretation of the tax laws, treaties or regulations or their
enforcement with respect to certain restructuring transactions
that it completed after the redomestication. In this event Ensco
may not realize the expected tax benefits of the
redomestication, and the operating results of the combined
company may be adversely affected in comparison to what they
would have been if the IRS agreed with Enscos conclusions.
41
If
Ensco and its
non-U.S.
subsidiaries become subject to U.S. federal income tax, its
financial position, operating results and cash flows would be
adversely affected.
Ensco and its
non-U.S. subsidiaries
will conduct their operations in a manner intended to minimize
the risk that Ensco or its
non-U.S. subsidiaries
engage in the conduct of a U.S. trade or business. Its
U.S. subsidiaries will continue to be subject to
U.S. federal income tax on their worldwide income, and its
non-U.S. subsidiaries
will continue to be subject to U.S. federal income tax on
their U.S. operations. However, if Ensco or any of its
non-U.S. subsidiaries
is or are determined to be engaged in a trade or business in the
U.S., Ensco or such
non-U.S. subsidiaries
would be required to pay U.S. federal income tax on income
that is subject to the taxing jurisdiction of the U.S. If
this occurs, the financial position, operating results and cash
flows of the combined company may be adversely affected.
The
redomestication may not allow Ensco to maintain a competitive
consolidated effective income tax rate.
Ensco believes the redomestication should improve its ability to
maintain a competitive consolidated effective income tax rate
because the U.K. corporate tax rate is lower than the
U.S. corporate tax rate and because the U.K. has
implemented a dividend exemption system that generally does not
subject non-U.K. earnings to U.K. tax when such earnings are
repatriated to the U.K. in the form of dividends from non-U.K.
subsidiaries. In 2010, the new U.K. Government announced its
intention that there will be a phased reduction in the headline
rate of U.K. corporation tax from 27% to 24% by 2014, its lowest
ever rate.
The U.K. has implemented controlled foreign companies rules,
referred to as the CFC rules, under which, in certain
circumstances, the income or profits of controlled non-U.K.
resident companies which are subject to a lower level of
taxation may be subject to U.K. corporation tax, subject to
credit relief for foreign tax on those profits. The HMRC has
granted Ensco an exemption from the CFC rules in respect of its
material non-U.K. operations under the motive test
exemption until December 31, 2012, subject to certain
conditions and limitations based on its facts and circumstances.
In June 2010, the new U.K. Government announced in its Emergency
Budget that it aims to create the most competitive corporate tax
system in the G20, and that as a first step it will reform the
U.K.s CFC rules, which it recognized as a key priority for
U.K. multinationals. The U.K. Governments policy is that
the U.K.s corporate tax system should focus more on
profits from U.K. activity in determining the tax base, rather
than attributing the worldwide income of a group to the U.K. It
has been announced that legislation for new CFC rules will be
introduced in the spring of 2012, allowing time to consider how
to make the rules more competitive, to enhance long-term
stability and to provide adequate protection of the U.K. tax
base. The U.K. Government launched a consultation on the reform
of the CFC rules in November 2010 which will continue until late
February 2011, and it intends to publish draft legislation in
respect of the same during the second half of 2011. At the same
time, the U.K. Government also launched a consultation on
certain interim improvements to the current CFC rules, to make
the rules easier to operate and, where possible, increase
competitiveness. The U.K. Government published draft legislation
in respect of the same on December 9, 2010. Legislation on
interim improvements to the CFC rules will be introduced during
the first half of 2011. The effect of any changes to the CFC
rules on Enscos effective rate of income taxation will not
be clear until the new legislation is published and enacted in
its entirety. However, it is anticipated that these reforms will
generally be favorable to the combined company, as compared to
the current CFC rules. Nevertheless, as the U.K.s current
CFC rules for the most part do not apply to Enscos
material overseas operations until December 31, 2012, its
ability to efficiently manage those operations with a view to
managing its effective income tax rates may be restricted by
virtue of the new CFC rules from January 1, 2013. In the
event that the U.K. Government adopts changes to the CFC rules
that have the effect of increasing the consolidated effective
income tax rate, the results of operations of the combined
company may be adversely affected unless it is able to identify
and implement any mitigating actions.
Ensco cannot provide any assurances as to what its effective
income tax rates will be because of, among other reasons,
uncertainty regarding the nature and extent of its business
activities in any particular jurisdiction in the future and the
tax laws of such jurisdictions, as well as potential changes in
U.K. and U.S. tax laws.
42
Enscos actual effective income tax rates may vary from
expectations and those variances may be material. Additionally,
the tax laws of other jurisdictions could change in the future,
and such changes could cause a material change in the
consolidated effective income tax rate.
Ensco also could be subject to future audits conducted by U.K.,
U.S. and other tax authorities, and the resolution of such
audits could significantly impact its effective income tax rates
in future periods, as would any reclassification or other matter
(such as changes in applicable accounting rules) that increases
the amounts it has provided for income taxes in its consolidated
financial statements. There can be no assurance that Ensco would
be successful in attempting to mitigate the adverse impacts
resulting from any changes in law, audits and other matters. The
inability to mitigate the negative consequences of any changes
in the law, audits and other matters could cause the effective
income tax rates to increase and the financial position,
operating results or cash flows of the combined company to be
adversely affected.
Changes
in laws, including tax law changes, could adversely affect
Ensco, its subsidiaries and its securityholders.
Changes in tax laws, regulations or treaties or the
interpretation or enforcement thereof, in the U.S., the U.K. or
elsewhere, could adversely affect the tax consequences of the
redomestication and post-redomestication internal restructuring
to Ensco and its shareholders
and/or its
effective income tax rates (whether associated with the
redomestication, the subsequent internal restructuring or
otherwise). For example, one reason for the redomestication was
to begin to align its structure so as to have an opportunity to
take advantage of U.K. corporate tax rates, which are lower than
the U.S. income tax rates, and to take advantage of the
recent dividend exemption system implemented in the U.K., which
generally does not subject earnings of non-U.K. subsidiaries to
U.K. tax when such earnings are repatriated to the U.K. as
dividends. Future changes in tax laws, regulations or treaties
or the interpretation or enforcement thereof in general or any
such changes resulting in a material change in the U.S. or
U.K. tax rates in particular could reduce or eliminate the
benefits that Ensco expects to achieve from the redomestication.
Changes
in effective income tax rates or adverse outcomes resulting from
examination of Enscos tax returns could adversely affect
its financial results.
Changes in the valuation of Enscos deferred tax assets and
liabilities or changes in tax treaties, regulations, accounting
principles or interpretations thereof in one or more countries
in which it operates could result in a higher effective income
tax rate on worldwide earnings and such change could be
significant to financial results. Enscos future effective
income tax rates could also be adversely affected by lower than
anticipated earnings in countries where it has lower statutory
rates and higher than anticipated earnings in countries where it
has higher statutory rates. In addition, Ensco is subject to
examinations of its income tax returns by HMRC, the IRS and
other tax authorities. Ensco regularly assesses the likelihood
of adverse outcomes resulting from these examinations to
determine the adequacy of the provision for income taxes. There
can be no assurance that such examinations will not have an
adverse effect on the financial position, operating results or
cash flows of the combined company.
The
expected financial, logistical and operational benefits of the
redomestication may not be realized.
There can be no assurances that all of the goals of the
redomestication will be achieved, particularly as achievement of
Enscos goals is in many important respects subject to
factors that it does not control. These factors include the
reactions of U.K. and U.S. tax authorities, the reactions
of third parties with whom it enters into contracts and conducts
business and the reactions of investors and analysts.
While Ensco expects that the redomestication will enable it to
take advantage of lower U.K. tax rates and the benefits of the
U.K. dividend exemption system for certain non-U.K. source
dividends repatriated to the U.K. in the years after
implementation of the redomestication to a greater extent than
would likely have been available if the redomestication had not
occurred, these benefits may not be achieved. In particular,
U.K. or U.S. tax authorities may challenge its application
and/or
interpretation of relevant tax laws, regulations or treaties,
valuations and methodologies or other supporting documentation.
If they are successful in doing so,
43
Ensco may not experience the level of benefits it anticipates,
or it may be subject to adverse tax consequences. Even if Ensco
is successful in maintaining its tax positions, Ensco may incur
significant expenses in defending its position and contesting
claims or positions asserted by tax authorities.
Whether Ensco realizes other expected financial benefits of the
redomestication will depend on a variety of factors, many of
which are beyond its control. These factors include changes in
the relative rate of economic growth in the U.K. compared to the
U.S., financial performance in jurisdictions with lower tax
rates, foreign currency exchange rate fluctuations (especially
as between the British pound and the U.S. dollar), and
significant changes in trade, monetary or fiscal policies of the
U.K. or the U.S., including changes in interest rates. It is
difficult to predict or quantify the effect of these factors,
individually and in the aggregate, in part because the
occurrence of any of these events or circumstances may be
interrelated. If any of these events or circumstances occur,
Ensco may not be able to realize the expected financial benefits
of the redomestication, and its expenses may increase to a
greater extent than if it had not completed the redomestication.
Realization of the logistical and operational benefits of the
redomestication is also dependent on a variety of factors
including the geographic regions in which its rigs are deployed,
the location of the business unit offices that oversee its
global offshore contract drilling operations, the locations of
its customers corporate offices and principal areas of
operation and the location of investors. If events or changes in
circumstances occur affecting the aforementioned factors, Ensco
may not be able to realize the expected logistical and
operational benefits of the redomestication, which could
adversely affect the combined company.
Ensco
has less flexibility as a U.K. public limited company with
respect to certain aspects of capital management than U.S.
corporations due to increased shareholder approval
requirements.
Directors of a Delaware and other U.S. corporation may
issue, without further shareholder approval, shares of common
stock authorized in its certificate of incorporation that were
not already issued or reserved. The business corporation laws of
Delaware and other U.S. states also provide substantial
flexibility in establishing the terms of preferred stock.
However, English law provides that a board of directors may only
allot shares with the prior authorization of shareholders, such
authorization being up to the aggregate nominal amount of shares
and for a maximum period of five years, each as specified in the
articles of association or relevant shareholder resolution. Such
authorization would need to be renewed by Enscos
shareholders upon its expiration (i.e., at least every five
years). A special resolution was adopted prior to the effective
time of the redomestication in December 2009 to authorize the
allotment of additional shares for a five-year term and renewal
of such authorization for additional five-year terms may be
sought more frequently.
English law also generally provides shareholders preemptive
rights when new shares are issued for cash. However, it is
possible for the articles of association or shareholders in a
general meeting to exclude preemptive rights. Such an exclusion
of preemptive rights may be for a maximum period of up to five
years from the date of adoption of the articles of association,
if the exclusion is contained in the articles of association, or
from the date of the shareholder resolution, if the exclusion is
by shareholder resolution. In either case, this exclusion would
need to be renewed upon its expiration (i.e., at least every
five years). A special resolution was adopted to exclude
preemptive rights prior to the effective time of the
redomestication in December 2009 for a five-year term and
renewal of such exclusion for additional five-year terms may be
sought more frequently.
English law prohibits Ensco from conducting on-market
purchases as Ensco ADSs are not traded on a recognized
investment exchange in the U.K. English law also generally
prohibits a company from repurchasing its own shares by way of
off-market purchases without the prior approval of
75% of its shareholders by special resolution. Such approval
lasts for a maximum period of up to five years. Special
resolutions were adopted prior to the effective time of the
redomestication in December 2009 to permit off-market
purchases. These special resolutions will need to be
renewed upon expiration (i.e., at least every five years) to
permit off-market purchases and renewal for
additional five-year terms may be sought more frequently.
44
There can be no assurances that situations will not arise where
such shareholder approval requirements for any of these actions
would deprive the combined companys shareholders of
substantial benefits.
The
redomestication will result in additional ongoing
costs.
The redomestication has resulted in an increase in some of
Enscos ongoing expenses and will require it to incur some
new expenses. Some costs, including those related to relocation
and employment of expatriate officers and other employees in
Enscos U.K. offices and holding board of directors
meetings in the U.K., are expected to be higher than would be
the case if the principal executive offices remained in the
U.S. Ensco has incurred and expects to continue to incur
additional expenses, including professional fees, to comply with
U.K. corporate and tax laws.
Risk
Factors Relating to Ensco ADSs Following the Merger
The
market value of Ensco ADSs could decline if large amounts of
ADSs are sold following the merger.
Following the merger, shareholders of Ensco and former
stockholders of Pride will own interests in a combined company
operating an expanded business with more assets and a different
mix of liabilities. Current shareholders of Ensco and
stockholders of Pride may not wish to continue to invest in the
additional operations of the combined company, or for other
reasons, such as an inability to hold ADSs under the investment
guidelines of various institutional investors, may wish to
dispose of some or all of their interests in the combined
company. If, following the merger, large amounts of Ensco ADSs
are sold, the price of its ADSs could decline.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus, including information
included or incorporated by reference in this joint proxy
statement/prospectus, may contain certain forward-looking
statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include words or phrases such as
anticipate, believe,
contemplate, estimate,
expect, intend, plan,
project, could, may,
might, should, will and
words and phrases of similar import. Without limiting the
generality of the preceding sentence, certain statements
contained in the sections The Merger
Background of the Merger, The Merger
Recommendation of the Ensco Board of Directors and
Its Reasons for the Merger and The Merger
Recommendation of the Pride Board of Directors and
Its Reasons for the Merger constitute forward-looking
statements.
These forward-looking statements appear in a number of places
and include statements with respect to, among others:
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projected operating or financial results, including any
accretion/dilution to earnings and cash flow;
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the ability to integrate the operations of Ensco and Pride as
contemplated;
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the amount and timing of any cost savings, synergies or
operational or administrative efficiencies expected to result
from the merger;
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the ability of each of Pride and Ensco to satisfy the conditions
to closing of the merger;
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Enscos plans to obtain additional financing after the
transaction;
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prospects for our services and expected activity in our areas of
operations;
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the effects of competition in our areas of operations;
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the outlook of oil and gas prices;
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the current economic conditions and expected trends in the
industry we serve;
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the amount, nature and timing of capital expenditures, including
future development costs, and availability of capital resources
to fund the merger and subsequent capital expenditures;
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the various risks and other factors considered by the respective
boards of Ensco and Pride as described under The
Merger Recommendation of the Ensco Board of
Directors and Its Reasons for the Merger and under
The Merger Recommendation of the Pride Board
of Directors and Its Reasons for the Merger;
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the impact of political and regulatory developments in general
and in the U.S. Gulf of Mexico in particular;
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future and pro forma financial condition or results of
operations and future revenues and expenses; and
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business strategy and other plans and objectives for future
operations.
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Factors that could cause actual results to differ materially
from those contemplated by the forward-looking statements
include, among others, the following factors:
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the ability to consummate the merger, including the ability to
resolve pending litigation seeking to prevent the merger;
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conditions in the credit markets for additional borrowing
capacity after the merger;
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failure, difficulties and delays in obtaining regulatory
clearances and approvals for the merger;
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failure, difficulties and delays in achieving expected synergies
and cost savings;
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failure, difficulties and delays in meeting conditions required
for closing set forth in the merger agreement;
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general economic and business conditions;
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prices of crude oil and natural gas and industry expectations
about future prices;
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ability to adequately staff rigs;
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political stability in the countries in which the combined
company will operate;
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the business opportunities (or lack thereof) that may be
presented to and pursued by the combined company;
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cancellation or renegotiation of drilling contracts or payment
or other delays, including acceptance testing delays, permit
delays or defaults by customers;
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unplanned downtime and repairs on rigs, particularly due to the
age of some of the rigs; and
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changes in laws and regulations.
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Other factors that could cause actual results to differ
materially from those contemplated by the forward-looking
statements include, among others, the factors detailed in
Risk Factors of this joint proxy
statement/prospectus and the risk factors described in each
companys Annual Report on
Form 10-K
for the year ended December 31, 2010, which are filed with
the SEC and available on the SECs website at
www.sec.gov. Should one or more of the factors, risks or
uncertainties described above materialize (or the other
consequences of such a development worsen), or should underlying
assumptions prove incorrect, actual results and plans could
differ materially from those expressed in any forward-looking
statements. You are cautioned not to place undue reliance on
these statements, which speak only as of the date of this joint
proxy/prospectus or the date of any document incorporated by
reference in this joint proxy/prospectus, as applicable.
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Any projection or estimate by Pride or Ensco that was furnished
to its financial advisor, the other party or the other
partys financial advisor, including those statements
summarized herein, was made as of a date before the date of the
merger agreement and spoke only as of the date furnished and has
not been updated. These estimates and projections were only
intended to be used by the recipient for analysis of the merger
and are not intended to provide guidance as to future results
and should not be relied upon for that purpose.
All forward-looking statements, expressed or implied, included
in this joint proxy statement/prospectus are expressly qualified
in their entirety by this cautionary statement. This cautionary
statement should also be considered in connection with any
subsequent written or oral forward-looking statements that
Ensco, Pride or persons acting on their behalf may issue.
All information in this document is as of today. Except as
otherwise required by applicable law, Ensco and Pride disclaim
any duty to update any forward-looking statements, whether as a
result of new information, future events or otherwise, all of
which are expressly qualified by the statements in this section.
See also Where You Can Find More Information;
Incorporation by Reference.
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THE
MERGER
The following is a description of the material aspects of the
merger. While Ensco and Pride believe that the following
description covers the material terms of the merger, the
description may not contain all of the information that is
important to Ensco shareholders and Pride stockholders. For a
more complete understanding of the merger, Ensco and Pride
encourage Ensco shareholders and Pride stockholders to carefully
read this entire joint proxy statement/prospectus, including the
merger agreement attached to this joint proxy
statement/prospectus as Annex A and incorporated herein by
reference.
Each of the Ensco and Pride boards of directors has unanimously
approved the merger agreement and the transactions contemplated
by the merger agreement. In the merger, Merger Sub will merge
with and into Pride with Pride surviving the merger as an
indirect wholly owned subsidiary of Ensco. Pride stockholders
will be entitled to receive the merger consideration described
below under The Merger Agreement Merger
Consideration.
Background
of the Merger
Ensco continually reviews strategic options to improve its asset
base and business opportunities. As part of its review, Ensco
considers possible rig fleet combinations, geographic diversity
and customer base opportunities that may be available through
potential business combinations with companies that share the
same core values of dedication to safety, ethics, operational
excellence, employee development, customer satisfaction and
disciplined risk management. At the regularly scheduled meetings
of the Ensco board of directors, Daniel W. Rabun, the chairman
of the board of directors and chief executive officer of Ensco,
and management periodically update the board on various business
strategies for Ensco and potential business combination
transactions. Three of the highest strategic priorities
identified by the Ensco management team were to continue to
expand its deepwater business, enter the drillship business and
enter West Africa and Brazil as key markets for future growth
opportunities.
As part of the ongoing evaluation of its business, the Pride
board of directors and management continually evaluate
Prides business strategy and prospects for growth and
consider opportunities to improve Prides operations and
financial performance in order to create value for Pride
stockholders. As part of this evaluation, Pride has regularly
considered acquisitions of other companies or their assets,
acquisition or construction of additional rigs or other assets
and, on occasion, business combination transactions with other
industry participants. In recent years, Pride has focused on
increasing its high-specification assets, with a particular
focus on expansion of its deepwater fleet. Prides
management team also meets regularly with institutional
investors who have expressed their views on consolidation in the
offshore drilling industry and on Prides possible role in
that consolidation. Senior management of Pride has from time to
time engaged in preliminary discussions with other industry
participants regarding the possibility of business combination
transactions, and has reported these discussions to the Pride
board of directors.
In late July 2005, Louis A. Raspino, who was promoted to
president and chief executive officer of Pride in June 2005, met
with Tor Olav Trøim, the chief executive officer of
Seatankers Management Co. Ltd. and a vice president and director
of Seadrill Limited, and discussed, among other things, a
proposal by Seatankers to acquire a significant equity interest
in Pride and obtain board representation. Mr. Trøim
also referred to discussions between Mr. Trøim and the
former chief executive officer of Pride. Mr. Trøim
sent Mr. Raspino a letter dated August 3, 2005
confirming the proposal.
On August 9, 2005, Pride retained Goldman Sachs to assist
Pride in evaluating the proposal letter at the August 10,
2005 meeting of the Pride board of directors.
On August 10, 2005, the Pride board of directors met with
management, representatives of Goldman Sachs and Prides
outside counsel, Baker Botts L.L.P. and Wachtell, Lipton,
Rosen & Katz, to discuss the Seatanker proposal. Given
Prides access to capital and other available opportunities
and the inherent conflicts of interest with having a competitor
owning a significant equity interest in the company with board
representation, the Pride board determined not to pursue the
opportunity, which response was conveyed to Mr. Trøim
by letter dated August 10, 2005.
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In March 2007, Mr. Raspino and the chief operating officer
of Pride at the time met with Mr. Trøim and an advisor
of Seadrill. Mr. Trøim stated that he was having
discussions with a number of industry participants regarding a
business combination transaction and would like to explore the
possibility of a transaction with Pride. Mr. Trøim
expressed Seadrills general interest in acquiring Pride in
an all-cash transaction with a reasonable premium to
Prides stockholders. No other terms were discussed.
Mr. Raspino stated that he would discuss the matter with
members of the Pride board of directors. The following week,
Mr. Raspino called Mr. Trøim to respond to the
prior discussion. Mr. Raspino stated that the Pride board
would be open to considering any transaction that would be
compelling to its stockholders. No specific proposal was made by
Seadrill.
During the spring of 2007, Pride had preliminary discussions
with Company A, an industry participant, regarding a possible
business combination transaction involving cash and stock of
Company A as consideration. The Pride board of directors held
various meetings during that period with management and
Prides legal and financial advisors to discuss the
potential transaction. No specific proposals were made by
Company A.
Pride and Goldman Sachs entered into a letter agreement dated as
of August 10, 2007 and effective March 27, 2007,
pursuant to which Pride engaged Goldman Sachs to act as its
financial advisor in connection with the potential acquisition
of Pride or any other attempts to acquire all or a significant
portion of the stock or assets of Pride.
On January 29, 2008, Mr. Raspino met with
Mr. Trøim to discuss industry matters. During the
discussion, Mr. Trøim expressed a general interest in
a combination transaction involving Seadrill and Pride without
providing specifics. Mr. Trøim stated that Seadrill
would not be interested in a hostile transaction involving
Pride. Mr. Raspino reiterated that the Pride board would be
open to considering any transaction that would be compelling to
its stockholders. Mr. Trøim informed Mr. Raspino
that John Fredriksen, the chairman of Seadrill, had acquired an
unspecified number of shares of Pride for investment.
On April 12, 2008, Mr. Raspino received correspondence
from Messrs. Fredriksen and Trøim regarding
Seadrills and its affiliates acquisition, through
undisclosed forward purchase contracts and other acquisitions
from undisclosed parties, of approximately 9.9% of Prides
outstanding common stock. Seadrill also advised Pride that it
had made a filing under the HSR Act to permit Seadrill to
acquire Pride securities. Seadrill also requested that Pride not
publicly disclose its acquisition of Pride securities or its HSR
filing.
On April 14, 2008, in order to assist the Pride board of
directors and management with its consideration of the matter,
Mr. Raspino and Baker Botts sent letters to
Messrs. Fredriksen and Trøim and to Seadrills
U.S. counsel, respectively, requesting information about
Seadrills intentions, plans and proposals with respect to
Pride and its acquisition of the common stock; any agreements,
arrangements or understandings it has with third parties
regarding Pride securities; the terms of the forward purchase
contracts; the reasons for its HSR filing; and the maximum
ownership level specified in the filing. On April 15, 2008,
the Pride board met with management and its financial and legal
advisors to discuss the matter. No information was ever provided
by Seadrill or its counsel pursuant to the requests made on
April 14.
On April 21, 2008, the Pride board again met with
management and its financial and legal advisors. At the meeting,
the board took action under Prides stockholder rights plan
to lower, solely with respect to Seadrill and its affiliates and
associates, the threshold level of beneficial ownership of
Prides common stock that would trigger the rights from 15%
to 10%. The board took the action with respect to the rights
plan because, among other things, Seadrill had not provided
Pride any information about its intentions, and the board wanted
to make sure that all stockholders were protected appropriately.
Pride issued a press release the next morning announcing the
boards action and the reasons therefor, including
information regarding Seadrills positions in Pride stock.
Shortly after the board action and press release,
Mr. Raspino received a call from the chief executive
officer of Company A, and Brian C. Voegele, the senior vice
president and chief financial officer of Pride, received a call
from Jay W. Swent, the chief financial officer of Ensco,
regarding the ongoing Seadrill matter and their potential
interest in a possible transaction with Pride if Pride thought
such a transaction desirable.
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On April 30, 2008, Messrs. Raspino and Voegele had a
telephonic conference with Messrs. Fredriksen and
Trøim. Messrs. Fredriksen and Trøim discussed in
very general terms whether Seadrill and Pride should combine and
the recent action taken by Pride under its rights plan.
Messrs. Fredriksen and Trøim reiterated that Seadrill
had no intention of conducting a hostile transaction with
respect to Pride. They also inquired about a possible meeting
between the parties.
On May 8, 2008, Messrs. Raspino and Voegele met with
Messrs. Kjell E. Jacobsen and Alf C. Thorkildsen, the chief
executive officer and the chief operating officer, respectively,
of Seadrill at the time, to discuss a possible business
combination transaction. The Seadrill representatives stated
that a transaction structure involving a merger of
equals, similar to the 2007 transaction between Transocean
Ltd. and GlobalSantaFe Corporation, was generally of interest to
Seadrill. The participants also discussed the benefits of
industry consolidation in general, as well as Seadrills
views of the jackup and tender markets. The Seadrill
representatives stated that they would come back to Pride with
more specifics regarding a proposed transaction. On May 27,
2008, Mr. Trøim called Mr. Raspino and generally
discussed a possible merger of equals transaction structure
without providing specifics, as well as general industry
conditions.
On June 20, 2008, Messrs. Raspino and Voegele met with
Mr. Trøim. At the meeting, Mr. Trøim stated
that Seadrill had a general interest in a potential acquisition
of Pride and would prefer an all-cash transaction on a
negotiated basis. No pricing terms were proposed by Seadrill.
Mr. Trøim also stated that, if Pride were not willing
to proceed on a negotiated basis, Seadrill had prepared a draft
bear hug letter and was willing to undertake a proxy
contest if needed. Mr. Trøim discussed Seadrills
need to conduct limited tax due diligence on Pride in order to
make a proposal and stated that it would be willing to sign a
confidentiality agreement to obtain the information.
Mr. Trøim inquired as to the level of the premium
Prides board of directors would require. Mr. Raspino
responded that the Pride board would be open to considering any
transaction that would be compelling to its stockholders.
Mr. Raspino stated that he would discuss the matter with
Prides board and would respond in early July 2008.
Prides board met with management and Prides
financial and legal advisors on June 24, 2008 and
July 3, 2008 to discuss the June 20 meeting,
Seadrills request for information and Prides
response. On July 3, 2008, Messrs. Fredriksen and
Trøim sent a letter to Mr. Raspino with respect to the
matters discussed on June 20, which indicated that Seadrill
was working with the intention to make an all cash proposal but
would consider other forms of consideration.
On June 30, 2008, Mr. Raspino met with the chief
executive officer of Company B, an industry participant, at the
request of that officer. The chief executive officer of Company
B expressed a general interest in a business combination with
Pride, but indicated that Company B did not want to get into a
bidding war with Seadrill. No specific proposal was made by
Company B. The Pride board discussed this meeting at its July 3
meeting. On September 8, 2008, the chief executive officer
of Company B and Mr. Raspino spoke while at an industry
conference, and the chief executive officer of Company B again
expressed interest in a transaction to Mr. Raspino, but no
specific proposal was discussed.
On July 8, 2008 and consistent with the discussions of
June 20, Mr. Raspino requested a telephone call with
Mr. Trøim to continue the discussion.
Mr. Trøim did not respond. Seadrill filed an initial
Schedule 13D under the Exchange Act with respect to Pride
securities on July 21, 2008.
On July 22, 2008, Messrs. Raspino and Voegele spoke by
phone with Mr. Trøim. Mr. Raspino indicated that
Pride would be willing to provide tax due diligence as requested
by Seadrill upon execution of a confidentiality agreement.
Mr. Trøim stated that Seadrill would be willing to do
so and would provide Pride a list of the tax due diligence
requested. Mr. Raspino reiterated that the Pride board
would be open to considering any transaction that would be
compelling to its stockholders. At various times between
July 28, 2008 and August 2, 2008, representatives of
Seadrill and Pride corresponded regarding the tax due diligence
requested by Seadrill, and Pride provided a draft
confidentiality agreement. In the correspondence,
Mr. Trøim stated that it was Seadrills intention
to present an attractive all-cash proposal for the consideration
of Prides board.
Mr. Trøim responded to the draft confidentiality
agreement on August 27, 2008 and requested that
Prides counsel discuss certain issues raised with
Seadrills counsel. Members of Prides legal
department called
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Seadrills counsel on August 29, 2008 to discuss open
points on the agreement. Counsel agreed to have further
discussions at a later date.
On September 16, 2008, Mr. Trøim called
Mr. Raspino. With respect to the confidentiality agreement,
Mr. Raspino proposed a compromise proposal to resolve the
open points, and Mr. Trøim indicated the proposal was
likely acceptable, but that he needed to confer with
Mr. Fredriksen. Mr. Trøim stated that Seadrill
was exploring financing proposals for a proposed transaction at
a premium to the then-current market price. Thereafter, no
further discussions regarding the draft confidentiality
agreement or such a proposed transaction occurred.
From the summer of 2008 to the end of the year, the market
prices for equity securities of offshore drilling companies
generally (including Pride) declined significantly, in response
to the worldwide financial and credit crisis and economic
recession.
On January 14, 2009, Messrs. Raspino and Voegele met
with Messrs. Trøim and Thorkildsen, who had been
appointed as the chief executive officer of Seadrill in June
2008. The participants discussed general industry matters and
the two companies respective newbuild programs.
Mr. Trøim also discussed Seadrills discussions
with other industry participants regarding business
combinations. Mr. Trøim stated that Seadrill was still
interested in pursuing an all-cash transaction on a negotiated
basis and suggested that Pride stockholders might be willing to
support a $30 per share offer price. Mr. Raspino responded
that the Pride board would be open to considering any
transaction that would be compelling to its stockholders.
Mr. Trøim stated that Seadrill was testing the market
for financing of the transaction. No specific proposal was made
by Seadrill.
On June 18, 2009, Messrs. Raspino and Voegele met with
Messrs. Fredriksen and Trøim. They discussed general
industry conditions. Messrs. Fredriksen and Trøim
expressed Seadrills continued interest in a transaction
with Pride. No specific proposal was made by Seadrill.
On August 24, 2009, Pride completed the spin-off of Seahawk
Drilling, Inc., which held the assets and liabilities that were
associated with Prides mat-supported jackup rig business.
In the spin-off, Pride stockholders received 100% of the
outstanding common stock of Seahawk by way of a pro rata stock
dividend.
On September 29, 2009, Messrs. Raspino and Voegele met
with Messrs. Trøim and Thorkildsen.
Messrs. Trøim and Thorkildsen expressed
Seadrills continued interest in a transaction with Pride.
They indicated that Seadrill would not be interested in a
hostile transaction. Messrs. Trøim and Thorkildsen
stated that Seadrill had drafted a written proposal that
outlined a framework of a possible transaction. No specific
proposals were made by Seadrill, and the written proposal was
never provided to Pride.
On October 5, 2009, Mr. Raspino met with the chief
executive officer and chief operating officer of Company C, an
industry participant, at their request. At the meeting, Company
C expressed a general interest in acquiring Pride in an
at-market transaction. No specific proposal was ever made by
Company C.
At various times in the fall of 2009, Mr. Raspino met with
the chief executive officer of Company B in order to generally
discuss a possible business combination transaction between the
companies. At one of the meetings, Mr. Voegele and the
chief financial officer of Company B and Company Bs
financial advisors attended. Company B proposed a
stock-for-stock
merger transaction with a cash distribution to shareholders of
both companies, similar to the 2007 Transocean/GlobalSantaFe
transaction. Although the proposal did not include a premium to
Pride stockholders, Company B later indicated that some level of
premium could be provided to the Pride stockholders. The chief
executive officer of Company B confirmed its interest in
pursuing such a transaction in a letter dated November 17,
2009.
The Pride board of directors held several meetings from
September to November 2009 with management and Prides
financial and legal advisors to discuss ongoing developments
with respect to Seadrill, Company B and Company C.
Mr. Raspino responded to the November 17 letter from
Company B by letter dated December 10, 2009.
Mr. Raspino indicated that Prides board did not
believe it was appropriate to pursue further discussions
51
regarding a business combination transaction at that time in
light of Prides strategic business plan, which focused on
higher specification assets.
On April 15, 2010, Mr. Raspino met with the chief
executive officer of Company B. They discussed general industry
matters. The chief executive officer of Company B reiterated
Company Bs interest in a strategic transaction with Pride,
but made no specific proposal.
On April 20, 2010, the rig drilling the Macondo well in the
U.S. Gulf of Mexico experienced an explosion and fire that
resulted in, among other consequences, the death of several of
the workers on the rig and a massive oil spill in the Gulf. The
U.S. government responded by implementing a moratorium on
drilling activities with respect to new wells in water depths
greater than 500 feet in the U.S. Gulf of Mexico and
issuing various environmental, technological and safety
regulations. The Macondo well incident and governmental
responses have had, and continue to have, a significant, lasting
impact on the offshore drilling industry worldwide.
On May 28, 2010, Mr. Raspino was in London on business
unrelated to a possible transaction and contacted Mr. Rabun
about having a business luncheon. At that luncheon,
Messrs. Raspino and Rabun discussed general industry
matters, including the recent events associated with the Macondo
well and resulting oil spill. They further discussed the core
values shared by the companies and the relative strengths of
each company. They also discussed the merits of a company
needing scale to compete effectively in the future offshore
drilling industry, especially given the events related to the
Macondo well incident. Mr. Rabun inquired whether Pride had
considered a strategic combination to achieve critical mass.
Mr. Raspino responded that Pride was assessing the
implications of recent events in the U.S. Gulf of Mexico
and that the Pride board had not made any determination whether
a strategic combination was in the best interests of Pride and
its stockholders. Mr. Rabun indicated that Ensco was
interested in exploring a strategic combination with Pride.
Mr. Rabun and Mr. Raspino continued their discussions
of these topics on July 15, 2010 after attending an
industry event in Washington, D.C. related to the Macondo
well incident.
On August 2, 2010 at the Ensco regularly scheduled quarterly
board meeting, Mr. Rabun advised the Ensco board of his
conversations with Mr. Raspino. The Ensco management team
made an oral presentation of the various strategic priorities
for Ensco and the alternatives to achieve those priorities.
During an executive session of the meeting, the Ensco board
authorized Mr. Rabun to continue the conversations with
Mr. Raspino to determine whether Pride would have an
interest in considering a strategic combination. On
August 3, 2010, at the reconvened Ensco board meeting,
Enscos outside counsel, Helen Bradley of Baker &
McKenzie LLP, provided a general briefing on the fiduciary
duties of directors under English law and discussed the
similarities and differences of Delaware law in this regard.
On August 6, 2010, Mr. Raspino met with the chief
executive officer of Company B. The chief executive officer of
Company B again expressed an interest in exploring a strategic
combination with Pride, but made no specific proposal.
In early September 2010, representatives of Seadrill called
representatives of Goldman Sachs to ask that certain general
terms of a proposed transaction structure be conveyed to Pride.
Price and form of consideration were not discussed, but the
transaction proposal contemplated that the combined company
would be domiciled outside of the U.S. and that Seadrill
would not require control of the board of the combined company.
Mr. Raspino discussed this call with Prides board of
directors on September 13, 2010. Mr. Raspino also
updated the board on his discussions with Ensco and Company B.
On September 14, 2010, Mr. Rabun met with
Mr. Raspino and continued their discussions.
Mr. Raspino informed Mr. Rabun that the Pride board
was preparing for its regularly scheduled board meeting in
October 2010 to consider the companys long-term strategic
plan.
On September 29, 2010, Messrs. Raspino and Voegele met
with Messrs. Fredriksen and Trøim and discussed, among
other matters, a possible transaction between the companies.
Mr. Trøim described a restructuring of the combined
company into three separate companies, one holding premium
assets, a second holding lower specification rigs and a third
holding rigs working in Brazil. Mr. Trøim stated that
Seadrill would be willing to pay a premium to Prides
stockholders, similar to what he characterized as an 18% premium
paid by Pride in its 2001 acquisition of Marine Drilling
Companies, Inc. Mr. Trøim stated that the
52
transaction could be an all-stock transaction or include up to
40% cash. He stated that Seadrill was open-minded regarding the
number of board seats Pride directors would have in the combined
company, but stated that Seadrill would not require a majority
of the board. However, Mr. Trøim stated that Seadrill
would require that the combined company continue Seadrills
financial strategy of significant financial leverage and
significant cash dividends following a business combination.
Mr. Trøim stated that Seadrill was only interested in
a negotiated transaction and would be willing to make a written
proposal to the Pride board if the board would consider a letter
from Seadrill. Mr. Raspino responded that the Pride board
was always open to considering any transaction that would be
compelling to its stockholders. Later that day, the chief
executive officer of Company B
e-mailed
Mr. Raspino about market rumors regarding a meeting by
Mr. Raspino with competitors and requesting that Pride not
enter into a transaction without discussing the matter with
Company B.
On October 5, 2010, the Pride board of directors met with
management and its financial and legal advisors to discuss the
meeting with Seadrill and Seadrills willingness to submit
a written proposal to the board. The board authorized management
to meet with Seadrill to explore the possibility of a
combination with Seadrill in more detail and to obtain more
information about the matters discussed at the September 29
meeting. Based on various comments and inquiries from the media,
other industry participants and stockholders following meetings
or other contacts with Seadrill, the board also expressed
concern about recurring public rumors regarding Seadrills
actions and intentions with respect to Pride and requested
management to discuss the matter with Seadrill.
On October 7, 2010, Mr. Raspino met with the chief
executive officer of Company A. The chief executive officer of
Company A suggested that the companies explore a possible
strategic combination. No terms were discussed.
On October 14, 2010, Messrs. Raspino and Voegele met
with Mr. Trøim and Esa Ikäheimonen, the chief
financial officer of Seadrill, to explore the possibility of a
combination with Seadrill and to obtain more information about
the matters discussed at the September 29 meeting in order to
assist Pride management prepare for the regularly scheduled
board meeting later in October. Messrs. Trøim and
Ikäheimonen discussed Seadrills operating and
financial strategy, as well as their views on the offshore
drilling industry after the Macondo well incident. They also
discussed their views of the strategy of the combined company in
Brazil. Mr. Trøim reiterated that Seadrill wanted to
pursue only a negotiated transaction and that he would be
willing to meet with Prides board if that would facilitate
such a transaction. Mr. Trøim also indicated that
Seadrill would pursue a transaction with another industry
participant if Pride was not interested in a transaction with
Seadrill. Mr. Raspino stated that the Pride board would be
open to considering any transaction that would be compelling to
its stockholders.
At its regularly scheduled meeting on October 18 and 19, 2010,
the Pride board met with management and its legal and financial
advisors. At the meeting, the ongoing discussions with Seadrill,
Ensco, Company A and Company B were reviewed. Baker Botts and
Wachtell Lipton discussed with the directors their fiduciary
duties. Management reviewed with the board potential
transactions involving certain companies in the industry.
Representatives of Goldman Sachs then reviewed its preliminary
financial analyses of the potential transactions.
On October 27, 2010, Messrs. Raspino and Voegele had a
telephone conference with Mr. Trøim and discussed the
companies interest in continuing to explore a possible
combination transaction. Mr. Raspino stated that, following
discussions at the October 18 and 19 board meetings, the Pride
board was open to continuing discussions with Seadrill regarding
a transaction, and would expect the parties to enter into an
appropriate confidentiality agreement. Mr. Trøim
indicated that Seadrill would need to retain its rights to
pursue a hostile transaction.
Also on October 27, 2010, Mr. Rabun had a telephone
conference with Mr. Raspino. Mr. Rabun informed
Mr. Raspino that the Ensco board of directors was having
its regularly scheduled quarterly board meeting on
November 1, 2010 and inquired whether the Pride board of
directors had an interest in considering a strategic combination
with Ensco so the matter could be discussed, in general, at that
board meeting. Mr. Raspino responded that the Pride board
would be open to considering any transaction that would be
compelling to its
53
stockholders. Mr. Raspino informed Mr. Rabun that
Mr. Raspino would need to further discuss Enscos
fleet and the market with the Pride board and requested
Mr. Rabun to provide information in this regard.
On November 1 and 2, 2010, the Ensco board of directors
held a regular quarterly board meeting in London attended by all
members of the board, as well as members of management and
representatives of Deutsche Bank. On November 2, the
members of the board and representatives of Deutsche Bank
discussed the offshore drilling industry in relation to
potential merger and acquisition activity, the competitive
landscape in the offshore drilling industry and several
potential transactions, one of which included Pride. The board
also met in executive session with representatives of Deutsche
Bank to address various questions and comments regarding
potential merger and acquisition activity. The board then
authorized management to pursue initial discussions and take
preliminary actions relating to a potential combination with
Pride, including entry into a confidentiality agreement and
negotiation of an engagement letter with Deutsche Bank.
On November 2, 2010, Messrs. Raspino, Voegele and
Brady K. Long, vice president, general counsel and secretary of
Pride, had a telephonic conference with Mr. Trøim.
Mr. Raspino stated that he had discussed the matter with
the Pride board of directors, and advised that the board
remained open to receiving a written proposal from Seadrill.
Mr. Raspino noted that all discussions with Seadrill over
the past several years had been general in nature, with no
specific proposal ever having been provided by Seadrill.
Mr. Raspino stated that the board would fully consider any
proposal made by Seadrill. Mr. Raspino discussed the
principal topics that Seadrill should include in any such
proposal, including the amount and form of consideration,
financing, conditions to the transaction, board and management
of the combined company, timeline for conducting due diligence,
signing a definitive agreement and closing, and strict
confidentiality. Mr. Raspino informed Mr. Trøim
that Pride had been approached by other competitors and that
Seadrill should put its best offer on the table for an
acquisition of Pride. Mr. Trøim stated that Perella
Weinberg Partners LP (PWP) was acting as
Seadrills financial advisor and would be available for
discussions with Prides board and financial advisor.
During an industry conference on November 10 and 11, 2010,
Mr. Raspino met at separate times with each of
Mr. Rabun, the chief executive officer of each of Company A
and Company B and a representative of another industry
participant. At their meeting, Mr. Rabun and
Mr. Raspino continued their discussion of the strategic
benefits of scale and critical mass, the companies shared
core values and other potential benefits of a strategic
combination. The chief executive officer of Company B expressed
to Mr. Raspino a potential interest in an acquisition of
Pride involving mostly cash, but suggested that a price above
approximately $37 per share would be quite expensive. The chief
executive officer of Company A expressed to Mr. Raspino a
potential interest in a merger of equals transaction.
On November 16, 2010, Mr. Rabun sent a letter to
Mr. Raspino advising him that the Ensco board of directors
authorized Mr. Rabun to proceed with discussions regarding
the possibility of combining Pride and Ensco. Mr. Rabun
stated his expectation that the consideration would represent a
premium to Pride stockholders consistent with that of recent
acquisitions in the oil and gas services industry and would
consist of a mix of cash and newly issued shares of Ensco, which
would permit Pride stockholders to receive up-front value
coupled with an ability to participate in the upside potential
in the combined company.
Also on November 16, 2010, Mr. Fredriksen sent a
letter to Mr. Raspino setting forth the proposed terms of a
combination of Pride and Seadrill. The proposed terms indicated
a price of $37 per share, and included a right of Pride
stockholders to elect to receive for each Pride share $37 in
cash or 1.168 Seadrill shares, subject to proration if more than
30% of the shares elected to receive cash. The proposed
consideration represented an approximately 15% premium to the
closing price of Prides common stock on November 15,
2010. Pride would have the right to nominate three of the eight
members of the companys board of directors. The letter
acknowledged Prides need to conduct due diligence of
Seadrill in light of the substantial portion of the
consideration in the form of Seadrill stock and that Seadrill
stood ready to accommodate due diligence in a timely manner. The
letter also noted that Seadrill would require due diligence with
respect to Pride.
On November 22, 2010, the Pride board of directors met with
management and Prides financial and legal advisors. At the
meeting, the Seadrill and Ensco letters were discussed in
preliminary terms. The board was informed that management and
Prides advisors would provide a more comprehensive
analysis of the proposals at the regularly scheduled board
meetings on December 9 and 10.
54
On November 23, 2010, Mr. Rabun had a telephone
conference with Mr. Raspino to discuss the November 16
letter sent by Mr. Rabun. Mr. Raspino requested
additional information on Enscos fleet and the jackup
market for his discussions with the Pride board.
On November 24, 2010, Mr. Raspino sent
Mr. Fredriksen correspondence informing him that Pride was
targeting a board meeting late in the week of December 6 to
discuss Seadrills November 16 letter and that
Mr. Raspino intended to respond to Mr. Fredriksen
shortly after the meeting.
On November 30, 2010, Mr. Rabun met with
Mr. Raspino to discuss Enscos November 16 letter and
the merits of a combination of the two companies. Mr. Rabun
discussed his view of premium levels consistent with those of
recent acquisitions in the oil and gas services industry as
described in this letter. Mr. Raspino advised
Mr. Rabun that the Pride board of directors would consider
Enscos letter at its regularly scheduled meetings on
December 9 and 10.
On December 1, 2010, Mr. Raspino, Mr. Voegele and
other members of Prides senior management team met with
the chief executive officer, the chief financial officer and
other members of the senior management team of Company A. The
management teams made presentations to each other regarding the
respective companys operations based on publicly available
information. No specifics of a transaction were discussed.
At its regularly scheduled meeting on December 10, 2010,
the Pride board of directors met with management and its legal
and financial advisors. At the meeting, Baker Botts and Wachtell
Lipton discussed with the directors their fiduciary duties.
Management reviewed with the board the proposals made by
Seadrill and Ensco on November 16, and representatives of
Goldman Sachs reviewed its preliminary financial analyses of the
proposals. Also discussed were possible combination transactions
with other industry participants, including Company A, Company B
and Company C. Management and the board discussed various
financial metrics applicable to the possible transactions. The
board authorized management to explore transactions with both
Ensco and Seadrill and to conduct due diligence regarding
potential transactions with both companies.
On December 13, 2010, Mr. Rabun had a telephone
conference with Mr. Raspino. Mr. Raspino stated that
the Pride board had reviewed Enscos proposal based on
publicly available data and that the Pride board had authorized
him to explore with Ensco the possibility of a business
combination transaction on the basis of Enscos November 16
letter and the prior conversations and to initiate mutual due
diligence. Mr. Raspino asked that Ensco send a proposed
confidentiality agreement. Mr. Rabun advised
Mr. Raspino that Ensco would need to perform preliminary
due diligence before an initial proposal of principal terms
could be submitted to Pride.
Ensco sent a draft confidentiality agreement to Pride on
December 14, 2010. The draft confidentiality agreement
included, among other provisions, a requirement that Pride
negotiate exclusively with Ensco for a period of 45 days.
During that day, at the direction of Ensco and Pride,
representatives of Deutsche Bank and Goldman Sachs discussed the
timing of a possible business combination transaction, an
exchange of priority diligence lists, a framework for diligence
and diligence-related matters.
Also on December 14, Messrs. Raspino and Long held a
telephone conference with Messrs. Fredriksen and
Trøim. Mr. Raspino informed them that the Pride board
had reviewed Seadrills proposal based on publicly
available data and that the board had authorized
Mr. Raspino to explore a possible transaction.
Mr. Raspino expressed an interest to meet with Seadrill
representatives to explore a transaction and conduct due
diligence. Mr. Raspino requested that Seadrill provide a
list of the due diligence that Seadrill would require as
referenced in its November 16 letter. Mr. Raspino noted
that Prides analysis was based on only public data and,
accordingly, Pride would need to conduct due diligence of
Seadrill as acknowledged by Seadrill in its letter and would
send Seadrill a list of requested information shortly.
Mr. Raspino noted that the exchange of nonpublic
information would be covered by a typical confidentiality
agreement to be entered into by the companies.
Mr. Trøim suggested that Pride instead meet with PWP,
as Seadrill was not interested in participating in extensive due
diligence meetings. Mr. Trøim indicated uncertainty as
to whether Seadrills November 16 proposal was tied to
a fixed exchange ratio or a fixed share price.
Mr. Trøim requested that Pride agree to a period of
exclusivity with Seadrill and stated that Seadrill would not be
interested in pursuing a transaction without exclusivity.
Mr. Trøim also requested a written response to the
November 16 letter.
55
On December 16, 2010, the Ensco board of directors held an
informal teleconference and discussed the status of the
discussions with Pride. Mr. Rabun informed the board of his
conversations with Mr. Raspino and the board authorized
Mr. Rabun to continue the negotiations with
Mr. Raspino.
On December 17, 2010, the Pride board of directors met with
management to discuss the status of the discussions with Ensco
and Seadrill. Mr. Raspino informed the board of his
conversations with Mr. Rabun and the board authorized Pride
to continue due diligence and authorized Mr. Raspino to
continue the negotiations with Mr. Rabun. The board also
discussed the appropriate response to Seadrill.
On December 18, 2010, Ensco and Pride executed a
confidentiality agreement. The agreement included customary
provisions for the confidentiality of discussions and the
exchange of information. It also included a mutual standstill
agreement effective for 18 months that would be terminated
upon the occurrence of certain events including the commencement
by a third party of a tender offer to acquire voting stock of a
party to the confidentiality agreement representing 20% or more
of the voting securities of such party and the agreement of a
party to enter into a business combination or acquisition
transaction involving a third party. The standstill agreement
precluded either party, without the prior written invitation of
the other partys board of directors or chief executive
officer, from taking various actions, including acquiring or
proposing to acquire securities or derivative securities of the
other party, participating in a proxy solicitation concerning
the other party or proposing a business combination transaction
with the other party. The agreement did not include a provision
requiring Pride to negotiate exclusively with Ensco.
On December 20, 2010, Mr. Raspino sent a letter to
Messrs. Fredriksen and Trøim as requested by Seadrill
in the December 14 conference call to reiterate the discussions
on that call. The letter set forth the proposed next steps,
which were consistent with Seadrills November 16 letter
and customary for transactions involving a significant amount of
stock of the acquiring company. The letter stated that the Pride
board continued to be open to considering any opportunity that
could be compelling for all of Prides stockholders and
that, to the extent Seadrill would like Pride to complete its
evaluation of the proposal, Pride would be willing to proceed
with a meeting and mutual due diligence as Seadrill suggested in
its November 16 letter.
Also on December 20, 2010, the chief executive officer of
Company A sent Mr. Raspino correspondence expressing
interest in continuing the discussions regarding a possible
transaction, which had previously concerned a merger of equals.
No specific terms were provided.
On December 21, 2010, representatives of Goldman Sachs
called PWP to discuss the process for conducting due diligence.
PWP indicated that it would respond after it had discussed the
matter with Seadrill.
Commencing December 22, 2010, officers and other
representatives and advisors of Pride and Ensco conducted mutual
due diligence. Representatives and advisors of the companies
held a number of in person and telephonic meetings with each
other, and each company established virtual data rooms to enable
the parties and their representatives and advisors to engage in
documentary due diligence.
On December 28, 2010, the Pride board of directors met with
management to discuss the status of the discussions with Ensco
and Seadrill.
On December 30, 2010, the Ensco board of directors held a
special telephonic board meeting with participation of all
members of the board, as well as members of management and
representatives of Deutsche Bank and Baker & McKenzie
LLP. Mr. Rabun described several recent senior management
meetings with Pride that included diligence presentations by
each company. Mr. Rabun also reviewed his discussions with
Mr. Raspino, the preliminary financial analyses and models
that had been developed based on different levels and mixes of
stock and cash consideration, the due diligence undertaken by
Ensco and Prides refusal to grant Ensco exclusivity
rights. Mr. Rabun noted that progress had been made in
refining Enscos financial models and analyses.
Representatives of Deutsche Bank discussed certain financial
aspects of the potential transaction with the members of the
board. The directors discussed various questions and comments
regarding the potential merger transaction with management and
representatives of Deutsche Bank. Mr. Rabun noted that
extended diligence, merger agreement and debt financing
negotiations, regulatory submissions and preparation of proxy
materials would proceed concurrently. The board reviewed a draft
of an expression of interest letter and related summary of
proposed terms, discussing various aspects of the drafts in
general and the merger consideration in particular. The board
authorized Mr. Rabun to submit a non-binding expression of
interest letter and summary of proposed terms
56
to Pride, which would reflect an implied value of $39.00 per
share, a mix of 35% cash and 65% shares, and one or two board
seats. After excusing the representatives of Deutsche Bank from
the meeting, Mr. Rabun described the negotiations with
Deutsche Bank regarding terms of engagement of Deutsche Bank to
serve as exclusive financial advisor to Ensco for the potential
transaction.
On December 31, 2010, Mr. Rabun sent a letter to
Mr. Raspino that set forth an indicative proposal of the
terms upon which Ensco proposed to enter into an agreement to
combine the companies. The letter proposed merger consideration
for Pride stockholders consisting of 0.4778 Ensco ADSs and
$13.65 per share of Pride common stock, which represented a
value of $39.00 per share based on the closing price of Ensco
ADSs as of December 30, 2010 and an approximately 18%
premium to the closing price of Prides common stock as of
that same date. The letter indicated that each companys
senior management would have good opportunities with the
combined company. The proposal included a requirement that Pride
negotiate exclusively with Ensco for a period of 21 days
after entering into a written agreement to such effect to be
negotiated between the parties. Pride representatives
subsequently advised Ensco representatives that Pride would not
be in a position to enter into any exclusive negotiating
arrangement.
On January 5, 2011, the Pride board of directors met with
management and its financial and legal advisors. At the meeting,
the board was provided an update on the status of discussions
with Ensco, Seadrill, Company A and Company B. Management
reviewed the due diligence completed to date and representatives
of Goldman Sachs reviewed its preliminary financial analyses of
the proposal by Ensco.
On January 6, 2011, Mr. Rabun had a telephone
conference with Mr. Raspino to discuss the reaction of the
Pride board to Enscos indicative proposal.
Mr. Raspino stated that the Pride board generally reacted
favorably to the indicative proposal and Enscos approach
to the process. However, Mr. Raspino stated that price and
a number of other issues regarding the proposal would need to be
discussed further. Mr. Raspino indicated in general terms
that Pride would require a higher price, and
Messrs. Raspino and Rabun discussed the flexibility in the
mix of stock and cash proposed in the December 31 letter and
Prides proportional representation on the combined
companys board based on the pro forma share ownership of
each companys shareholders in the combined company. No
agreement was reached. They did not discuss any of the other
items in the indicative proposal, but Mr. Raspino stated
the Pride board authorized management to proceed with full
diligence and preliminary negotiation of definitive documents.
On January 7, 2011, the Ensco board of directors held a
special telephonic board meeting with participation of all
members of the board, as well as members of management and
representatives of Deutsche Bank and Baker & McKenzie.
Mr. Rabun provided an update on the proposed transaction
with Pride, with emphasis upon developments following submission
of the expression of interest and summary of proposed terms on
December 31, 2010. Mr. Rabun advised that he received
initial feedback from Mr. Raspino, who had questions
regarding the proposed merger consideration and the board
composition of the merged company. Deutsche Bank representatives
commented that they had a similar discussion with their
counterparts at Goldman Sachs earlier in the week. The Ensco
board then discussed with management and representatives of
Deutsche Bank the points that were raised during the telephone
conversations between the respective chief executive officers.
It was noted that initial due diligence requests had been
prepared and that further meetings with representatives of Pride
had been scheduled to be held in Houston. The board discussed
the proposed terms for the merger and potential points of focus
for diligence. Mr. Swent discussed the contemplated impact
of the potential transaction on Enscos credit ratings and
reported on the financing plan for the proposed transaction and
the status thereof. Michael B. Howe, Enscos Treasurer,
described bridge financing discussions with potential lenders.
Following deliberation, the board authorized management to
continue moving forward with the process and approved the
proposed engagement of Deutsche Bank as Enscos financial
advisor in respect of the potential merger with Pride.
On January 10, 2011, responding to the December 21,
2010 discussions, PWP called representatives of Goldman Sachs to
advise that Seadrill was willing to conduct mutual due diligence
and to request that Pride provide its due diligence request
list. At the direction of Pride, Goldman Sachs sent the initial
due diligence request list to PWP on January 12, 2011.
57
On January 11, 2011, Mr. Rabun met with
Mr. Raspino to discuss the status of due diligence and the
path forward while both were attending an industry event.
On January 14, 2011, Mr. Rabun held an informal
teleconference with the members of the Ensco board of directors,
Ensco management and representatives of Deutsche Bank and
Baker & McKenzie. During the teleconference, the
participants reviewed the progress and findings of the legal,
financial and operational due diligence which had been
conducted, discussed potential synergies that would result from
the combination of Ensco and Pride and considered the financial
and rating agency reactions to such a combination and associated
matters. Deutsche Bank representatives reviewed certain
financial models and assumptions, described communications with
Prides financial advisor Goldman Sachs and commented on
various aspects of the potential merger of Ensco and Pride. It
was the consensus of the board and management that it would be
appropriate to further consider the potential combination of the
two companies and to proceed with preparation of a draft merger
agreement.
On January 16, 2011 Baker & McKenzie delivered a
draft of the proposed merger agreement to Baker Botts. The terms
of the proposed merger agreement were generally consistent with
the terms of the merger agreement as finally executed by the
parties but did not specify an amount of merger consideration or
the number of board seats that would be filled by designees of
Pride. The proposed agreement contemplated a transaction that
would be treated as a reorganization qualifying under
Section 368(a) of the U.S. Internal Revenue Code of
1986, as amended, provided for an election by Pride stockholders
between cash and stock consideration and included conditions to
closing relating to the receipt by Ensco of financing for the
transaction and a limit on the number of Pride shares for which
valid demands for appraisal remained effective. The proposed
merger agreement included covenants restricting Prides
ability to change its board recommendation or solicit competing
transactions and, while not specifying a specific dollar figure
for the termination fee to be payable by Pride, provided that
the amount of such termination fee would be 3.5% of Prides
equity value to be determined at the time of signing of the
merger agreement.
On January 18, 2011, PWP called representatives of Goldman
Sachs after consulting with Seadrill regarding Prides
initial due diligence request list. PWP indicated that Seadrill
would begin compiling the information to respond to the request
on the expectation that the due diligence process would be
reciprocal. PWP reiterated Seadrills position that Pride
agree to negotiate exclusively with Seadrill. On
January 19, at the direction of Pride, representatives of
Goldman Sachs called PWP to discuss Prides need to conduct
a full due diligence review of Seadrill to support its valuation
analysis and advised PWP that Pride would not be in a position
to enter into any exclusive negotiating arrangement.
On January 18, 2011, a stockholder of Pride called to
inform Pride that it would make an HSR filing with respect to
Pride and would propose a slate of directors for the upcoming
annual stockholders meeting. The stockholder requested a meeting
with Pride management, which was held on January 21. On
January 19, counsel for the stockholder notified Pride of
its HSR filing and requested various materials in connection
with a possible nomination of directors. Over the next two
weeks, Pride and its legal counsel had various discussions and
correspondence with the stockholder and its counsel regarding
Pride, the director nomination process and the HSR filing.
On January 19, 2011, the Pride board of directors met with
management and its financial and legal advisors. At the meeting,
the board was provided an update on the status of discussions
with Ensco and Seadrill and the stockholder matters referenced
in the preceding paragraph.
In late January, Mr. Trøim called representatives of
Goldman Sachs to reiterate Seadrills continued interest in
a potential transaction, its expectation that due diligence
would be reciprocal, and that a decision would need to be made
as to direction by mid-February to enable Seadrill to make
decisions regarding directors. Representatives of Goldman Sachs
then communicated Mr. Trøims message to Pride.
Pride assumed that the reference to a mid-February deadline was
a reference to the February 17 deadline for director nominations
under Prides bylaws.
On January 21, 2011, Baker & McKenzie, Baker
Botts and Wachtell Lipton had a telephone conference to discuss
initial comments to the draft Ensco merger agreement, which were
confirmed by email the next day. On
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January 24, Baker & McKenzie, Richards,
Layton & Finger, special Delaware counsel to Ensco,
Baker Botts and Wachtell Lipton discussed the draft of the
merger agreement and the initial comments to the agreement.
In the January 21 and January 24 discussions, counsel for Pride
addressed, among other concerns, their objections to the
proposed financing condition and the condition regarding the
percentage of Pride stockholders demanding appraisal rights, the
requirement that confidentiality agreements that Pride would be
permitted to enter into with potential competing bidders would
be required to include standstill provisions consistent with the
standstill agreement entered into with Ensco, the period of
prior notice that Ensco would require before the Pride board of
directors could change its recommendation, the amount of time
during which Ensco could submit a revised proposal in response
to a notice by Pride of its intent to terminate the merger
agreement and enter into a superior proposal, the absence of
reciprocal provisions restricting Enscos ability to change
its board recommendation or solicit alternative transactions,
the circumstances under which a termination fee would be payable
and the absence of an adequate termination fee that would be
payable under certain circumstances in the event that Ensco
shareholders failed to approve the issuance of Ensco ADSs in
connection with the merger. Counsel for Pride also suggested
that the transaction be structured as a taxable merger without
any election between cash and stock to simplify the structure
and mitigate tax risk to the combined company.
On January 24, 2011, PWP called representatives of Goldman
Sachs. PWP indicated that Seadrill was preparing due diligence
materials in response to Prides January 12 request. PWP
inquired about the process once the materials were provided to
Pride. At the direction of Pride, representatives of Goldman
Sachs stated that Pride could not commit to a specific time
frame for responding, given that no materials had yet been
provided, but that Pride would respond promptly once materials
were received.
On January 25, Baker & McKenzie sent a revised
draft of the merger agreement to Baker Botts. Over the next
10 days, counsel to the parties had various discussions and
correspondence regarding comments to the draft. In addition to
the issues noted below, other principal issues involved
increasing deal certainty by having the no solicitation covenant
apply reciprocally to Ensco and by Enscos agreeing that
Delaware Sub would agree to pay the same termination fee in the
same circumstances as would apply to Pride. The parties also
discussed the provisions dealing with the treatment of employees
of Pride after the merger.
As contemplated by the letter agreement between Pride and
Goldman Sachs, dated August 10, 2007, Pride and Goldman
Sachs entered into a letter agreement effective as of
January 26, 2011, pursuant to which Pride engaged Goldman
Sachs to act as its financial advisor in connection with the
potential acquisition of Pride or other similar extraordinary
transactions involving Pride or the acquisition of Pride.
On January 27, 2011, the Ensco board of directors held a
special telephonic board meeting with participation of all
members of the board, as well as members of management and
representatives of Deutsche Bank and Baker & McKenzie.
Mr. Rabun reported that the business and legal due
diligence had progressed substantially and described the Pride
comments to the merger agreement and the plan for continued
negotiations. Mr. Swent reviewed revised financial models
prepared by management that were reconciled to models previously
reviewed with the board, noting that budget information recently
had been received from Pride. He noted that due diligence would
continue regarding capital expenditures. Representatives of
Deutsche Bank reviewed with the board various financial analyses
and other considerations relating to the proposed transaction.
The Deutsche Bank presentation concluded with a review of
certain terms of the proposed transaction, after which
representatives of Deutsche Bank responded to questions and
comments from the board. Mr. Howe described the proposed
bridge financing arrangements and the progress in obtaining
credit committee approval from affiliates of Deutsche Bank.
On January 31, 2011, Gerald Haddock, an Ensco director and
chairman of Enscos audit committee, telephonically
conferred with Francis S. Kalman, a Pride director and chairman
of Prides audit committee, to discuss certain FCPA and
regulatory compliance diligence matters.
On February 1, 2011, Mr. Raspino had a telephone
conference with Mr. Rabun to further discuss the principal
issues related to pricing and board representation in connection
with the potential transaction. With respect to pricing,
Mr. Raspino indicated that Ensco should make its highest
possible proposal for consideration by the Pride board.
Mr. Raspino again suggested that Pride should have
proportional representation on the
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combined companys board based on the pro forma share
ownership of each companys shareholders in the combined
company. No agreement was reached.
On February 2, 2011, PWP provided to Pride an initial
package of due diligence materials of Seadrill in partial
response to Prides request. On February 4,
Mr. Raspino sent a letter to Mr. Fredriksen
acknowledging receipt of the materials and requesting again the
due diligence request list of information that Seadrill would
require. Mr. Raspino indicated that the Pride board
continued to be open to considering any opportunity that would
be compelling for its stockholders and that Mr. Raspino was
available to meet with Mr. Fredriksen, as he had done many
times in the past with Messrs. Fredriksen and Trøim,
if it would further advance that goal. Later that day,
Mr. Raspino sent Messrs. Fredriksen and Trøim a
confidentiality agreement executed by Pride that did not have
any standstill provisions.
Also on February 2, 2011, the Pride board of directors met
with management and representatives of Goldman Sachs, Baker
Botts and Wachtell Lipton. At the meeting, Baker Botts and
Wachtell Lipton reviewed with the Pride directors their
fiduciary duties. Management discussed with the board various
financial metrics and analyses regarding Pride, Ensco and the
pro forma combined company. Management also discussed with the
board the results of the due diligence review with respect to
Ensco. Management, together with Baker Botts and Wachtell
Lipton, discussed the significant business issues contained in
the most recent draft of the merger agreement, including with
respect to price, mix of consideration, board representation,
conditionality, deal certainty and employee matters. The board
discussed with management the status of discussions with
Seadrill, Company A and Company B, as well as possible
transactions with other industry participants, including Company
C. Representatives of Goldman Sachs reviewed its preliminary
financial analyses of the proposed merger.
On February 4, 2011, Baker & McKenzie sent a
revised draft of the merger agreement to Baker Botts, which, in
addition to the matters that had been previously discussed,
included a modification to the definition of material
adverse effect that would include a breach or violation,
or occurrence reasonably likely to result in a breach or
violation, of Prides deferred prosecution agreement with
the U.S. Department of Justice in connection with
Prides settlement of potential violations of the FCPA if
such breach, violation or occurrence would permit the Department
of Justice to extend the term of such agreement or pursue any
criminal charges or prosecution or any civil or administrative
action that was not filed as a result of the deferred
prosecution agreement.
On February 4, 2011, the Ensco board of directors held a
special telephonic board meeting with participation of all
members of the board, as well as members of management and
representatives of Deutsche Bank and Baker & McKenzie.
Mr. Rabun reported that due diligence had progressed
substantially and advised that comments had been received from
Pride on the proposed merger agreement. Mr. Rabun discussed
various aspects of the diligence undertaken by Ensco and Pride.
Mr. Haddock described his telephone conversation with
Mr. Kalman. Mr. Rabun described a recent telephone
conversation with Mr. Raspino. Mr. Rabun summarized
the principal outstanding issues in relation to the proposed
merger agreement, and called upon Alan Harvey of
Baker & McKenzie to provide an overview of the
contemplated transaction. Mr. Harvey reviewed the
contemplated merger structure and consideration composed of a
mix of cash and Ensco shares and also discussed the potential
tax treatment of the merger consideration for the Pride
stockholders. He described the principal open issues.
Mr. Rabun described the process that would be employed, if
the board determined to proceed. Representatives of Deutsche
Bank reviewed updated materials which had been distributed to
the board. After noting that there were no major changes since
the last discussion with the board, representatives of Deutsche
Bank reviewed various updated financial analyses and
sensitivities, the competitive landscape and other illustrative
combinations with Pride. The board discussed the dynamics of
recent developments, other potential interested parties and due
diligence, and further reviewed key issues pertaining to the
merger agreement. Mr. Rabun led a discussion on negotiating
strategy. Following discussion with participation by the
financial and legal advisors, Mr. Rabun was authorized to
present a specific merger proposal to Pride involving designated
merger consideration in cash and stock and two Pride
directorships on the combined company board. The board met in
executive session to discuss social, organizational, severance
and retentive compensation matters.
On February 4, 2011, Mr. Rabun had a telephone
conference with Mr. Raspino, during which Mr. Rabun
stated that Ensco was willing to increase the cash portion of
the consideration by $1.08 per share to $14.73 per share, with
the same exchange ratio of 0.4778 Ensco ADSs per Pride share as
set forth in the December 31
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proposal. The proposed consideration represented a price of
$41.00, or an approximately 20% premium to the closing price of
Prides common stock as of February 3, based on the closing
price of Ensco ADSs on that date.
On February 5, 2011, Mr. Raspino advised
Mr. Rabun that, based on the level of premium previously
discussed and the favorable results of due diligence, the Pride
board had expected a price in the $42.00 per share range, as
well as three board seats. Mr. Raspino also discussed the
removal of the new provision relating to the deferred
prosecution agreement that had been proposed for inclusion in
the definition of material adverse effect in the merger
agreement. Mr. Rabun indicated that Ensco would not require
the proposed provision.
On February 5, 2011, the Ensco board of directors held a
special telephonic board meeting with participation of all
members of the board, as well as members of management and
representatives of Deutsche Bank and Baker & McKenzie.
Mr. Rabun advised that he had received an initial response
to Enscos revised proposal from Mr. Raspino, who
requested that three Pride directors serve on the board of the
combined company. Mr. Rabun also advised that
Mr. Raspino indicated that the Pride board required a
somewhat higher price. The board determined that it would be
inappropriate to modify the proposal that had been submitted to
Pride until such time as the Pride board had an opportunity to
fully consider the matter. The meeting was adjourned until Ensco
received a response to its proposal.
On February 5, 2011, the Pride board of directors met with
management and Prides financial and legal advisors to
discuss the Ensco proposal and the terms of the current draft of
the merger agreement. The board indicated to Mr. Raspino
that it would support a transaction if, among other matters, it
offered a value that was a 21% premium to the closing price of
Pride common stock on February 4, 2011, or $41.60 per
share. The board authorized Mr. Raspino to continue to seek
additional board representation on Enscos board following
the merger so long as it would not diminish the value that Ensco
was prepared to offer.
Mr. Raspino called Mr. Rabun that day to propose a
price with a value equal to a 21% premium to the closing price
of Pride common stock on February 4, 2011, or $41.60 per
share, and that Pride directors would have three seats on the
combined companys board.
The Ensco telephonic board meeting was reconvened later that
day. Mr. Rabun reported on his call with Mr. Raspino.
The Ensco board discussed the feedback received from
Mr. Raspino and considered the merger consideration issue
in consultation with Enscos financial advisor.
Representatives of Deutsche Bank then discussed certain
considerations that it would take into account in rendering a
fairness opinion. Following discussion with representatives of
Deutsche Bank regarding the merger consideration, the board
determined that its initial proposal to provide Pride two seats
on the combined company board should remain unchanged. The board
determined that Pride should be advised (1) that the
proposed additional merger consideration would be satisfactory
if comprised of $15.60 in cash and 0.4778 Ensco ADSs, each whole
ADS representing one Class A ordinary share, for each share
of Pride common stock and (2) the Pride directors would
have two seats on the combined companys board.
Mr. Rabun was authorized to convey the boards
determination to Mr. Raspino for presentation to the Pride
board of directors. The Ensco board entered into executive
session to enable the board to discuss certain employment and
compensation matters.
Mr. Rabun called Mr. Raspino to convey the Ensco
boards determination that (1) the proposed additional
merger consideration would be satisfactory if comprised of
$15.60 in cash and 0.4778 Ensco ADSs for each share of Pride
common stock and (2) the Pride directors would have two
seats on the combined companys board. After discussions
with the chairman of the Pride board of directors and
Prides financial and legal advisors, Mr. Raspino
called Mr. Rabun to inform him that those proposed terms
were acceptable to the Pride board and that the respective
counsel should work to finalize the documentation.
Mr. Rabun again reconvened the Ensco telephonic board
meeting later that day. Mr. Rabun advised that
Mr. Raspino had informed him that Enscos proposed
terms for the merger were acceptable to the Pride board, subject
to resolution of the few remaining open issues in agreement. The
final approval would be forthcoming following a Pride board
meeting to be held on the following day. Mr. Harvey
reviewed the proposed merger agreement and summarized the terms
of the proposed merger, pursuant to which the owner of each
share of Pride common stock would be entitled to receive per
share compensation composed of $15.60 in cash and 0.4778 Ensco
ADSs, each whole ADS representing one Class A ordinary
share. He then described the
61
termination provisions of the merger agreement, noting that they
entailed a
break-up fee
of $260 million, which is reciprocal, contained fiduciary
outs and a reciprocal $50 million fee in the event either
companys shareholders fail to approve the transaction in
the absence of a competing offer. Mr. Rabun noted that
employee matters had also been addressed in his conversation
with Mr. Raspino, resulting in an understanding that
employees would generally be treated on a common basis. The
board engaged in a general discussion with management and
Enscos outside financial and legal advisors regarding the
terms and conditions of the contemplated agreement. Helen
Bradley of Baker & McKenzie LLP, described the
boards fiduciary duties in relation to the contemplated
merger transaction, referring to her presentation to the board
on August 3, 2010 regarding directors duties.
Representatives of Deutsche Bank described the terms of the
fairness opinion which would be delivered by Deutsche Bank and
the financial terms of the merger agreement, and presented
financial analysis with respect to Pride, Ensco and the combined
company. Deutsche Bank then delivered its oral opinion to the
Ensco board of directors, which was subsequently confirmed by
delivery of a written opinion dated February 6, 2011, to
the effect that, as of such date and based upon and subject to
the matters set forth therein, the merger consideration
comprised of $15.60 in cash and 0.4778 Ensco ADSs, each whole
ADS representing one Class A ordinary share, to be paid in
respect to each share of Pride common stock was fair, from a
financial point of view, to Ensco. The full text of Deutsche
Banks written opinion, dated February 6, 2011, which
sets forth, among other matters, the assumptions made, matters
considered and limitations, qualifications and conditions on the
review undertaken by Deutsche Bank in connection with the
opinion, is attached as Annex B. See
Opinion of Deutsche Bank Securities Inc.
Following review and discussion among the Ensco directors, the
Ensco board unanimously determined the merger to be advisable
and likely to promote the success of Ensco for the benefit of
its shareholders and in the best interests of Ensco. The board
unanimously approved the terms and conditions for the
contemplated merger including the conversion of each Pride share
into the right to receive $15.60 and 0.4778 Ensco ADSs, each
whole ADS representing one Class A ordinary share. The
board also approved the submission to Ensco shareholders of an
ordinary resolution to approve the issuance and delivery of the
ADSs in respect of Class A ordinary shares to Pride
stockholders, the filing with the SEC of a registration
statement to register Class A ordinary shares represented
by ADSs pursuant to the Securities Act of 1933, as amended, the
filing with the New York Stock Exchange of a listing application
and a bridge commitment letter and related fee letter providing
for an unsecured term loan bridge facility of $2.75 billion
to fund, together with cash on hand, the cash portion of the
merger consideration. Later on February 5, 2011,
Mr. Rabun had a telephone conference with Mr. Raspino
to discuss the Ensco proposal and the results of the Ensco board
meeting.
On February 6, 2011, the Pride board of directors held a
specially scheduled board meeting attended in person or
telephonically by all members of the Pride board, as well as
members of management and representatives of Goldman Sachs,
Baker Botts and Wachtell Lipton. At the meeting, Baker Botts and
Wachtell Lipton reviewed with the Pride board of directors its
fiduciary duties. Baker Botts and Wachtell Lipton discussed with
the board the principal terms and conditions of the merger
agreement. Goldman Sachs presented its financial analyses of the
proposed merger and delivered its oral opinion to the Pride
board of directors, which was confirmed by delivery of a written
opinion dated February 6, 2011, that, as of such date and
based upon and subject to the limitations and assumptions set
forth therein, the merger consideration to be received by the
Pride stockholders (other than Ensco and its affiliates)
pursuant to the merger agreement was fair, from a financial
point of view, to such holders. See Opinion of
Goldman, Sachs & Co. The board discussed with
management the strategic benefits of the transaction and
compared the transaction to possible transactions with Seadrill
and other industry participants. Mr. Raspino discussed his
view of the principal benefits to Pride and its stockholders of
the combination of the two companies and recommended, on behalf
of management, that the board approve the transaction. See
Recommendation of the Pride Board of Directors
and Its Reasons for the Merger for a discussion of such
principal benefits of the transaction and for a discussion of
the factors considered by the Pride board in concluding that the
merger agreement and the transactions contemplated by the merger
agreement are advisable and in the best interests of Pride and
its stockholders, including the boards belief that the
merger represented superior value to Pride stockholders as
compared with the potential stockholder value that might result
from other strategic alternatives that might be available to
Pride, including Prides remaining an independent public
company and possible transactions with other industry
participants. Upon the recommendation of the compensation
committee of the board of
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directors, the board approved certain matters with respect to
the treatment of equity awards as provided in the merger
agreement. Following review and discussion among the members of
the Pride board of directors, the Pride board of directors
unanimously determined that the merger agreement and the
transactions contemplated by the merger agreement were advisable
and in the best interests of Pride stockholders, and all of the
Pride directors unanimously voted to approve the merger
agreement and the transactions contemplated by the merger
agreement.
On February 6, 2011, Mr. Rabun had a telephone
conference with Mr. Raspino to discuss the results of the
Pride board meeting.
Over the course of the day on February 6, 2011, the merger
agreement was finalized and was executed and delivered by Ensco
and Pride that evening.
On February 7, 2011 and shortly before the public
announcement of the merger, Mr. Trøim
e-mailed
Mr. Raspino addressing the confidentiality agreement and
Seadrills continuing interest in pursuing a transaction
with Pride.
On February 7, 2011, Ensco and Pride issued a joint press
release, before the commencement of trading on the NYSE,
announcing the transaction, and senior management of Ensco and
Pride held a joint conference call. Various communications and
the merger agreement were filed with the SEC on February 7,
2011 and thereafter.
On February 10, 2011, representatives of Baker &
McKenzie and Citibank, the exchange agent for the merger
consideration, conferred by telephone to discuss the
certification and settlement procedures with respect to shares
of Pride common stock beneficially owned in book-entry form by
certain U.K. residents in order to provide reasonable assurances
of compliance with the U.K. Prospectus Rules. Citibank reported
that the Depository Trust Company had indicated that the
certification process would require a specified deadline and
that revisions would be necessary to the certification and
exchange process with respect to settlement of book-entry
shares. Over the next three weeks, representatives of
Baker & McKenzie, Baker Botts, Wachtell Lipton and
Citibank conferred several times to discuss potential amendments
to the merger agreement to provide for an efficient
certification, exchange and settlement process, and
Baker & McKenzie provided drafts of revised language
for the merger agreement, which were discussed by the parties.
On February 27, 2011, Baker & McKenzie sent Baker
Botts a form of amendment to the merger agreement reflecting the
negotiated language. On February 28, 2011, the Ensco board,
at a regularly scheduled meeting, approved the amendment. On
March 1, 2011, the Pride board approved the amendment by
unanimous written consent, and the parties executed and
delivered the amendment that day.
Recommendation
of the Ensco Board of Directors and Its Reasons for the
Merger
By vote at a meeting held on February 5, 2011, the Ensco
board of directors unanimously determined that the merger
agreement and the transactions contemplated by it are advisable
and in the best interests of Ensco and its stockholders and
approved the merger agreement and approved the issuance and
delivery of Ensco ADSs pursuant to the merger agreement. The
Ensco board of directors unanimously recommends that Ensco
shareholders vote FOR approval of the issuance and
delivery of Ensco ADSs pursuant to the merger agreement.
In deciding to approve the merger agreement and to recommend
that Ensco shareholders vote to approve the issuance and
delivery of Ensco ADSs to Pride stockholders pursuant to the
merger agreement, the Ensco board of directors consulted with
Enscos management and financial and legal advisors and
considered several factors.
Many of the factors considered favored the conclusion of the
Ensco board of directors that the merger is advisable and in the
best interests of Ensco and its stockholders. The Ensco board of
directors considered a number of factors concerning the merger.
The Ensco board of directors considered these factors as a whole
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and without assigning relative weights to each such factor, and
overall considered the relevant factors to be favorable to, and
in support of, its determinations and recommendations. These
factors included:
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that the merger would enhance Enscos asset base, customer
opportunities and service offerings by creating the worlds
second largest offshore drilling fleet, with 74 rigs spanning
all of the strategic, high-growth markets around the globe;
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that the merger would lead to future business opportunities in
strategic, high-growth markets, particularly Brazil and West
Africa, two of the fastest-growing deepwater markets in the
world.;
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that the addition of Prides assets would provide a
substantial presence in deepwater drilling sector, with 21
deepwater drilling rigs, including seven rigs delivered since
2008 and another five rigs expected to be delivered between now
and 2013, establishing the combined fleet as among the youngest
and most capable in the industry;
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that the merger would provide a complementary fleet composition,
geographic scope and customer base;
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that the merger would provide a combined estimated revenue
backlog of approximately $10 billion;
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that Ensco management expects the merger to result in meaningful
cost savings and operational synergies, estimated to be in
excess of $50 million per year in 2012 and beyond;
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the merger is anticipated to be immediately accretive to
Enscos earnings and cash flow;
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the terms of the merger agreement, the structure of the
transaction, including the conditions to each partys
obligation to complete the merger, and the ability of the Ensco
board of directors to terminate the agreement under certain
circumstances;
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that the merger agreement provides that, under certain
circumstances, Pride could be required to pay a termination fee
of $260 million to Ensco and a fee of $50 million in
other circumstances;
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the ability of Ensco and Pride to complete the merger, including
their ability to obtain the necessary regulatory approvals and
their obligations in connection with obtaining those
approvals; and
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Deutsche Banks presentation to the Ensco board on
February 5, 2011 and the oral opinion of Deutsche Bank to
the Ensco board of directors on February 5, 2011,
subsequently confirmed in a written opinion dated
February 6, 2011, to the effect that, as of the date
thereof and based on and subject to the assumptions,
limitations, qualifications and conditions described therein,
the merger consideration comprised of $15.60 in cash and 0.4778
Ensco ADSs, each whole ADS representing one Class A
ordinary share, to be paid in respect of each share of Pride
common stock was fair, from a financial point of view, to Ensco.
The full text of Deutsche Banks written opinion, dated
February 6, 2011, which sets forth, among other matters,
the assumptions made, matters considered and limitations,
qualifications and conditions on the review undertaken by
Deutsche Bank in connection with the opinion, is attached as
Annex B. Deutsche Banks opinion was addressed to, and
for the use and benefit of, the Ensco board, does not address
Enscos underlying business decision to engage in the
merger, and is not a recommendation as to how any holder of
Ensco ADSs or Class A ordinary shares should vote with
respect to the merger. See Opinion of Deutsche
Bank Securities Inc.
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The Ensco board of directors considered additional information
concerning the merger. The Ensco board of directors considered
this information as a whole and without assigning relative
weights to each such item, and overall considered the relevant
factors to be favorable to, and in support of, its
determinations and recommendations. This information included:
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information concerning the financial condition, results of
operations, prospects and businesses of Ensco and Pride provided
by management of each of the companies, including the respective
companies cash flows from operations, expected accretion
to earnings and cash flow, recent performance of common stock
and the ratio of Ensco ADSs price to Pride common stock price
over various periods, as well as current industry, economic and
market conditions;
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the earnings per share, price to earnings multiples and other
market factors of both Ensco and Pride; and
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the results of Enscos business, legal and financial due
diligence review of Pride.
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The Ensco board of directors also considered a variety of risks
and other potentially negative factors concerning the merger
agreement and the transactions contemplated by it, including the
merger. These factors included:
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that there are significant risks inherent in combining and
integrating two companies, including that the companies may not
be successfully integrated or that the expected synergies from
combining the two companies may not be realized, and that
successful integration of the companies will require the
dedication of significant management resources, which will
temporarily detract attention from the
day-to-day
businesses of the combined company;
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the effects on cash flows from operations and other financial
measures under various modeling assumptions, and the
uncertainties in timing and execution risk with respect to the
anticipated benefits of the merger;
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the need to obtain additional debt financing to be able to pay
the cash component of the merger consideration and the lack of a
financing condition in the merger agreement;
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the negative effect on employee morale and cost of relocating
the headquarters of its U.S. operations to be consolidated
with Prides headquarters in Houston;
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that the merger agreement provides that, in certain
circumstances, Delaware Sub could be required to pay a
termination fee of $260 million to Pride and a fee of
$50 million in certain other circumstances;
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that the merger might not be completed as a result of a failure
to satisfy the conditions contained in the merger agreement,
including failure to receive necessary regulatory approvals such
as under the HSR Act;
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the potential that certain institutional holders of shares of
Pride common stock may not be permitted by their investment
policies or may not otherwise want to hold ADSs of a
non-U.S. company
and would, as a result, sell the Ensco ADSs in the open market
shortly after the closing of the merger, which may have a
short-term, negative effect on the market prices of Ensco ADSs;
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the possibility of losing key employees and skilled workers as a
result of the merger and the expected consolidation of its
U.S. headquarters in Houston;
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the possibility of customer overlap or that key customers may
choose not to do business with the combined company; and
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other matters described under the caption Risk
Factors.
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This discussion of the information and factors considered by the
Ensco board of directors in reaching its conclusion and
recommendations includes all of the material factors considered
by the board but is not intended to be exhaustive and is not
provided in any specific order or ranking. In view of the wide
variety of factors considered by the Ensco board of directors in
evaluating the merger agreement and the transactions
contemplated by it, including the merger, and the complexity of
these matters, the Ensco board of directors did not find it
practicable to, and did not attempt to, quantify, rank or
otherwise assign relative weight to those factors. In addition,
different members of the Ensco board of directors may have given
different weight to different factors. The Ensco board of
directors did not reach any specific conclusion with respect to
any of the factors considered and instead conducted an overall
analysis of such factors and determined that, in the aggregate,
the potential benefits considered outweighed the potential risks
or possible negative consequences of approving the merger
agreement and the issuance and delivery of Ensco ADSs pursuant
to the merger agreement. As of the date of this joint proxy
statement/prospectus, there have been no material changes in the
operations or performance of Ensco or in the financial
projections for Ensco or Pride prepared by Enscos
65
management since February 6, 2011, and Ensco does not
anticipate such changes to occur prior to the general meeting of
Ensco shareholders.
It should be noted that this explanation of the reasoning of the
Ensco board of directors and all other information presented in
this section is forward-looking in nature and, therefore, should
be read in light of the factors discussed under the heading
Cautionary Statement Concerning Forward-Looking
Statements.
Recommendation
of the Pride Board of Directors and Its Reasons for the
Merger
By a vote at a meeting held on February 6, 2011, the Pride
board of directors unanimously determined that the merger
agreement and the transactions contemplated by the merger
agreement were advisable and in the best interests of Pride and
its stockholders and approved the merger agreement and the
transactions contemplated thereby, including the merger. The
Pride board of directors unanimously recommends that the Pride
stockholders vote FOR the proposal to adopt the merger agreement
at the Pride special meeting.
In evaluating the merger, the Pride board of directors consulted
with Prides management and legal and financial advisors
and, in reaching its determination and recommendation, the Pride
board of directors considered a number of factors. The Pride
board of directors also consulted with outside legal counsel
regarding its fiduciary duties, legal due diligence matters and
the terms of the merger agreement.
Many of the factors considered favored the conclusion of the
Pride board of directors that the merger agreement and the
transactions contemplated by the merger agreement are advisable
and in the best interests of Pride and its stockholders,
including the following:
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The aggregate value and composition of the merger consideration
to be received by Pride stockholders in the merger.
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That the merger consideration with a value of $41.60 per share
of Pride common stock, based upon the closing price of Ensco
ADSs on February 4, 2011 (the last trading date before the
date of the Pride board meeting), represented a premium of:
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21% to the closing price of Pride common stock on the same
date; and
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26%, 38% and 45% to the one-month, six-month and
12-month
average closing prices of Pride common stock.
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The potential stockholder value that might result from other
alternatives available to Pride, including the alternative of
remaining as an independent public company, considering, in
particular, the potential for Pride stockholders to benefit from
any future earnings growth of Pride and continued costs, risks
and uncertainties associated with continuing to operate as a
public company.
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The belief of the Pride board of directors that the shared core
values of the two companies, including those of safety, employee
development, ethics, operational excellence and customer
satisfaction, will assist in integration of the companies,
enhance the reputation of the combined company as an
employer of choice and its ability to attract,
retain and develop a high quality workforce and enhance customer
service going forward.
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That the merger would enhance Prides assets, customer
opportunities and service offerings by creating the worlds
second largest and second youngest fleet of deepwater rigs, with
21 rigs and an average age of approximately seven years, and the
second largest fleet of offshore drilling rigs, with 74 rigs
spanning the worlds strategic, high-growth markets,
including the largest active fleet of jackups, all independent
leg design with many equipped with high specification features
increasingly preferred by clients.
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The diversity of the combined companys assets, customers
and geographic areas of operations.
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The prospects of the combined company, including the value of
critical mass and the potential for the combined company to have
a stronger competitive position, greater opportunities for
growth and an
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enhanced ability to meet the increasingly stringent regulatory
requirements worldwide than Pride would have operating
independently in the offshore drilling industry, particularly
given events related to the Macondo well incident.
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The boards familiarity with, and understanding of,
Prides business, assets, financial condition, results of
operations, current business strategy and prospects.
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The financial analyses presented by Goldman Sachs at the Pride
board meeting held on February 6, 2011, and the oral
opinion of that firm delivered to Prides board on that
date, which was confirmed by delivery of a written opinion dated
February 6, 2011, that, as of such date and based upon and
subject to the limitations and assumptions set forth therein,
the merger consideration to be received by the Pride
stockholders (other than Ensco and its affiliates) pursuant to
the merger agreement (which for purposes of this paragraph
refers to the original merger agreement dated February 6,
2011) was fair, from a financial point of view, to such holders,
as more fully described below under Opinion of
Goldman, Sachs & Co. The full text of the
written opinion of Goldman Sachs, dated February 6, 2011,
which sets forth assumptions made, procedures followed, matters
considered and limitations on the review undertaken in
connection with the opinion, is attached as Annex C to this
joint proxy statement/prospectus.
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Information and discussions regarding Enscos business,
assets, financial condition, results of operations, business
plan, financial strategy, customer relationships, management and
prospects, including the size and scale of the combined company
and the expected pro forma effect of the merger on the combined
companys global rig fleet, potential customers, cost of
capital, earnings, cost structure and capitalization, and the
belief that the larger combined company would have more
financial resources to pursue additional, meaningful growth
while high-grading its fleet.
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The possibility that the combined company would achieve a higher
trading multiple than Pride as a stand-alone company and would
be more attractive to a broader group of investors because of
the size, competitive position, asset quality and worldwide
presence of the combined company.
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That the merger consideration is payable in cash and Ensco ADSs,
providing Pride stockholders with the opportunity to participate
in the equity value of the combined company following the merger
while at the same time providing immediate value through the
cash component of the merger consideration, with Pride
stockholders expected to hold approximately 38% of the combined
companys ADSs outstanding immediately after the merger and
two Pride directors bringing their experience to the combined
companys board.
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That the merger agreement has no financing condition and the
belief of the Pride board of directors, supported by the
financing commitment letter, and established after consultation
with Prides advisors regarding the terms and degree of
conditionality of the financing commitment letter, that Ensco
would be able to obtain the financing necessary to pay the cash
portion of the merger consideration payable under the merger
agreement.
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The belief of the Pride board of directors that the merger
represented superior value to Pride stockholders as compared
with the potential stockholder value that might result from
other strategic alternatives that might be available to Pride,
including possible transactions with Seadrill, Company A,
Company B, Company C, other industry participants with which
Pride has had discussions and other potential acquirers, taking
into account, among other matters, (1) indications of value
proposed or suggested by such participants as compared with the
value of the merger consideration, and the boards view of
the low likelihood that value superior to the merger
consideration was achievable, (2) the history of
discussions with such participants, (3) the likelihood that
any of them would offer a transaction more advantageous to Pride
stockholders than the merger, (4) the likelihood that an
agreement could be reached regarding such an alternative
transaction on a timely basis, the likelihood that any
transaction agreed to would be consummated and the risk that
pursuing such an alternative transaction would render a
transaction with Ensco unavailable, (5) the risks to Pride
if such an
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alternative transaction was not agreed to or not consummated,
(6) the possible detrimental effects of public disclosure
of Prides exploring possible business combination
transactions and (7) the following:
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Information and discussions regarding Seadrills business,
assets, financial condition, leverage, results of operations,
financial strategy, customer relationships, management and
prospects, as well as the status, nature and uncertainty of
Prides discussions with Seadrill, including consideration
of the matters with respect to Seadrill described under
Background of the Merger above, and
discussions with respect to the relative value of Seadrill
equity compared with Ensco equity and the equity of other
offshore drillers.
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Consideration of the analyses presented to the Pride board
regarding Company A, Company B, Company C, other industry
participants with which Pride has had discussions and the
potential for other interested acquirers and the substance of
the discussions with Company A, Company B, Company C and such
other industry participants.
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That Ensco is headquartered in a jurisdiction that has a
favorable tax regime and an extensive network of tax treaties,
which can allow the combined company to achieve a global
effective tax rate comparable to our competitors, and that Ensco
is moving its U.S. headquarters to Houston from Dallas,
thereby allowing the employees of Pride more easily to
contribute to the success of the combined company.
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That Ensco currently pays regular quarterly cash dividends on
its Class A ordinary shares ($0.35 per share since the
second quarter of 2010) while Pride does not currently pay
a dividend and that, after the proposed transaction,
Prides stockholders will be entitled to receive dividends,
if any, paid by Ensco on its Class A ordinary shares.
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The review by the Pride board of directors with its legal and
financial advisors of the structure of the merger and the
financial and other terms of the merger agreement, including the
parties representations, warranties and covenants, the
conditions to their respective obligations and the termination
provisions, as well as the likelihood of consummation of the
merger and the Pride boards evaluation of the likely time
period necessary to close the transaction. The Pride board of
directors also considered the following specific aspects of the
merger agreement:
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The combination of stock and cash consideration contemplated by
the merger agreement.
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Prides right to designate two current non-employee
directors to the board of directors of Ensco.
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The nature of the closing conditions included in the merger
agreement, including the market, industry-related and other
exceptions to the events that would constitute a material
adverse effect on either Pride or Ensco for purposes of the
agreement, as well as the likelihood of satisfaction of all
conditions to the consummation of the merger.
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Enscos agreement to use reasonable best efforts to obtain
approvals of applicable antitrust and competition authorities,
including disposing of assets and limiting the combined
companys freedom of action, except for such matters which,
in the reasonable good faith judgment of both Ensco and Pride,
are reasonably likely individually or in the aggregate to have a
material adverse effect on either Ensco or Pride.
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Prides right to engage in negotiations with, and provide
information to, a third party that makes an unsolicited written
acquisition proposal, if the Pride board of directors determines
in good faith, after consultation with its legal and financial
advisors, that such proposal constitutes or could reasonably be
expected to result in a transaction that is superior to the
merger.
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Prides right to change its recommendation to vote in favor
of the adoption of the merger agreement if it determines in good
faith that the failure to take such action would be inconsistent
with its fiduciary duties, subject to certain conditions
(including considering any adjustments to the merger agreement
proposed by Ensco and payment to Ensco of a $260 million
termination fee if Ensco
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68
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subsequently terminates the merger agreement under circumstances
specified in the merger agreement).
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Prides right to terminate the merger agreement in order to
accept a superior proposal, subject to certain conditions
(including considering any adjustments to the merger agreement
proposed by Ensco and payment to Ensco of a $260 million
termination fee).
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The obligations of Pride and Ensco to hold their respective
stockholders and shareholders meetings even if their respective
boards change their recommendation of the merger.
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That termination fees of $260 million and $50 million,
in each case, payable by Pride to Ensco under the circumstances
specified in the merger agreement, were reasonable in the
judgment of the Pride board of directors after consultation with
its advisors.
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The obligation of Delaware Sub to pay to Pride $260 million
and $50 million termination fees under reciprocal
circumstances.
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The fact that Enscos obligation to close the merger is not
subject to a financing condition or any condition related to the
number of Pride stockholders seeking statutory appraisal rights.
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The obligation of Ensco to use its reasonable best efforts to
take all actions necessary to consummate the financing provided
for in the bridge commitment letter and, if such financing is
unavailable, to use its reasonable best efforts to arrange to
obtain alternate financing for an equivalent amount of funds.
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The requirement that Pride stockholder approval be obtained as a
condition to consummation of the merger.
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In the course of its deliberations, the Pride board of directors
also considered a variety of risks and other potentially
negative factors, including the following:
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That because the merger consideration is a fixed dollar amount
and a fixed exchange ratio of Ensco ADSs to Pride common stock,
Pride stockholders could be adversely affected by a decrease in
the trading price of Ensco ADSs during the pendency of the
merger and the fact that the merger agreement does not provide
Pride with a price-based termination right or other similar
protection.
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That Enscos obligation to close the merger is conditioned
on a vote of its shareholders.
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That, while the merger is expected to be completed, there is no
assurance that all conditions to the parties obligations
to complete the merger will be satisfied or waived, and as a
result, it is possible that the merger might not be completed
even if approved by Prides stockholders and Enscos
shareholders.
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The restrictions on the conduct of Prides business prior
to completion of the merger, requiring Pride to conduct its
business only in the ordinary course, subject to specific
limitations, which may delay or prevent Pride from undertaking
business opportunities that may arise pending completion of the
merger.
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That the exchange of shares of Pride common stock for Ensco ADSs
and cash generally will be a taxable transaction for
U.S. federal income tax purposes.
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The limitations imposed on Prides ability to solicit
alternative transactions prior to closing or termination of the
merger agreement, including the requirement to pay a
$260 million termination fee in the event Pride accepts a
superior proposal.
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The transaction costs to be incurred in connection with the
merger.
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Risks of the type and nature described under Risk
Factors.
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Prides board considered all of these factors as a whole
and, on balance, concluded that they supported a determination
to approve the merger agreement. The foregoing discussion of the
information and factors considered by the Pride board of
directors is not exhaustive. In view of the wide variety of
factors considered
69
by the Pride board of directors in connection with its
evaluation of the proposed transaction and the complexity of
these matters, the Pride board of directors did not consider it
practical to, nor did it attempt to, quantify, rank or otherwise
assign relative weights to the specific factors that it
considered in reaching its decision. The Pride board of
directors evaluated the factors described above, among others,
and reached a consensus that the proposed transaction was
advisable, fair to and in the best interests of Pride and its
stockholders. In considering the factors described above and any
other factors, individual members of the Pride board of
directors may have viewed factors differently or given different
weight or merit to different factors.
In considering the recommendation of the Pride board of
directors to adopt the merger agreement, Pride stockholders
should be aware that the executive officers and directors of
Pride have certain interests in the merger that may be different
from, or in addition to, the interests of Pride stockholders
generally. The Pride board of directors was aware of these
interests and considered them when approving the merger
agreement and recommending that Pride stockholders vote to adopt
the merger agreement. See Interests of the
Pride Directors and Executive Officers in the Merger.
It should be noted that this explanation of the reasoning of the
Pride board of directors and all other information presented in
this section is forward-looking in nature and, therefore, should
be read in light of the factors discussed under the heading
Cautionary Statement Concerning Forward-Looking
Statements.
Opinion
of Deutsche Bank Securities Inc.
Deutsche Bank has acted as Enscos financial advisor in
connection with the merger. At the February 5, 2011 meeting
of the board of directors of Ensco, Deutsche Bank delivered its
oral opinion, subsequently confirmed in writing on
February 6, 2011, to the board of directors of Ensco to the
effect that, as of the date of such opinion, and based upon and
subject to the assumptions, limitations, qualifications and
conditions described in Deutsche Banks opinion, the merger
consideration comprised of $15.60 in cash and 0.4778 Ensco ADSs,
each whole ADS representing one Class A ordinary share, to
be paid in respect of each share of Pride common stock in the
merger was fair, from a financial point of view, to Ensco.
The full text of Deutsche Banks written opinion, dated
February 6, 2011, which sets forth, among other matters,
the assumptions made, matters considered, and limitations,
qualifications and conditions of the review undertaken by
Deutsche Bank in connection with the opinion, is attached as
Annex B to this proxy statement/prospectus and is
incorporated herein by reference. The summary of the Deutsche
Bank opinion set forth in this proxy statement/prospectus is
qualified in its entirety by reference to the full text of the
opinion. Deutsche Banks opinion was addressed to, and for
the use and benefit of, the Ensco board of directors. The
Deutsche Bank opinion is not a recommendation as to how any
holder of Ensco ADSs or Ensco Class A ordinary shares
should vote with respect to the merger. Deutsche Banks
opinion is limited to the fairness, from a financial point of
view, of the merger consideration to be paid in respect of each
share of Pride common stock and does not address any other
aspect of the merger. Deutsche Bank was not asked to, and
Deutsche Banks opinion did not, address the fairness of
the merger to the holders of any class of securities, creditors
or other constituencies of Ensco. Deutsche Bank expressed no
opinion as to the merits of the underlying decision by Ensco to
engage in the merger or the relative merits of the merger as
compared to any alternative transactions or business strategies.
Nor did Deutsche Bank express an opinion as to how any holder of
the Ensco ADSs or Class A ordinary shares should vote with
respect to the merger. Deutsche Bank did not express any view or
opinion as to the fairness, financial or otherwise, of the
amount or nature of any compensation payable to or to be
received by any of the officers, directors, or employees of any
party to the merger, or any class of such persons, in connection
with the merger relative to the merger consideration.
In connection with Deutsche Banks role as financial
advisor to Ensco, and in arriving at its opinion, Deutsche Bank
reviewed certain publicly available financial and other
information concerning Ensco and Pride, and certain internal
analyses, financial forecasts and other information relating to
Ensco, Pride and the combined company prepared by the management
of Ensco. Deutsche Bank also held discussions with certain
senior officers and other representatives and advisors of Ensco
and Pride regarding the businesses and
70
prospects of Ensco, Pride and the combined company, including
certain cost savings and operating synergies projected by the
management of Ensco to result from the merger. In addition,
Deutsche Bank:
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reviewed the reported prices and trading activity for both the
Ensco ADSs and Pride common stock;
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compared certain financial and stock market information for
Ensco and Pride with, to the extent publicly available, similar
information for certain other companies it considered relevant
whose securities are publicly traded;
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to the extent publicly available, reviewed the financial terms
of certain recent business combinations or acquisition
transactions it deemed relevant;
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reviewed the merger agreement; and
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performed such other studies and analyses and considered such
other factors as it deemed appropriate.
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Deutsche Bank did not assume responsibility for independent
verification of, and did not independently verify, any
information, whether publicly available or furnished to it,
concerning Ensco or Pride, including, without limitation, any
financial information considered in connection with the
rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank, with the knowledge and permission of the
board of directors of Ensco, assumed and relied upon the
accuracy and completeness of all such information. Deutsche Bank
did not conduct a physical inspection of any of the properties
or assets, and did not prepare or obtain any independent
evaluation or appraisal of any of the assets or liabilities
(including any contingent, derivative or off-balance-sheet
assets or liabilities) of Ensco, Pride or any of their
respective subsidiaries, nor did Deutsche Bank evaluate the
solvency or fair value of Ensco, Pride or the combined company
(or the impact of the merger thereon) under any law relating to
bankruptcy, insolvency or similar matters. With respect to the
financial forecasts, including, without limitation, the analyses
and forecasts of the amount and timing of certain cost savings,
operating efficiencies, revenue effects, financial synergies and
other strategic benefits projected by management of Ensco to be
achieved as a result of the merger (collectively, the
Synergies), made available to Deutsche Bank and used
in its analyses, Deutsche Bank assumed, with the knowledge and
permission of the board of directors of Ensco, that the
forecasts had been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the
management of Ensco as to the matters covered thereby. In
rendering its opinion, Deutsche Bank expressed no view as to the
reasonableness of such forecasts and projections, including,
without limitation, the Synergies, or the assumptions on which
they were based. Deutsche Banks opinion was necessarily
based upon economic, market and other conditions as in effect
on, and the information made available to it as of, the date of
the opinion. Deutsche Bank expressly disclaimed any undertaking
or obligation to advise any person of any change in any fact or
matter affecting its opinion of which it becomes aware after the
date of its opinion.
For purposes of rendering its opinion, Deutsche Bank assumed,
with the permission of the board of directors of Ensco, that in
all respects material to its analysis, the merger would be
consummated in accordance with the terms of the merger
agreement, without any material waiver, modification or
amendment of any term, condition or agreement. Deutsche Bank
also assumed that all material governmental, regulatory or other
approvals and consents required in connection with the
consummation of the merger would be obtained and that in
connection with obtaining any necessary governmental, regulatory
or other approvals and consents, no restrictions, terms or
conditions would be imposed that would be material to its
analysis. Deutsche Bank is not a legal, regulatory, tax or
accounting expert and Deutsche Bank relied on the assessments
made by Ensco and its advisors with respect to such issues.
Deutsche Banks opinion was approved and authorized for
issuance by a Deutsche Bank fairness opinion review committee
and was addressed to, and for the use and benefit of, the board
of directors of Ensco in connection with and for the purposes of
its evaluation of the merger. Deutsche Banks opinion was
limited to the fairness of the merger consideration to be paid
in respect of each share of Pride common stock, from a financial
point of view, to Ensco as of the date of the opinion. Deutsche
Banks opinion did not address any other terms of the
merger or the merger agreement. Deutsche Bank was not asked to,
and its opinion did not, address the fairness of the merger, or
any consideration received in connection therewith, to the
holders of any class of securities, creditors or other
constituencies of Ensco, nor did it address the fairness of the
71
contemplated benefits of the merger. Deutsche Bank expressed no
opinion as to the merits of the underlying decision by Ensco to
engage in the merger or the relative merits of the merger as
compared to any alternative transactions or business strategies.
Nor did Deutsche Bank express any opinion, and its opinion did
not constitute a recommendation, as to how any holder of Ensco
ADSs or Ensco Class A ordinary shares should vote with
respect to the merger. In addition, Deutsche Bank did not
express any view or opinion as to the fairness, financial or
otherwise, of the amount or nature of any compensation payable
to or to be received by any officers, directors, or employees of
any parties to the merger agreement, or any class of such
persons, in connection with the merger relative to the merger
consideration. Deutsche Banks opinion did not in any
manner address the prices at which the Ensco ADSs, Pride common
stock or any other securities would trade following the
announcement or consummation of the merger.
The following is a summary of the material financial analyses
contained in the presentation that was made by Deutsche Bank to
the board of directors of Ensco on February 5, 2011 and
that were used by Deutsche Bank in connection with rendering its
opinion described above. The following summary, however, does
not purport to be a complete description of the financial
analyses performed by Deutsche Bank, nor does the order in which
the analyses are described represent the relative importance or
weight given to the analyses by Deutsche Bank. Some of the
summaries of the financial analyses include information
presented in tabular format. The tables must be read together
with the full text of each summary and are alone not a complete
description of Deutsche Banks financial analyses. Except
as otherwise noted, the following quantitative information, to
the extent that it is based on market data, is based on market
data as it existed on or before February 4, 2011, and is
not necessarily indicative of current market conditions.
Implied
Transaction Multiples Analysis
Based upon the closing price of $54.41 per Ensco ADS on
February 4, 2011, Deutsche Bank calculated that the merger
consideration, consisting of 0.4778 of an Ensco ADS and $15.60
in cash, had an implied value of $41.60 per share of Pride
common stock. Deutsche Bank then derived an implied total
enterprise value for Pride of approximately $8.89 billion
by multiplying this implied value of the merger consideration by
the number of fully diluted shares of Pride common stock
outstanding and adding Prides estimated net debt as of
December 31, 2010 of approximately $1.379 billion.
Using the results of the calculations described above and Wall
Street consensus estimates for Pride, Deutsche Bank calculated
the following premia and multiples:
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price as a premium to the closing price of Pride common stock on
February 4, 2011;
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price as a premium to the volume weighted average price (which
we refer to as VWAP) of Pride common stock during
the one month and three months ended February 4, 2011,
respectively; and
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total enterprise value (which we refer to as TEV) as
a multiple of Wall Street consensus estimated earnings before
interest, tax expense, depreciation and amortization (which we
refer to as EBITDA) for 2010, 2011 and 2012,
respectively.
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The results of this analysis are summarized as follows:
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Premium to
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2/4/2011 Close
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21.0
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%
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1-Month VWAP
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25.4
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%
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3-Month VWAP
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27.9
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%
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Implied Multiple of TEV to
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2010E consensus EBITDA
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18.5
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2011E consensus EBITDA
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10.6
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2012E consensus EBITDA
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8.7
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x
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Selected
Trading Comparables Analysis Pride
Deutsche Bank reviewed and compared certain financial
information and commonly used valuation measurements for Pride
with corresponding financial information and measurements for
the following selected companies:
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Transocean Ltd.
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Seadrill Limited
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Noble Corporation
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Diamond Offshore Drilling, Inc.
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Fred Olsen Energy ASA
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Atwood Oceanics, Inc.
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These companies were selected as comparables because they are
publicly traded companies in the offshore drilling industry with
rig fleets weighted towards floater rigs, which are similar to
Prides fleet. Although none of the selected companies is
directly comparable to Pride, the companies included were
selected by Deutsche Bank based upon Deutsche Banks
general experience and knowledge of offshore drilling companies
that for purposes of this analysis may be considered similar to
certain operations of Pride. Accordingly, the analysis of
publicly traded comparable companies was not simply
mathematical. Rather, it involved complex considerations and
qualitative judgments, reflected in Deutsche Banks
opinion, concerning differences in financial and operating
characteristics of the selected companies and other factors that
could affect the public trading value of such companies.
Based on the closing prices of Pride common stock and the common
stock of the selected companies on February 4, 2011,
information contained in the most recent public periodic and
other filings of the selected companies and Wall Street
consensus estimates of EBITDA for Pride and the selected
companies, Deutsche Bank calculated the multiple of total
enterprise value to estimated EBITDA for each of 2010, 2011 and
2012, respectively.
The results of this analysis are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price
|
|
TEV
|
|
TEV/EBITDA
|
Company
|
|
at 2/4/2011
|
|
(millions)
|
|
2010E
|
|
2011E
|
|
2012E
|
|
Transocean Ltd.
|
|
$
|
79.99
|
|
|
$
|
33,925
|
|
|
|
7.4
|
x
|
|
|
7.1
|
x
|
|
|
7.0
|
x
|
Seadrill Limited
|
|
$
|
34.44
|
|
|
$
|
23,306
|
|
|
|
11.1
|
x
|
|
|
9.0
|
x
|
|
|
8.5
|
x
|
Noble Corporation
|
|
$
|
37.60
|
|
|
$
|
12,021
|
|
|
|
8.3
|
x
|
|
|
8.5
|
x
|
|
|
6.0
|
x
|
Diamond Offshore Drilling, Inc.
|
|
$
|
71.67
|
|
|
$
|
10,475
|
|
|
|
5.9
|
x
|
|
|
6.0
|
x
|
|
|
6.5
|
x
|
Fred Olsen Energy ASA
|
|
$
|
45.09
|
|
|
$
|
3,811
|
|
|
|
6.1
|
x
|
|
|
5.3
|
x
|
|
|
5.6
|
x
|
Atwood Oceanics, Inc.
|
|
$
|
40.80
|
|
|
$
|
2,713
|
|
|
|
7.7
|
x
|
|
|
7.1
|
x
|
|
|
6.5
|
x
|
Median of Selected Companies
|
|
|
|
|
|
|
|
|
|
|
7.6
|
x
|
|
|
7.1
|
x
|
|
|
6.5
|
x
|
Pride
|
|
$
|
34.39
|
|
|
$
|
7.573
|
|
|
|
15.7
|
x
|
|
|
9.0
|
x
|
|
|
7.4
|
x
|
Based in part on the trading multiples of the selected companies
described above, Deutsche Bank calculated a range of the
estimated total enterprise value of Pride by applying multiples
of total enterprise value to estimated EBITDA ranging from 8.0x
to 9.0x and 7.0x to 8.0x to Wall Street consensus estimates of
Prides EBITDA for 2011 and 2012, respectively. Deutsche
Bank then subtracted Prides estimated net debt as of
December 31, 2010 of approximately $1.379 billion from
the ranges of total enterprise value and divided the results by
the number of fully diluted shares of Pride common stock
outstanding to derive ranges of implied equity value per share
of Pride common stock ranging from $29.66 to $34.27 based on
Wall Street consensus EBITDA estimates for 2011, and from $32.06
to $37.65 based on Wall Street consensus EBITDA estimates for
2012.
73
Selected
Precedent Transactions Analysis Pride
Deutsche Bank reviewed publicly available information relating
to certain selected acquisition transactions in the offshore
drilling and oilfield service industries that were announced
between 1997 and 2010.
The Offshore Drilling Industry transactions involved the
acquisition of corporate entities comprised primarily of
floating rigs
and/or
higher specification jackup rigs larger than $500 million.
The Oilfield Service Industry transactions, which were utilized
solely to compare premiums paid, were selected due to the
similar characteristics these transactions had when compared to
the transaction involving Pride including, but not limited to,
transactions in the Oilfield Service Industry involving public
targets larger than $500 million and a consideration mix
including cash and stock. Transactions characterized as mergers
of equals were excluded. Although none of the selected
transactions is directly comparable to the Pride transaction,
the transactions included were selected by Deutsche Bank based
upon its general experience and knowledge of precedent
transactions of a similar nature that for purposes of this
analysis may be considered similar to the transaction involving
Pride.
With respect to each selected transaction, Deutsche Bank
calculated the value of the per share consideration paid in such
transaction as a premium to the closing price of the
targets common stock on the last trading day prior to the
announcement of the applicable transaction and to the price of
the targets common stock one-month prior to the
announcement of the applicable transaction. With respect to each
selected transaction in the offshore drilling industry, Deutsche
Bank also calculated the targets total enterprise value,
or TEV, as a multiple of Wall Street consensus EBITDA estimates
for the target for the first fiscal year
74
ended after announcement of the transaction, referred to as FY+1
EBITDA. The results of these analyses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
Premium to
|
|
|
|
|
|
|
|
|
|
|
TEV
|
|
|
Prior Close
|
|
|
TEV/
|
|
Date Announced
|
|
Acquirer
|
|
Target
|
|
(millions)
|
|
|
1-Day
|
|
|
1-Month
|
|
|
FY+1 EBITDA
|
|
|
Offshore Drilling Industry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
06/27/2010
|
|
Noble Corporation
|
|
FDR Holdings Limited
|
|
$
|
2,160
|
|
|
|
|
|
|
|
|
|
|
|
11.3
|
x
|
07/07/2008
|
|
China Oilfield Services Ltd.
|
|
Awilco Offshore ASA
|
|
$
|
3,794
|
|
|
|
19
|
%
|
|
|
18
|
%
|
|
|
13.9
|
x
|
04/22/2008
|
|
DryShips Inc.
|
|
Ocean Rig ASA
|
|
$
|
1,331
|
|
|
|
29
|
%
|
|
|
25
|
%
|
|
|
15.7
|
x
|
01/02/2007
|
|
Aban Offshore Ltd.
|
|
Sinvest ASA
|
|
$
|
1,327
|
|
|
|
35
|
%
|
|
|
7
|
%
|
|
|
8.0
|
x
|
01/09/2006
|
|
Seadrill Limited
|
|
Smedvig ASA
|
|
$
|
3,021
|
|
|
|
22
|
%
|
|
|
52
|
%
|
|
|
12.7
|
x
|
05/15/2002
|
|
ENSCO International Incorporated
|
|
Chiles Offshore Inc.
|
|
$
|
674
|
|
|
|
14
|
%
|
|
|
24
|
%
|
|
|
18.0
|
x
|
08/21/2000
|
|
Transocean Sedco Forex Inc.
|
|
R&B Falcon Corporation
|
|
$
|
8,754
|
|
|
|
19
|
%
|
|
|
31
|
%
|
|
|
10.8
|
x
|
07/10/1997
|
|
Falcon Drilling Company, Inc.
|
|
Reading & Bates Corporation
|
|
$
|
2,805
|
|
|
|
17
|
%
|
|
|
26
|
%
|
|
|
11.9
|
x
|
Mean of Selected Offshore Drilling Industry Transactions
|
|
|
|
|
|
|
22
|
%
|
|
|
26
|
%
|
|
|
12.8
|
x
|
Median of Selected Offshore Drilling Industry Transactions
|
|
|
|
|
|
|
19
|
%
|
|
|
25
|
%
|
|
|
12.3
|
x
|
Oilfield Service Industry
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2010
|
|
General Electric Company
|
|
Wellstream Holdings PLC
|
|
$
|
1,366
|
|
|
|
31
|
%
|
|
|
55
|
%
|
|
|
|
|
05/10/2010
|
|
Seadrill Limited
|
|
Scorpion Offshore Limited
|
|
$
|
1,242
|
|
|
|
14
|
%
|
|
|
25
|
%
|
|
|
|
|
02/19/2010
|
|
Schlumberger Limited
|
|
Smith International, Inc.
|
|
$
|
12,591
|
|
|
|
37
|
%
|
|
|
52
|
%
|
|
|
|
|
08/31/2009
|
|
Baker Hughes Incorporated
|
|
BJ Services Company
|
|
$
|
5,530
|
|
|
|
16
|
%
|
|
|
26
|
%
|
|
|
|
|
06/02/2009
|
|
Cameron International Corporation
|
|
NATCO Group Inc.
|
|
$
|
923
|
|
|
|
53
|
%
|
|
|
87
|
%
|
|
|
|
|
06/03/2008
|
|
Smith International, Inc.
|
|
W-H Energy Services, Inc.
|
|
$
|
3,203
|
|
|
|
20
|
%
|
|
|
31
|
%
|
|
|
|
|
05/23/2008
|
|
Umbrellastream Ltd
|
|
Expro International Group
|
|
$
|
3,820
|
|
|
|
74
|
%
|
|
|
73
|
%
|
|
|
|
|
|
|
|
|
PLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/17/2007
|
|
National Oilwell Varco, Inc.
|
|
Grant Prideco, Inc.
|
|
$
|
7,238
|
|
|
|
22
|
%
|
|
|
23
|
%
|
|
|
|
|
03/19/2007
|
|
Hercules Offshore, Inc.
|
|
TODCO
|
|
$
|
2,172
|
|
|
|
28
|
%
|
|
|
28
|
%
|
|
|
|
|
02/12/2007
|
|
Tenaris S.A.
|
|
Hydril Company
|
|
$
|
2,017
|
|
|
|
17
|
%
|
|
|
40
|
%
|
|
|
|
|
Mean of Selected Oilfield Service Industry Transactions
|
|
|
|
|
|
|
31
|
%
|
|
|
44
|
%
|
|
|
|
|
Median of Selected Oilfield Service Industry Transactions
|
|
|
|
|
|
|
25
|
%
|
|
|
36
|
%
|
|
|
|
|
Mean of All Selected Transactions
|
|
|
|
|
|
|
27
|
%
|
|
|
37
|
%
|
|
|
|
|
Median of All Selected Transactions
|
|
|
|
|
|
|
22
|
%
|
|
|
28
|
%
|
|
|
|
|
With respect to the acquisitions of Ocean Rig ASA, Sinvest ASA,
Smedvig ASA, Wellstream Holdings PLC, Scorpion Offshore Limited
and Expro International Group PLC, the premia were calculated
based upon the closing price of the targets common stock
on the last trading day as of which the price of the
targets common stock was assumed to be unaffected and one
month prior to such date.
Based in part on the premia and multiples of the selected
transactions described above, Deutsche Bank selected reference
ranges of the same premia and multiples and derived
corresponding ranges of estimated equity value per share of
Pride common stock as follows:
|
|
|
|
|
Deutsche Bank calculated a range of the implied total enterprise
value of Pride by applying multiples of total enterprise value
to EBITDA ranging from 10.0x to 12.0x to Wall Street consensus
estimates of Prides EBITDA for 2011. Deutsche Bank then
subtracted from the total enterprise values Prides
estimated net debt as of December 31, 2010 of approximately
$1.379 billion and divided the results by the number of
fully diluted shares of Pride common stock outstanding. This
analysis resulted in a range of implied equity value per share
of Pride common stock of $38.85 to $48.03 per share.
|
|
|
|
Deutsche Bank calculated a range of implied equity value per
share of Pride common stock by applying premia ranging from 15%
to 30% to the closing price of Pride common stock on
February 4, 2011.
|
75
|
|
|
|
|
This analysis resulted in a range of implied equity value per
share of Pride common stock ranging from $39.55 to $44.71 per
share.
|
|
|
|
|
|
Deutsche Bank calculated a range of implied equity value per
share of Pride common stock by applying premia ranging from 25%
to 40% to the volume weighted average price of Pride common
stock for the one-month period ended February 4, 2011. This
analysis resulted in a range of implied equity value per share
of Pride common stock of $41.48 to $46.46 per share.
|
Discounted
Cash Flow Analysis
Deutsche Bank performed a discounted cash flow analysis to
determine a range of implied net present values per share of
Pride common stock. Deutsche Bank calculated the discounted cash
flow value for Pride as the sum of the net present value of
(i) the estimated future unlevered free cash flow,
calculated as earnings before interest expense and taxes, less
cash taxes, referred to as tax-adjusted EBIT, minus capital
expenditures, plus or minus changes in working capital, and plus
depreciation and amortization, that Pride will generate for the
years 2011 through 2015, plus (ii) the value of Pride at
the end of such period, or the terminal value, calculated by
applying multiples of terminal value to last-twelve-month EBITDA
ranging from 8.0x to 10.0x (selected by Deutsche Bank based on
its analysis of historical comparable multiples of the selected
companies described under Selected Trading
Comparables Analysis Pride above) to estimates
of Prides EBITDA in a terminal year which equated to 2015
prepared by management of Ensco assuming no net synergies. Based
on its calculation of Prides estimated weighted average
cost of capital, Deutsche Bank applied discount rates ranging
from 9.0% to 11.0% to Prides future cash flows and
terminal value to derive a range of present total enterprise
values for Pride. Deutsche Bank subtracted Prides
estimated net debt as of December 31, 2010 of approximately
$1.379 billion from such present total enterprise values
and divided the results by the number of fully diluted shares of
Pride common stock outstanding. This analysis resulted in a
range of implied net present value per share of Pride common
stock of approximately $30.98 to $42.86 per share.
Using the same multiples and discount rates described above,
Deutsche Bank performed similar discounted cash flow analyses
assuming net pre-tax synergies of approximately $50 million
per year starting in 2012 and approximately $25 million in
costs in 2012 to achieve such synergies. This analysis resulted
in a range of implied net present value of approximately $32.89
to $45.28 per share of Pride common stock.
Selected
Trading Comparables Analysis Ensco
Deutsche Bank reviewed and compared certain financial
information and commonly used valuation measurements for Ensco
with corresponding financial information and measurements for
the following selected companies in the offshore drilling
industry with a fleet concentrated in jackup rigs and floater
rigs, respectively:
Selected Jackup Companies:
|
|
|
|
|
Rowan Companies, Inc.
|
|
|
|
Vantage Drilling Company
|
|
|
|
Hercules Offshore, Inc.
|
Selected Floater Companies:
|
|
|
|
|
Transocean Ltd.
|
|
|
|
Seadrill Limited
|
|
|
|
Noble Corporation
|
|
|
|
Diamond Offshore Drilling, Inc.
|
|
|
|
Pride International, Inc.
|
76
|
|
|
|
|
Fred Olsen Energy ASA
|
|
|
|
Atwood Oceanics, Inc.
|
These companies were selected as comparables because, similar to
Ensco, they are publicly traded companies in the offshore
drilling industry with rig fleets characterized predominantly as
comprising jackup rigs and floater rigs, respectively.
Enscos fleet comprises a balance of both jackup rigs and
floater rigs, with a more significant concentration of jackup
rigs. Although none of the selected companies is directly
comparable to Ensco, the companies included were selected by
Deutsche Bank based upon its general experience and knowledge of
offshore drilling companies that for purposes of this analysis
may be considered similar to certain operations of Ensco.
Accordingly, the analysis of publicly traded comparable
companies was not simply mathematical. Rather, it involved
complex considerations and qualitative judgments, reflected in
Deutsche Banks opinion, concerning differences in
financial and operating characteristics of the selected
companies and other factors that could affect the public trading
value of such companies.
Based on the closing prices of the Ensco ADSs and the common
stock of the selected companies on February 4, 2011,
information contained in the most recent public periodic and
other filings of the selected companies and Wall Street
consensus estimates of EBITDA for Ensco and the selected
companies, Deutsche Bank calculated the multiple of total
enterprise value to estimated EBITDA for each of 2010, 2011 and
2012, respectively.
The results of this analysis are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price at
|
|
|
|
|
|
TEV/EBITDA
|
|
Company
|
|
2/4/2011
|
|
|
TEV
|
|
|
2010E
|
|
|
2011E
|
|
|
2012E
|
|
|
|
|
|
|
(millions)
|
|
|
|
|
|
|
|
|
|
|
|
Selected Jackup Companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rowan Companies, Inc.
|
|
$
|
36.58
|
|
|
$
|
5,440
|
|
|
|
9.0
|
x
|
|
|
8.5
|
x
|
|
|
6.2
|
x
|
Vantage Drilling Company
|
|
$
|
1.90
|
|
|
$
|
1,608
|
|
|
|
18.4
|
x
|
|
|
6.7
|
x
|
|
|
6.1
|
x
|
Hercules Offshore, Inc.
|
|
$
|
3.49
|
|
|
$
|
1,125
|
|
|
|
7.0
|
x
|
|
|
7.3
|
x
|
|
|
8.1
|
x
|
Median of Selected Jackup Companies
|
|
|
|
|
|
|
|
|
|
|
9.0
|
x
|
|
|
7.3
|
x
|
|
|
6.2
|
x
|
Selected Floater Companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transocean Ltd.
|
|
$
|
79.99
|
|
|
$
|
33,925
|
|
|
|
7.4
|
x
|
|
|
7.1
|
x
|
|
|
7.0
|
x
|
Seadrill Limited
|
|
$
|
34.44
|
|
|
$
|
23,306
|
|
|
|
11.1
|
x
|
|
|
9.0
|
x
|
|
|
8.5
|
x
|
Noble Corporation
|
|
$
|
37.60
|
|
|
$
|
12,021
|
|
|
|
8.3
|
x
|
|
|
8.5
|
x
|
|
|
6.0
|
x
|
Diamond Offshore Drilling, Inc.
|
|
$
|
71.67
|
|
|
$
|
10,475
|
|
|
|
5.9
|
x
|
|
|
6.0
|
x
|
|
|
6.5
|
x
|
Pride International, Inc.
|
|
$
|
34.39
|
|
|
$
|
7,573
|
|
|
|
15.7
|
x
|
|
|
9.0
|
x
|
|
|
7.4
|
x
|
Fred Olsen Energy ASA
|
|
$
|
45.09
|
|
|
$
|
3,811
|
|
|
|
6.1
|
x
|
|
|
5.3
|
x
|
|
|
5.6
|
x
|
Atwood Oceanics, Inc.
|
|
$
|
40.80
|
|
|
$
|
2,713
|
|
|
|
7.7
|
x
|
|
|
7.1
|
x
|
|
|
6.5
|
x
|
Median of Selected Floater Companies
|
|
|
|
|
|
|
|
|
|
|
7.7
|
x
|
|
|
7.1
|
x
|
|
|
6.5
|
x
|
Ensco
|
|
$
|
54.41
|
|
|
$
|
7.003
|
|
|
|
8.6
|
x
|
|
|
7.7
|
x
|
|
|
6.1
|
x
|
Based in part on the trading multiples of the selected companies
described above, Deutsche Bank calculated a range of the
estimated total enterprise value of Ensco by applying multiples
of total enterprise value to estimated EBITDA ranging from 7.0x
to 8.0x and 5.5x to 6.5x to the Wall Street consensus estimates
of Enscos EBITDA for 2011 and 2012, respectively. Deutsche
Bank then subtracted from the ranges of total enterprise value
Enscos estimated net debt and minority interest of
approximately ($787) million as of December 31, 2010
(i.e., adding Enscos net cash position) and divided the
results by the number of fully diluted Ensco ADSs outstanding.
This analysis resulted in ranges of implied equity value per
Ensco ADS of $50.25 to $56.60 based on Wall Street consensus
EBITDA estimates for 2011, and from $49.70 to $57.68 based on
Wall Street consensus EBITDA estimates for 2012.
77
Pro
Forma Transaction Analysis
Deutsche Bank performed an illustrative pro forma transaction
analysis of the potential financial impact of the merger on
Ensco using the implied value of the per share merger
consideration of $41.60 and earnings and cash flow estimates for
Ensco and Pride for 2011 and 2012 prepared by the management of
Ensco. For purposes of this analysis, Deutsche Bank assumed the
merger closed on December 31, 2010. This analysis
incorporated assumptions made by Enscos management,
including, among others, pre-tax synergies of $50 million
in 2012 (excluding the effect of approximately $25 million
in costs in 2012 to achieve such synergies), and the post-tax
effect of (1) net incremental non-cash income of
$54 million in 2011 and expense of $24 million in 2012
resulting from the
mark-to-market
impact of Prides drilling contracts, (2) incremental
net interest expense associated with financing of
$39 million in 2011 and $75 million in 2012, and
(3) incremental depreciation expense of $14 million in
each of 2011 and 2012, respectively.
This analysis indicated that the merger would be accretive to
Ensco on an earnings per share basis and on a cash flow per
share basis for both years analyzed. The following table
summarizes the results of this analysis:
Illustrative
Accretion Statistics
|
|
|
|
|
|
|
Accretion
|
|
|
Earnings Per Share
|
|
|
|
|
2011E
|
|
|
18
|
%
|
2012E
|
|
|
11
|
%
|
Cash Flow Per Share
|
|
|
|
|
2011E
|
|
|
9
|
%
|
2012E
|
|
|
12
|
%
|
In addition, Deutsche Bank noted that at the implied offer price
of $41.60 per share of Pride common stock, the pro forma ratios
of net debt to estimated EBITDA for Ensco after giving effect to
the merger were 3.1x, 2.6x and 1.9x for 2010, 2011 and 2012,
respectively, compared to a standalone case of (1.0x), (1.1x)
and (0.9x) for 2010, 2011 and 2012, respectively.
The preparation of a fairness opinion is a complex process
involving the application of subjective business and financial
judgment in determining the most appropriate and relevant
methods of financial analysis and the application of those
methods to the particular circumstances and, therefore, is not
readily susceptible to summary description. Deutsche Bank
believes that its analyses must be considered as a whole and
that considering any portion of such analyses and of the factors
considered without considering all analyses and factors could
create a misleading view of the process underlying the opinion.
In arriving at its fairness determination, Deutsche Bank did not
assign specific weights to any particular analyses.
In conducting its analyses and arriving at its opinion, Deutsche
Bank utilized a variety of generally accepted valuation methods.
The analyses were prepared solely for the purpose of enabling
Deutsche Bank to provide its opinion to the board of directors
of Ensco as to the fairness, from a financial point of view, of
the merger consideration to be paid in respect of each share of
Pride common stock to Ensco described above as of the date of
its opinion and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually
may be sold, which are inherently subject to uncertainty. As
described above, in connection with its analyses, Deutsche Bank
made, and was provided by the management of Ensco with, numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Deutsche Bank, Pride or Ensco.
Analyses based on estimates or forecasts of future results are
not necessarily indicative of actual past or future values or
results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or
events beyond the control of Ensco, Pride or their respective
advisors, future results or actual values may be materially
different from these forecasts or assumptions.
78
The terms of the transaction, including the merger
consideration, were determined through arms-length
negotiations between Ensco and Pride and were approved by the
board of directors of Ensco. Although Deutsche Bank provided
advice to the Ensco board of directors during the course of
these negotiations, the decision to enter into the merger was
solely that of the Ensco board of directors. As described above
under Recommendations of the Ensco Board of
Directors and Its Reasons for the Merger, the opinion and
presentation of Deutsche Bank to the board of directors of Ensco
were only one of a number of factors taken into consideration by
the board of directors of Ensco in making its determination to
approve the merger agreement and the transactions contemplated
by it, including the merger.
Ensco selected Deutsche Bank as its financial advisor in
connection with the transaction based on Deutsche Banks
qualifications, expertise, reputation and experience in mergers
and acquisitions. Ensco has retained Deutsche Bank pursuant to a
letter agreement dated December 22, 2010. As compensation
for Deutsche Banks services in connection with the merger,
Ensco has agreed to pay Deutsche Bank a fee of $15 million,
of which $3.75 million became payable upon delivery of
Deutsche Banks opinion (or would have become payable upon
Deutsche Bank advising Ensco that it was unable to render an
opinion) and the remainder is contingent upon consummation of
the merger. Ensco may also pay Deutsche Bank an additional
discretionary fee of up to $5 million, determined in
Enscos sole discretion, to compensate Deutsche Bank based
on the complexity of the transaction. Regardless of whether the
transaction is consummated, Ensco has agreed to reimburse
Deutsche Bank for reasonable fees and disbursements of Deutsche
Banks counsel and all of Deutsche Banks reasonable
travel and other
out-of-pocket
expenses incurred in connection with the transaction or
otherwise arising out of the retention of Deutsche Bank under
the engagement letter. Ensco has also agreed to indemnify
Deutsche Bank and certain related persons to the fullest extent
lawful against certain liabilities, including certain
liabilities under the federal securities laws arising out of its
engagement or the transaction.
Deutsche Bank is an internationally recognized investment
banking firm experienced in providing advice in connection with
mergers and acquisitions and related transactions. Deutsche Bank
is an affiliate of Deutsche Bank AG, which, together with its
affiliates, is referred to as the DB Group. One or more members
of the DB Group have, from time to time, provided, and are
currently providing, investment banking, commercial banking
(including extension of credit) and other financial services to
Ensco or its affiliates for which they have received, and in the
future may receive, compensation, including acting as a lender
under Enscos $700,000,000 revolving credit facility since
May 2010 (aggregate commitment $40,000,000). During the two year
period ended February 6, 2011, the DB Group has received
revenues for services provided to Ensco and its affiliates
unrelated to the transaction of approximately $0.2 million.
One or more members of the DB Group have, from time to time,
provided investment banking, commercial banking (including
extension of credit) and other financial services to Pride or
its affiliates for which it has received compensation but the DB
Group has not provided any such services to Pride or its
affiliates in the last two years. The DB Group may also provide
investment and commercial banking services to Ensco, Pride and
their respective affiliates in the future, for which the DB
Group would expect to receive compensation. In addition, at the
time of the execution of the merger agreement, one or more
members of the DB Group had agreed to provide financing to Ensco
in connection with the merger. Following the execution of the
merger agreement, Deutsche Bank acted as joint book-running
manager in connection with Enscos issuance of
$1.0 billion aggregate principal amount of 3.25% senior
notes due 2016 and $1.5 billion aggregate principal amount
of 4.70% senior notes due 2021 on March 17, 2011. In
connection with the issuance of the senior notes, Deutsche Bank
received underwriting discounts and commissions in the aggregate
amount of approximately $4.7 million. Due to the issuance
of the senior notes and the availability of cash on hand, Ensco
terminated the bridge commitment letter pursuant to which
members of the DB Group would have provided such financing to
Ensco. In the ordinary course of business, members of the DB
Group may actively trade in the securities and other instruments
and obligations of Ensco, Pride or their respective affiliates
for their own accounts and for the accounts of their customers.
Accordingly, the DB Group may at any time hold a long or short
position in such securities, instruments and obligations.
79
Opinion
of Goldman, Sachs & Co.
At the meeting of the board of directors of Pride on
February 6, 2011, Goldman Sachs delivered its oral opinion,
subsequently confirmed in writing, that, as of February 6,
2011, and based upon and subject to the limitations and
assumptions set forth therein, the per share consideration of
$15.60 in cash and 0.4778 Ensco ADSs, each duly and validly
issued against the deposit of an equal number of Ensco
Class A ordinary shares, to be paid to the holders (other
than Ensco and its affiliates) of the outstanding shares of
Pride common stock pursuant to the merger agreement (which for
purposes of this section refers to the original merger agreement
dated February 6, 2011) was fair from a financial point of
view to such holders.
The full text of the written opinion of Goldman Sachs, dated
February 6, 2011, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C to this joint proxy statement/prospectus. Goldman
Sachs provided its advisory services and its opinion for the
information and assistance of the board of directors of Pride in
connection with its consideration of the merger. The Goldman
Sachs opinion does not constitute a recommendation as to how any
holder of Pride common stock should vote with respect to the
merger or any other matter.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
|
|
|
|
|
the merger agreement;
|
|
|
|
annual reports to stockholders and Annual Reports on
Form 10-K
of Pride and Ensco for the five years ended December 31,
2009;
|
|
|
|
certain interim reports to stockholders and Quarterly Reports on
Form 10-Q
of Pride and Ensco;
|
|
|
|
certain other communications from Pride and Ensco to their
respective stockholders;
|
|
|
|
certain publicly available research analyst reports for Pride
and Ensco;
|
|
|
|
certain internal financial analyses and forecasts for Ensco
prepared by its management;
|
|
|
|
certain internal financial analyses and forecasts for Pride
prepared by its management and certain financial analyses and
forecasts for Ensco prepared by the management of Pride,
including the Base Case Forecasts for each of Pride and Ensco
(the Base Case Forecasts), in each case, as approved
for Goldman Sachs use by Pride; and
|
|
|
|
certain cost savings and operating synergies projected by the
management of Pride to result from the merger, as approved for
Goldman Sachs use by Pride (the Synergies).
|
Goldman Sachs also held discussions with members of the senior
managements of Pride and Ensco regarding their assessment of the
strategic rationale for, and the potential benefits of, the
merger and the past and current business operations, financial
condition and future prospects of Pride and Ensco. In addition,
Goldman Sachs reviewed the reported price and trading activity
for the Pride common stock, Ensco Class A ordinary shares
and Ensco ADSs; compared certain financial and stock market
information for Pride and Ensco with similar information for
certain other companies the securities of which are publicly
traded; reviewed the financial terms of certain recent business
combinations in the offshore drilling industry and in other
industries; and performed such other studies and analyses, and
considered such other factors, as Goldman Sachs deemed
appropriate.
For purposes of rendering the opinion described above, Goldman
Sachs relied upon and assumed, without assuming any
responsibility for independent verification, the accuracy and
completeness of all of the financial, legal, regulatory, tax,
accounting and other information provided to, discussed with or
reviewed by, Goldman Sachs; and Goldman Sachs did not assume any
responsibility for any such information. In that regard, Goldman
Sachs assumed with the consent of the board of directors of
Pride that the Base Case Forecasts and the Synergies were
reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Pride. In
addition, Goldman Sachs did not make an independent evaluation
or appraisal of the assets and liabilities (including any
contingent, derivative or other off-balance-sheet assets and
liabilities) of Pride or Ensco or any of their respective
subsidiaries nor was any such evaluation or
80
appraisal furnished to Goldman Sachs. Goldman Sachs assumed that
all governmental, regulatory or other consents and approvals
necessary for the consummation of the merger will be obtained
without any adverse effect on Pride or Ensco or on the expected
benefits of the merger in any way meaningful to Goldman
Sachs analysis. Goldman Sachs also assumed that the merger
will be consummated on the terms set forth in the merger
agreement, without the waiver or modification of any term or
condition the effect of which would be in any way meaningful to
Goldman Sachs analysis.
Goldman Sachs opinion does not address the underlying
business decision of Pride to engage in the merger, or the
relative merits of the merger as compared to any strategic
alternatives that may be available to Pride; nor does it address
any legal, regulatory, tax or accounting matters. Goldman
Sachs opinion addresses only the fairness from a financial
point of view, as of the date of its opinion, of the
consideration to be paid to the holders (other than Ensco and
its affiliates) of Pride common stock pursuant to the merger
agreement. Goldman Sachs does not express any view on, and its
opinion does not address, any other term or aspect of the merger
agreement or merger or any term or aspect of any other agreement
or instrument contemplated by the merger agreement or entered
into or amended in connection with the merger, including,
without limitation, the fairness of the merger to, or any
consideration received in connection therewith by, the holders
of any other class of securities, creditors, or other
constituencies of Pride; nor as to the fairness of the amount or
nature of any compensation to be paid or payable to any of the
officers, directors or employees of Pride, or class of such
persons, in connection with the merger, whether relative to the
consideration to be paid to the holders (other than Ensco and
its affiliates) of Pride common stock pursuant to the merger
agreement or otherwise. Goldman Sachs expressed no opinion as to
the prices at which Ensco Class A ordinary shares or Ensco
ADSs will trade at any time or as to the impact of the merger on
the solvency or viability of Pride or Ensco or the ability of
Pride or Ensco to pay their respective obligations when they
come due. Goldman Sachs opinion is necessarily based on
economic, monetary, market and other conditions as in effect on,
and the information made available to Goldman Sachs as of, the
date of its opinion and Goldman Sachs assumes no responsibility
for updating, revising or reaffirming its opinion based on
circumstances, developments or events occurring after such date.
Summary
of Financial Analyses of Prides Financial
Advisor
The following is a summary of the material financial analyses
delivered by Goldman Sachs to the board of directors of Pride in
connection with rendering the opinion described above. The
following summary, however, does not purport to be a complete
description of the financial analyses performed by Goldman
Sachs, nor does the order of analyses described represent
relative importance or weight given to those analyses by Goldman
Sachs. Some of the summaries of the financial analyses include
information presented in tabular format. The tables must be read
together with the full text of each summary and are alone not a
complete description of Goldman Sachs financial analyses.
Except as otherwise noted, the following quantitative
information, to the extent that it is based on market data, is
based on market data as it existed on or before February 6,
2011, and is not necessarily indicative of current market
conditions.
Selected Companies Analysis. Goldman Sachs
reviewed and compared certain financial information for Pride
and Ensco to corresponding financial information, ratios and
public market multiples for the following publicly traded
corporations in the offshore drilling industry:
Atwood Oceanics, Inc.
Diamond Offshore Drilling, Inc.
Noble Corporation
Rowan Companies, Inc.
Seadrill Limited
Transocean Ltd.
Each of these companies is referred to as a Selected
Company.
Although none of the Selected Companies is directly comparable
to Pride or Ensco, the companies included were chosen because
each is an offshore drilling company, with its common stock
listed on a United States securities exchange and with a market
capitalization of at least $2 billion.
81
Goldman Sachs calculated and compared various financial
multiples and ratios for the Selected Companies, Pride and
Ensco. The financial multiples and ratios for the Selected
Companies were based on closing stock market prices on
February 4, 2011, information obtained from public filings
and estimates from the Institutional Brokers Estimate System, or
IBES. The financial multiples and ratios for Ensco were based on
closing stock market prices on February 4, 2011,
information obtained from public filings, IBES estimates and the
Base Case Forecasts. The financial multiples and ratios for
Pride were based on closing stock market prices on
February 4, 2011, the $41.60 implied value per share of
Pride common stock to be received by the holders of such shares
in the merger (calculated based on the closing market price of
Ensco ADSs on February 4, 2011), information obtained from
public filings, IBES estimates and the Base Case Forecasts. The
financial multiples and ratios include:
|
|
|
|
|
ratios of enterprise value (computed as market capitalization
plus outstanding debt as of September 30, 2010 minus cash
and cash equivalents as of September 30, 2010) to each
of estimated calendar year 2011 and 2012 earnings before
interest, taxes, depreciation and amortization (
EBITDA);
|
|
|
|
ratios of the share price to each of estimated calendar year
2011 and 2012 earnings per share; and
|
|
|
|
ratios of the share price to each of estimated calendar year
2011 and 2012 cash flow per share.
|
Implied
Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise
|
|
Share Price/
|
|
Share Price/Cash
|
|
|
Value/EBITDA
|
|
Earnings Per Share
|
|
Flow Per Share
|
|
|
2011E
|
|
2012E
|
|
2011E
|
|
2012E
|
|
2011E
|
|
2012E
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pride
|
|
|
8.9x
|
|
|
|
7.4x
|
|
|
|
12.8x
|
|
|
|
10.7x
|
|
|
|
8.4x
|
|
|
|
7.1x
|
|
(February 4, 2011 IBES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pride
|
|
|
8.5x
|
|
|
|
7.5x
|
|
|
|
11.9x
|
|
|
|
10.7x
|
|
|
|
8.2x
|
|
|
|
7.4x
|
|
(February 4, 2011 Base Case Forecasts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pride
|
|
|
10.5x
|
|
|
|
8.7x
|
|
|
|
15.5x
|
|
|
|
13.0x
|
|
|
|
10.2x
|
|
|
|
8.6x
|
|
(Merger Consideration IBES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pride
|
|
|
10.0x
|
|
|
|
8.9x
|
|
|
|
14.4x
|
|
|
|
13.0x
|
|
|
|
10.0x
|
|
|
|
9.0x
|
|
(Merger Consideration Base Case Forecasts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ensco
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ensco (IBES)
|
|
|
7.6x
|
|
|
|
6.2x
|
|
|
|
13.7x
|
|
|
|
10.6x
|
|
|
|
9.1x
|
|
|
|
7.5x
|
|
Ensco (Base Case)
|
|
|
9.4x
|
|
|
|
6.8x
|
|
|
|
18.2x
|
|
|
|
12.0x
|
|
|
|
11.7x
|
|
|
|
8.3x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atwood Oceanics, Inc. (IBES)
|
|
|
7.2x
|
|
|
|
6.8x
|
|
|
|
10.2x
|
|
|
|
10.2x
|
|
|
|
8.5x
|
|
|
|
8.0x
|
|
Diamond Offshore Drilling, Inc. (IBES)
|
|
|
6.0x
|
|
|
|
6.4x
|
|
|
|
11.4x
|
|
|
|
12.5x
|
|
|
|
7.6x
|
|
|
|
7.9x
|
|
Noble Corporation (IBES)
|
|
|
8.8x
|
|
|
|
6.0x
|
|
|
|
17.1x
|
|
|
|
9.4x
|
|
|
|
7.5x
|
|
|
|
5.5x
|
|
Rowan Companies, Inc. (IBES)
|
|
|
8.3x
|
|
|
|
5.9x
|
|
|
|
16.6x
|
|
|
|
11.1x
|
|
|
|
9.4x
|
|
|
|
6.7x
|
|
Seadrill Limited (IBES)
|
|
|
9.4x
|
|
|
|
8.9x
|
|
|
|
10.7x
|
|
|
|
9.6x
|
|
|
|
7.7x
|
|
|
|
7.5x
|
|
Transocean Ltd. (IBES)
|
|
|
6.9x
|
|
|
|
6.7x
|
|
|
|
12.0x
|
|
|
|
11.3x
|
|
|
|
6.5x
|
|
|
|
6.2x
|
|
High
|
|
|
9.4x
|
|
|
|
8.9x
|
|
|
|
17.1x
|
|
|
|
12.5x
|
|
|
|
9.4x
|
|
|
|
8.0x
|
|
Low
|
|
|
6.0x
|
|
|
|
5.9x
|
|
|
|
10.2x
|
|
|
|
9.4x
|
|
|
|
6.5x
|
|
|
|
5.5x
|
|
82
Historical Exchange Ratio Analysis. Goldman
Sachs calculated the average historical exchange ratios of Pride
common stock to Ensco ADSs based on the closing prices of Pride
common stock and Ensco ADSs during the 30-trading day,
60-trading day, 90-trading day, one-year, three-year and
five-year periods ended February 4, 2011, as well as the
exchange ratio of the closing prices of Pride common stock to
Ensco ADSs on February 4, 2011. The following table
presents the results of this analysis:
Average
Exchange Ratio
|
|
|
|
|
|
|
Implied Exchange Ratio
|
|
|
|
of Pride common stock
|
|
|
|
to Ensco ADSs
|
|
|
Time Period (up to February 4, 2011)
|
|
|
|
|
February 4, 2011
|
|
|
0.63x
|
|
30-day
Average
|
|
|
0.62x
|
|
60-day
Average
|
|
|
0.63x
|
|
90-day
Average
|
|
|
0.64x
|
|
1-year
Average
|
|
|
0.64x
|
|
3-year
Average
|
|
|
0.61x
|
|
5-year
Average
|
|
|
0.60x
|
|
Implied Present Value of Future Share Price
Analysis. Goldman Sachs performed an illustrative
analysis of the implied present value of the future price per
share of Pride common stock, which is designed to provide an
indication of the present value of a theoretical future value of
a companys equity as a function of such companys
estimated future EBITDA, its assumed enterprise value to forward
year EBITDA multiple and its estimated future net debt amount.
For this analysis, Goldman Sachs used the Base Case Forecasts.
Goldman Sachs first calculated the implied values per share of
Pride common stock for each of the years ended December 31,
2013, December 31, 2014 and December 31, 2015, by
applying estimates of forward year EBITDA to assumed enterprise
value to forward year EBITDA multiples of 4.0x to 12.0x, then
subtracting the net debt as of year-end. The enterprise value to
forward year EBITDA multiple range used by Goldman Sachs in this
analysis was derived by Goldman Sachs utilizing its experience
and professional judgment, taking into account current and
historical trading data and the current and historical
enterprise value to forward year EBITDA multiples for Pride and
the Selected Companies referenced in Opinion
of Goldman, Sachs & Co. Summary of
Financial Analyses of Prides Financial Advisor
Selected Companies Analysis above. The implied per share
future values of Pride common stock for each year were then
discounted back to the beginning of 2011, using a range of
illustrative discount rates from 11.0% to 15.0%, derived by
utilizing the capital asset pricing model, which takes into
account certain financial metrics, including beta, for Pride, as
well as certain financial metrics for the United States
financial markets generally. The analysis resulted in a range of
implied present values per share of Pride common stock of $11.92
to $49.79, $13.26 to $49.65 and $13.12 to $45.55, for 2013, 2014
and 2015, respectively.
Relative Discounted Cash Flow
Analysis. Goldman Sachs performed an illustrative
relative discounted cash flow analysis to determine the implied
exchange ratio of Pride common stock to Ensco ADSs, assuming
each company continued to operate as a standalone company, using
the Base Case Forecasts for Pride and Ensco.
In its analysis Goldman Sachs applied a range of illustrative
discount rates for each of Pride and Ensco ranging from 9% to
13%, derived by utilizing the capital asset pricing model, which
takes into account certain financial metrics, including betas,
for Pride and Ensco, as well as certain financial metrics for
the United States financial markets generally, to the projected
cash flows (beginning January 1, 2011 and discounted using
the mid-year convention) generated by Prides and
Enscos assets over their estimated remaining lives. This
analysis resulted in a range of implied exchange ratios of 0.46x
to 0.51x.
Goldman Sachs also performed the same analysis as in the
paragraph above based upon the same assumptions, except that in
this analysis Goldman Sachs applied a range of discount rates
for Pride ranging from 9% to 13% and applied a range of discount
rates for Ensco equal to 100 basis points higher than the
corresponding discount rate for Pride. This analysis resulted in
a range of implied exchange ratios of 0.49x to 0.56x.
83
Goldman Sachs also calculated implied exchange ratios of Pride
common stock to Ensco ADSs using present values of estimated
cash flows for Pride and Ensco through the year 2015 and present
values of an illustrative terminal value of Pride and Ensco at
the end of year 2015, based on a range of multiples for Ensco of
3.0x to 11.0x estimated 2016 EBITDA and a range of multiples for
Pride of the corresponding multiple for Ensco plus 0.0x to 2.0x,
assuming an illustrative discount rate of 11%. The enterprise
value to forward year EBITDA multiple range used by Goldman
Sachs in this analysis was derived by Goldman Sachs utilizing
its experience and professional judgment, taking into account
current and historical trading data and the current and
historical enterprise value to forward year EBITDA multiples for
Pride, Ensco and the Selected Companies referenced in
Opinion of Goldman, Sachs &
Co. Summary of Financial Analyses of Prides
Financial Advisor Selected Companies Analysis
above. This analysis resulted in a range of implied exchange
ratios of 0.36x to 0.62x.
Goldman Sachs also calculated implied exchange ratios of Pride
common stock to Ensco ADSs using present values of estimated
cash flows for Pride and Ensco through the year 2015 and present
values of an illustrative terminal value of Pride and Ensco at
the end of year 2015, based on a range of multiples for Ensco of
3.0x to 11.0x estimated 2016 EBITDA and a range of multiples for
Pride of the corresponding multiple for Ensco plus 0.0x to 2.0x,
assuming an illustrative discount rate of 11% for Pride and an
illustrative discount rate of 12% for Ensco. The enterprise
value to forward year EBITDA multiple range used by Goldman
Sachs in this analysis was derived by Goldman Sachs utilizing
its experience and professional judgment, taking into account
current and historical trading data and the current and
historical enterprise value to forward year EBITDA multiples for
Pride, Ensco and the Selected Companies referenced in
Opinion of Goldman, Sachs &
Co. Summary of Financial Analyses of Prides
Financial Advisor Selected Companies Analysis
above. This analysis resulted in a range of implied exchange
ratios of 0.37x to 0.64x.
Consideration vs. Standalone Discounted Cash Flow
Analysis. Based on the Base Case Forecasts and
Synergies, Goldman Sachs performed illustrative
premium / (discount) analyses of the aggregate of an
illustrative discounted cash flow value of the Ensco ADSs and
cash to be received by holders of Pride common stock in the
merger in relation to an illustrative standalone discounted cash
flow analysis per share of Pride common stock to determine an
implied premium or discount to the holders of Pride common stock
as a result of the merger.
Goldman Sachs calculated ratios of the illustrative discounted
cash flow value of the consideration to be paid to holders of
Pride common stock in the merger to the illustrative standalone
discounted cash flow analysis per share of Pride common stock,
as of January 1, 2011, based on discount rates ranging from
9.0% to 13.0% applied to the estimated cash flows generated by
Prides and Enscos assets over their estimated
remaining lives. This analysis resulted in a range of
premium/(discount) to standalone discounted cash flows of 28% to
51%.
Goldman Sachs then calculated ratios of the illustrative
discounted cash flow value of the merger consideration to be
paid to the holders of Pride common stock in the merger to the
illustrative standalone discounted cash flow analysis per share
of Pride common stock, as of January 1, 2011, using present
values of estimated cash flows for Pride and Ensco through the
year 2015 and present values of an illustrative terminal value
of Pride and Ensco at the end of year 2015, based on a range of
multiples for Pride of 4.0x to 12.0x estimated 2016 EBITDA and a
range of multiples for Ensco of the corresponding multiple for
Pride minus 1.5x to plus 0.5x, assuming a discount rate of 11%.
The enterprise value to forward year EBITDA multiple range used
by Goldman Sachs in this analysis was derived by Goldman Sachs
utilizing its experience and professional judgment, taking into
account current and historical trading data and the current and
historical enterprise value to forward year EBITDA multiples for
Pride, Ensco and the Selected Companies referenced in
Opinion of Goldman, Sachs &
Co. Summary of Financial Analyses of Prides
Financial Advisor Selected Companies Analysis
above. This analysis resulted in a range of premium/(discount)
to standalone discounted cash flows of 12% to 92%.
Accretion/Dilution Analysis. Goldman Sachs
analyzed the pro forma financial effects of the merger using the
Base Case Forecasts, IBES estimates and the Synergies. This
analysis incorporated assumptions made by Prides
management, including, among others, pre-tax synergies of
$24 million and $98 million in 2011 and 2012,
respectively, and the post-tax effect of net incremental
non-cash expenses of $159 million and $80 million in
2011 and 2012, respectively, resulting from the
mark-to-market
impact of Prides drilling contracts, and incremental
depreciation expense of $105 million in each of 2011 and
2012, respectively. Goldman Sachs compared the projected
earnings per share and cash flow per share of Ensco on a
standalone
84
basis for 2011 and 2012 to the projected earnings per share and
cash flow per share of the combined company assuming completion
of the merger. This analysis indicated that the merger would be
dilutive to holders of Ensco ADSs on an estimated earnings per
share basis for both years analyzed and accretive on an
estimated cash flow per share basis for both years analyzed. The
following table summarizes the results of this analysis:
Illustrative
Accretion / Dilution Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Case
|
|
|
|
IBES
|
|
|
Forecasts
|
|
|
Earnings Per Share
|
|
|
|
|
|
|
|
|
2011E
|
|
|
(26.6
|
)%
|
|
|
(16.9
|
)%
|
2012E
|
|
|
(8.9
|
)%
|
|
|
(5.1
|
)%
|
Cash Flow Per Share
|
|
|
|
|
|
|
|
|
2011E
|
|
|
7.3
|
%
|
|
|
22.1
|
%
|
2012E
|
|
|
11.3
|
%
|
|
|
14.2
|
%
|
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Goldman Sachs opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all of its analyses and did not attribute any particular weight
to any factor or analysis considered by it. Rather, Goldman
Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all of its analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to
Pride or the merger.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs providing its opinion to Prides board of
directors as to the fairness from a financial point of view of
the consideration to be received by the holders (other than
Ensco and its affiliates) of outstanding Pride common stock in
connection with the merger. These analyses do not purport to be
appraisals nor do they necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or
less favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or
their respective advisors, future results may be materially
different from those forecast.
The merger consideration to be received by holders of Pride
common stock was determined through arms length
negotiations between Pride and Ensco and was approved by
Prides board of directors. Goldman Sachs provided advice
to Pride during these negotiations. Goldman Sachs did not,
however, recommend any specific amount of consideration to Pride
or its board of directors or that any specific amount of
consideration constituted the only appropriate consideration for
the merger.
As described above, Goldman Sachs opinion to Prides
board of directors was one of many factors taken into
consideration by Prides board of directors in making its
determination to approve the merger agreement. The foregoing
summary does not purport to be a complete description of the
analyses performed by Goldman Sachs in connection with the
fairness opinion and is qualified in its entirety by reference
to the written opinion of Goldman Sachs attached as Annex C.
Goldman Sachs and its affiliates are engaged in investment
banking and financial advisory services, commercial banking,
securities trading, investment management, principal investment,
financial planning, benefits counseling, risk management,
hedging, financing, brokerage activities and other financial and
non-financial activities and services for various persons and
entities. In the ordinary course of these activities and
services, Goldman Sachs and its affiliates may at any time make
or hold long or short positions and investments, as well as
actively trade or effect transactions, in the equity, debt and
other securities (or related derivative securities) and
financial instruments (including bank loans and other
obligations) of Pride, Ensco,
85
any of their respective affiliates and third parties or any
currency or commodity that may be involved in the merger
contemplated by the merger agreement for their own account and
for the accounts of their customers.
In addition, Goldman Sachs has provided certain investment
banking services to Pride and its affiliates from time to time
for which Goldman Sachs Investment Banking Division has
received, and may receive, compensation, including having acted
as bookrunner with respect to the public offering of
Prides 8.5% Senior Notes due June 2019 (aggregate
principal amount $500,000,000) in May 2009, financial advisor to
Pride with respect to the spin-off of Seahawk Drilling in August
2009 and bookrunner with respect to the public offering of
Prides 6.875% Senior Notes due June 2020 and
7.875% Senior Notes due 2040 (aggregate principal amount
$1,200,000,000) in August 2010. During the two year period ended
February 6, 2011, the Investment Banking Division of
Goldman Sachs has accrued revenues for services provided to
Pride and its affiliates unrelated to the transaction of
approximately $16 million. Goldman Sachs also has provided
certain investment banking services to Ensco and its affiliates
from time to time for which Goldman Sachs Investment
Banking Division has received, and may receive, compensation,
including having acted as advisor to Ensco with respect to the
attempted acquisition of Scorpion Offshore Limited in May 2010.
During the two year period ended February 6, 2011, the
Investment Banking Division of Goldman Sachs has accrued
revenues for services provided to Ensco of approximately
$3 million. Goldman Sachs may also in the future provide
investment banking services to Pride, Ensco and their respective
affiliates for which Goldman Sachs Investment Banking
Division may receive compensation.
The board of directors of Pride selected Goldman Sachs as its
financial advisor because it is an internationally recognized
investment banking firm that has substantial experience in
transactions similar to the merger. Pursuant to a letter
agreement dated January 26, 2011, Pride engaged Goldman
Sachs to act as its financial advisor in connection with the
merger. Pursuant to the terms of the engagement letter, Pride
has agreed to pay Goldman Sachs a transaction fee currently
estimated to be approximately $42 million (which is based
on the closing price of Ensco ADSs and Pride net debt as of
March 31, 2011), of which $5 million became payable
upon execution of the engagement letter and the remainder is
contingent upon consummation of the merger. In addition, Pride
has agreed to reimburse Goldman Sachs for its expenses,
including attorneys fees and disbursements, and to
indemnify Goldman Sachs and related persons against various
liabilities, including certain liabilities under the federal
securities laws.
Ensco
Prospective Financial Information
Ensco is including selected prospective financial information
based on estimates by Ensco management in this joint proxy
statement/prospectus to provide its shareholders with access to
certain non-public unaudited projected financial information
that was made available to Pride and its financial advisor in
connection with the merger. The unaudited prospective financial
information does not give effect to the merger and does not take
into account any circumstances or events occurring after
January 21, 2011, the date it was prepared.
The unaudited prospective financial information was not prepared
with a view toward public disclosure, and the inclusion of this
information should not be regarded as an indication that any of
Ensco, Enscos financial advisor, Pride, Prides
financial advisor or any other recipient of this information
considered, or now considers, it to be predictive of actual
future results. The selected prospective financial information
is not being included in this joint proxy statement/prospectus
to influence shareholders decision whether to vote in
favor of the issuance and delivery of Ensco ADSs pursuant to the
merger, but because it represents prospective financial
information prepared by management of Ensco in connection with
due diligence. The information also was used for purposes of the
financial analyses performed by Enscos financial advisor
and was presented to the Ensco board of directors.
The unaudited prospective financial information was not prepared
with a view toward complying with GAAP, the published guidelines
of the SEC regarding projections or the guidelines established
by the American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information. All of the unaudited prospective financial
information was prepared by Ensco, and neither KPMG LLP nor any
other independent accountants have compiled, examined or
performed any procedures with respect to the unaudited
prospective financial information contained herein, nor have
they expressed any opinion or any other form of assurance on
such information or its achievability. The report of
Enscos independent registered public accounting firm
contained in Enscos Annual Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
by reference into this joint proxy statement/prospectus,
86
relates to Enscos historical financial information. It
does not extend to the unaudited prospective financial
information and should not be read to do so.
By including the unaudited prospective financial information in
this joint proxy statement/prospectus, neither Ensco nor any of
its representatives has made or makes any representation to any
person regarding the ultimate performance of Pride or Ensco
compared to the information contained in the unaudited
prospective financial information.
Although presented with numeric specificity, the unaudited
prospective financial information reflects numerous estimates
and assumptions with respect to oil and gas industry activity,
commodity prices, demand for natural gas and crude oil, global
rig count, capacity utilization and general economic and
regulatory conditions, and matters specific to Enscos
business, including the following material assumptions and
estimates as of January 21, 2011:
|
|
|
|
|
contracted drilling rigs were estimated to continue at their
contractual day rates through their firm contractual terms;
|
|
|
|
future day rates for uncontracted rigs or rigs coming off
contract were assumed to be consistent with Ensco management
estimates as derived from current market tenders and activity by
rig type and geographic location;
|
|
|
|
utilization rates by rig type and geographic location were
estimated based on current market trends;
|
|
|
|
drilling operations for ENSCO 8503 and ENSCO 8504 were estimated
to commence during the first and fourth quarters of 2011;
|
|
|
|
ENSCO 7500 was estimated to be unutilized during the first half
of the year as the rig is undergoing an enhancement project and
estimated to return to near-full utilization in the third and
fourth quarters of 2011;
|
|
|
|
future operating cost estimates on a
rig-by-rig
basis were assumed to be consistent with historical cost
information and management estimates by rig type and geographic
location;
|
|
|
|
management estimated a substantial decline in professional fees
over the prior year due to professional fees incurred during
2010 in connection with various reorganization efforts
undertaken as a result of Enscos redomestication to the
U.K. in December 2009;
|
|
|
|
capital expenditures for newbuild construction, rig enhancement
projects and minor upgrades and improvements were generally
consistent with managements estimates that were disclosed
in the Ensco Annual Report on
Form 10-K
for the year ended December 31, 2010;
|
|
|
|
management estimated there to be no significant legislative
changes affecting the offshore drilling industry;
|
|
|
|
management estimated there to be no significant changes in
prices of crude oil and natural gas that would affect demand for
offshore drilling services;
|
|
|
|
management estimated there to be no significant changes in
expected downtime and repairs on drilling rigs except as noted
above; and
|
|
|
|
management estimated there to be no significant impact from
pending litigation.
|
Many of these assumptions and estimates are beyond Enscos
control. As a result, although this information was prepared by
management of Ensco based on estimates and assumptions that
management believed were reasonable at the time, there can be no
assurance that the prospective results will be realized or that
actual results will not be significantly higher or lower than
estimated.
We caution you not to rely on the unaudited prospective
financial information set forth below. We urge you to read
carefully this entire joint proxy statement/prospectus,
including the annexes and the other documents to which this
joint proxy statement/prospectus refers or incorporates by
reference, including Enscos Annual Report on
87
Form 10-K
for the year ended December 31, 2010 and future SEC filings
for Enscos actual results of operations and a description
of risk factors with respect to Enscos business. See
Cautionary Statement Concerning Forward-Looking
Statements and Where You Can Find More Information;
Incorporation by Reference. No representation is made by
Pride, Ensco or any other person to any person regarding the
ultimate performance of Ensco compared to the unaudited
prospective financial information. No representation was made by
Ensco to Pride in the merger agreement concerning this
information.
The following table presents selected unaudited prospective
financial information prepared by Ensco as of January 21,
2011:
|
|
|
|
|
|
|
Year ended
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
|
(in millions)
|
|
|
Operating revenues
|
|
$
|
1,745
|
|
Contract drilling expenses (exclusive of depreciation)
|
|
|
836
|
|
Depreciation expense
|
|
|
256
|
|
General and administrative expense
|
|
|
75
|
|
Capital expenditures
|
|
|
518
|
|
The above unaudited prospective financial information does not
give effect to the merger.
Except as required by applicable securities laws, neither
Pride nor Ensco intends to update or otherwise revise the
prospective financial information to reflect circumstances
existing after the date when made or to reflect the occurrence
of future events, even in the event that any or all of the
assumptions underlying such prospective financial information
are no longer appropriate.
Pride
Prospective Financial Information
Pride is including selected prospective financial information
based on estimates by Pride management in this joint proxy
statement/prospectus to provide its stockholders with access to
certain non-public unaudited projected financial information
that was made available to Ensco and its financial advisor in
connection with the merger. The unaudited prospective financial
information does not give effect to the merger and does not take
into account any circumstances or events occurring after
January 27, 2011, the date it was prepared.
The unaudited prospective financial information was not prepared
with a view toward public disclosure, and the inclusion of this
information should not be regarded as an indication that any of
Pride, Prides financial advisor, Ensco, Enscos
financial advisor or any other recipient of this information
considered, or now considers, it to be predictive of actual
future results. The selected prospective financial information
is not being included in this joint proxy statement/prospectus
to influence a stockholders decision whether to vote in
favor of the adoption of the merger agreement, but because it
represents prospective financial information prepared by
management of Pride in connection with due diligence. The
information also was used for purposes of the financial analyses
performed by Prides financial advisor and was presented to
the Pride board of directors.
The unaudited prospective financial information was not prepared
with a view toward complying with GAAP, the published guidelines
of the SEC regarding projections or the guidelines established
by the American Institute of Certified Public Accountants for
preparation and presentation of prospective financial
information. All of the unaudited prospective financial
information was prepared by Pride, and neither KPMG LLP nor any
other independent accountants have compiled, examined or
performed any procedures with respect to the unaudited
prospective financial information contained herein, nor have
they expressed any opinion or any other form of assurance on
such information or its achievability. The report of
Prides independent registered public accounting firm
contained in Prides Annual Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
by reference into this joint proxy statement/prospectus, relates
to Prides historical financial information. It does not
extend to the unaudited prospective financial information and
should not be read to do so.
88
By including the unaudited prospective financial information in
this joint proxy statement/prospectus, neither Pride nor any of
its representatives has made or makes any representation to any
person regarding the ultimate performance of Pride or Ensco
compared to the information contained in the unaudited
prospective financial information.
Although presented with numeric specificity, the unaudited
prospective financial information reflects numerous estimates
and assumptions with respect to oil and gas industry activity,
commodity prices, demand for natural gas and crude oil, global
rig count, capacity utilization and general economic and
regulatory conditions, and matters specific to Prides
business, including the following material assumptions as of
January 27, 2011:
|
|
|
|
|
near-term oil price in the range of $70 to $90 per barrel;
|
|
|
|
the resumption of deepwater drilling activity in the
U.S. Gulf of Mexico;
|
|
|
|
incremental demand for newbuild ultra-deepwater rigs driven by
pre-salt activity in deepwater offshore Brazil;
|
|
|
|
the continued growth in the demand for deepwater drilling
services globally and a shift in customer demand to newer higher
specification rigs;
|
|
|
|
increased regulatory requirements with respect to deepwater
drilling activity, both domestically and internationally, and
stronger contractual protections sought by customers;
|
|
|
|
no significant changes to expected downtime, maintenance and
recertification procedures applicable to floating rigs and
jackups;
|
|
|
|
operating costs generally expected to continue to increase 3-5%
annually over the near term;
|
|
|
|
no material change to historical effective tax rates;
|
|
|
|
the reactivation of the Pride South Seas in mid third
quarter of 2011; and
|
|
|
|
the commencement of operations on full dayrate of the Deep
Ocean Ascension in early second quarter of 2011, the Deep
Ocean Clarion in late first quarter of 2011 and the Deep
Ocean Mendocino in late second quarter of 2011.
|
Many of the above assumptions are beyond Prides control.
As a result, although this information was prepared by
management of Pride based on estimates and assumptions that
management believed were reasonable at the time, there can be no
assurance that the prospective results will be realized or that
actual results will not be significantly higher or lower than
estimated.
We caution you not to rely on the unaudited prospective
financial information set forth below. We urge you to read
carefully this entire joint proxy statement/prospectus,
including the annexes and the other documents to which this
joint proxy statement/prospectus refers or incorporates by
reference, including Prides Annual Report on
Form 10-K
for the year ended December 31, 2010 and future SEC filings
for Prides actual results of operations and a description
of risk factors with respect to Prides business. See
Cautionary Statement Concerning Forward-Looking
Statements and Where You Can Find More Information;
Incorporation by Reference. No representation is made by
Pride, Ensco or any other person to any stockholder regarding
the ultimate performance of Pride compared to the unaudited
prospective financial information. No representation was made by
Pride to Ensco in the merger agreement concerning this
information.
The following table presents selected unaudited prospective
financial information prepared by Pride as of January 27,
2011:
|
|
|
|
|
|
|
Year ended
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
|
(in millions)
|
|
|
Operating revenues including reimbursable revenues
|
|
$
|
2,039
|
|
Operating costs, excluding depreciation and amortization
|
|
|
1,057
|
|
General and administrative expense
|
|
|
95
|
|
Capital expenditures
|
|
|
1,159
|
|
89
In addition, the Base Case Forecasts for Pride provided to
Goldman Sachs referred to above under Opinion
of Goldman, Sachs & Co. were based on this
information but reflected a 0.2%, or $5 million, increase
in revenues and a 1.5%, or $17 million, increase in total
costs (all of which was included in operating costs and general
and administrative expense) as compared to the prospective
financial information presented above. The Base Case Forecasts
for Ensco provided to Goldman Sachs by Pride reflected a 3.9%,
or $68 million, decrease in revenues, a 1.0%, or
$12 million, decrease in total costs (contract drilling
expense, depreciation expense and general and administrative
expense) and a substantial increase in capital expenditures as
compared to the prospective financial information presented
above under Ensco Prospective Financial
Information. The Base Case Forecasts reflected numerous
estimates and assumptions as more fully set forth above.
Except as required by applicable securities laws, neither
Pride nor Ensco intends to update or otherwise revise the
prospective financial information to reflect circumstances
existing after the date when made or to reflect the occurrence
of future events, even in the event that any or all of the
assumptions underlying such prospective financial information
are no longer appropriate.
Interests
of the Pride Directors and Executive Officers in the
Merger
In considering the recommendation of the Pride board of
directors with respect to the merger, Pride stockholders should
be aware that executive officers and directors of Pride have
certain interests in the merger that may be different from, or
in addition to, the interests of Pride stockholders generally.
The Pride board of directors was aware of the interests
described in this section and considered them, among other
matters, in approving the merger agreement and making its
recommendation that the Pride stockholders adopt the merger
agreement. See Recommendation of the Pride Board of
Directors and Its Reasons for the Merger.
These interests are summarized below. References in this section
to Prides executive officers are to the following
individuals: Louis A. Raspino, Imran Toufeeq, Brian C. Voegele,
W. Gregory Looser, Lonnie D. Bane, Kevin C. Robert and Brady K.
Long. For purposes of all the Pride plans and compensatory
arrangements described in this section, consummation of the
merger will constitute a change in control of Pride.
Ensco
Board of Directors Following the Merger
The merger agreement provides that Ensco will take such actions
as are necessary to expand the size of the Ensco board of
directors and to appoint two current non-employee members of the
Pride board of directors designated by Pride and reasonably
acceptable to Ensco to fill such vacancies effective as of the
effective time of the merger. Pride has not yet determined which
of its current directors will be its designees on the Ensco
board of directors as of the date of this joint proxy
statement/prospectus. See Directors and
Executive Officers of Ensco After the Merger.
Treatment
of Equity Incentive Awards
Prides executive officers have received, from time to
time, awards consisting of restricted stock units,
performance-based restricted stock units and options to acquire
Pride common stock. Prides directors have received, from
time to time, awards consisting of restricted stock units and
options to acquire Pride common stock, all of which are fully
vested as of January 31, 2011. Pursuant to the terms of
Prides long-term incentive plans and the applicable award
agreements thereunder, as a result of the merger all options to
acquire Pride common stock will fully vest, all restrictions
applicable to Pride restricted stock units will lapse and all
performance-based restricted stock units will fully vest and
will be earned based on actual performance as determined by
Prides Compensation Committee prior to the merger. Options
to acquire Pride common stock will remain outstanding and
exercisable following the merger according to their original
terms, provided that the options will be assumed by Ensco and
converted into equivalent options to acquire Ensco ADSs based on
an exchange ratio equal to 0.4778 plus a fraction obtained by
dividing $15.60 by the average closing price of Ensco ADSs for
the five trading days ending three trading days before the
closing of the merger. See The Merger
Agreement Merger Consideration Treatment
of Employee Stock Options and Other Equity
90
Awards. The option term will be extended for certain of
Prides executive officers pursuant to the terms of their
employment arrangements described below.
Employment
Agreements
Pride is party to employment agreements with each of its
executive officers. Upon the occurrence of a change in control,
the term of the employment agreements are automatically extended
for two years. The employment agreements provide for change in
control severance benefits in the event of certain qualifying
terminations of employment in connection with or within two
years after a change in control.
Under the employment agreements, if Pride terminates an
executive officers employment without cause (as defined in
the applicable agreement) or the executive officer terminates
employment for good reason (as defined in the applicable
agreement and as summarized below) at any time during the
two-year period following a change in control, the executive
will be eligible to receive the following payments and benefits
in exchange for a timely executed release of claims against
Pride and its affiliates:
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a lump sum cash payment equal to (i) two times (three times
for Mr. Raspino and 1.5 times for Mr. Long) the
executives annual base salary plus (ii) two times
(three times for Mr. Raspino) the executives maximum
bonus (1.5 times the target bonus for Mr. Long) under
Prides annual incentive plan;
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life, health and accident and disability insurance continuation,
at a cost to the executive at no more than the active employee
rates for such coverage, for a period of two years (three years
for Mr. Raspino and 1.5 years for Mr. Long) or
until similar benefits are received from another employer,
whichever is earlier; and
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immediate vesting of all equity awards, with options remaining
outstanding until the later of two years after the change in
control or 120 days after the executive officers
termination, except for (i) Mr. Voegele, for whom such
treatment is provided for in his equity award agreements,
(ii) Mr. Raspino, whose options remain outstanding for
their original term, and (iii) Mr. Long, whose options
remain outstanding for 60 days after termination as
provided in his equity award agreements.
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For purposes of the employment agreements, good
reason is defined generally to include
(i) resignation requested by Pride other than for cause,
(ii) a significant and adverse change in the nature or
scope of position, authority or duties (including for
Mr. Raspino, failure to be reelected to the board of
directors), (iii) a significant and material diminution in
duties and responsibilities that would degrade or embarrass the
executive or otherwise make it unreasonable for the executive to
remain employed, (iv) a reduction in base salary or target
bonus, or a material reduction in other benefits, (v) a
material breach of the employment agreement by Pride,
(vi) any requirement that the executive relocate more than
50 miles from downtown Houston, Texas, or (vii) notice
by Pride of non-renewal of the employment agreement prior to the
employment period in which the executive attains age 65.
Except for Mr. Long, if the executive voluntarily
terminates employment within six months (12 months for
Mr. Raspino) after a change in control, the executive is
deemed to have an involuntary termination entitling the
executive to receive the payments and benefits described above.
The employment agreements require Pride to establish a rabbi
trust prior to the consummation of a change in control and to
fund the rabbi trust with the cash severance amounts described
above.
The employment agreements provide that the executive officer is
responsible for all income tax liability as a result of payments
under the employment agreements, including any excise taxes
imposed on excess parachute payments made on account of a change
in control. In order to minimize excise tax liabilities, the
employment agreements provide for a reduction of certain
payments that are made as a result of a change in control. For
Messrs. Raspino, Toufeeq, Voegele, Looser, Bane and Robert,
if the reduction would reduce severance payments to the
executive by 10% or more, the reduction will not apply, and the
executive will receive a
gross-up
payment in an amount such that after payment of all taxes on the
gross-up
payment, the executive retains an amount of the
gross-up
payment equal to the excise taxes imposed on the
executives severance payments. For Mr. Long, the
reduction will not apply if the amount of Mr. Longs
benefit after paying the applicable taxes would exceed the
benefit Mr. Long would receive if his payments were subject
to the reduction.
91
Annual
Incentive Plan and Non-Executive Retention Plan
Each of Prides executive officers participate in
Prides annual incentive plan. In the event of a change in
control, Prides annual incentive plan provides for payment
of the executive officers maximum bonus for the year of
the change in control, pro-rated for full months of service in
such year prior to the date of the change in control. In
addition, the merger agreement permits Pride, with the agreement
of the Ensco senior executive in charge of human resources, to
establish a retention plan for certain key employees (other than
executive officers) up to a specified limit.
Supplemental
Executive Retirement Plan
Prides executive officers, with the exception of
Mr. Long, participate in Prides Supplemental
Executive Retirement Plan, or SERP. Messrs. Raspino, Looser
and Bane are fully vested in their SERP benefit.
Messrs. Toufeeq, Voegele and Robert vest incrementally
during their employment through the date of eligibility for
early or normal retirement.
The SERP is intended to provide specified benefits to a select
group of management and highly compensated employees of Pride.
The SERP benefit at an executives normal retirement
date, which is the date he attains age 62, is a lump
sum payment equal to the actuarial present value of an annual
benefit of 50% of his final annual pay payable for his lifetime.
Final annual pay for purposes of the benefits
calculations with respect to Messrs. Raspino, Looser and
Bane means the executives base annual salary and target
bonus award under Prides annual incentive plan as in
effect on the executives last day of active employment.
Final annual pay for purposes of the benefit
calculations with respect to Messrs. Toufeeq, Voegele and
Robert means the sum of (1) the executives average
base annual salary over the five years preceding his last day of
active employment and (2) the executives target bonus
percentage under Prides annual incentive plan as in effect
on the executives last day of active employment multiplied
by the amount in clause (1) above.
If the executive officers employment is terminated
involuntarily or for good reason within two years after a change
in control, or in the event of a voluntary resignation by the
executive within six months (12 months for
Mr. Raspino) after a change in control, then the executive
officers benefit under the SERP will fully vest and
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with respect to Messrs. Raspino, Toufeeq, Voegele and
Robert, the executive will receive from us a lump sum payment in
an amount equal to the actuarial present value of an annual
benefit of 50% of his final annual pay payable for his lifetime
and commencing on the first to occur of his early retirement
date or his normal retirement date; and
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with respect to Messrs. Looser and Bane, in lieu of the
lump sum benefit described above, the executive will receive
from us a lump sum payment in an amount equal to the greater of
his final annual pay at the time of the change in control or his
final annual pay at the time of termination, multiplied by five.
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The aggregate SERP benefits payable as a result of a change in
control are required to be deposited into a rabbi trust prior to
the change in control.
In addition, in connection with termination of employment with a
vested right to a benefit under the SERP, the executive is
entitled to receive retiree medical and dental coverage for
himself, his spouse and his dependents who were covered under
our group health plan as of the date of termination, with such
coverage beginning immediately with respect to
Messrs. Raspino, Looser and Bane and, with respect to
Messrs. Toufeeq, Voegele and Robert, on his normal
retirement date at age 62. The coverage will be provided
until the later of the death of the executive or his surviving
spouse. These benefits will be at least as favorable as the
group medical and dental coverage offered to Prides active
executive employees. This coverage (i) will be suspended
during any period the executive has medical coverage provided by
another employer, (ii) with respect to the executive and
his spouse (if applicable), will be converted to Medicare
Supplement coverage upon becoming eligible for and covered by
Medicare and (iii) with respect to his dependents, will
terminate at such time as the dependents are no longer eligible
for coverage under the terms of Prides group health plan.
Any retiree medical and dental benefits to the executives
spouse or surviving spouse are available solely to the spouse to
whom the executive was married on the date of the
executives termination of employment. The executive or, if
applicable, his surviving spouse will be responsible for the
applicable premiums for coverage at the same
92
rate paid by active executive employees but not to exceed the
cost of the most comprehensive group medical and dental coverage
offered by Pride.
Summary
of Estimated Value of Benefits Attributable to Change in
Control
The following table sets forth the number of outstanding,
unvested equity awards that will vest upon consummation of the
merger for Prides executive officers and directors, as
well as the estimated value of such awards. The chart also
includes the amount of the estimated cash severance payments and
the estimated value of other severance benefits that the
executive officers would receive. The table is based on grants
outstanding as of April 21, 2011 and assumes that the
merger is completed on June 1, 2011 and that each executive
officer experiences a severance-qualifying termination
immediately thereafter.
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Louis A.
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Imran
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Brian C.
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W. Gregory
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Lonnie D.
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Kevin C.
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Brady K.
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Raspino
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Toufeeq
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Voegele
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Looser
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Bane
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Robert
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Long
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Restricted stock units
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157,699
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50,245
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55,509
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52,959
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34,807
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33,647
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28,342
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Estimated value of restricted stock units(1)
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$
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6,811,020
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$
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2,170,082
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$
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2,397,434
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$
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2,287,299
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$
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1,503,314
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$
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1,453,214
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$
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1,224,091
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Performance-based restricted stock units(2)
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130,677
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57,814
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44,163
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45,039
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28,702
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34,420
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20,740
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Estimated value of performance-based restricted stock units(1)
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$
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5,643,940
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$
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2,496,987
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$
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1,907,400
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$
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1,945,234
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$
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1,239,639
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$
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1,486,600
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$
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895,761
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Shares subject to outstanding options
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387,273
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116,515
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130,292
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128,115
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84,877
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93,161
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33,815
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Estimated value of shares subject to outstanding options(1)
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$
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6,538,103
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$
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1,633,614
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$
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2,215,357
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$
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2,134,264
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$
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1,430,635
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$
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1,525,379
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$
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388,410
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Estimated cash severance payments under employment agreements
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$
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8,550,000
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$
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2,600,000
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$
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2,112,000
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$
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2,136,000
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$
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1,628,000
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$
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1,725,000
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$
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888,000
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Estimated pro-rated 2011 Annual Incentive Plan payment
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$
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791,666
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$
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325,000
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$
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256,666
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$
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259,583
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$
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185,000
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$
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203,125
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$
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185,000
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Estimated enhanced SERP lump sum payment(3)
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$
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$
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3,250,040
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$
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2,456,353
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$
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1,810,939
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$
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71,713
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$
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2,166,638
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$
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Estimated 280G
gross-up
amount
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$
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$
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4,075,117
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$
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3,223,564
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$
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2,303,846
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$
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$
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2,633,261
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$
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(1) |
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Estimated value is based on the closing price of Pride common
stock as of April 21, 2011 at $43.19. The estimated option
value represents $43.19 less the applicable exercise price
multiplied by the number of option shares. |
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(2) |
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The number of performance-based restricted stock units to be
earned depends upon the satisfaction of certain performance
goals. This chart assumes that all unvested performance goals
will be achieved at the maximum level. On March 9, 2011,
Prides executive officers vested in the following number
of earned performance-based restricted stock units:
Mr. Raspino 17,532 units;
Mr. Toufeeq 7,452 units;
Mr. Voegele 6,137 units;
Mr. Looser 6,137 units;
Mr. Bane 3,945 units;
Mr. Robert 4,384 units and
Mr. Long 1,772 units. Pursuant to the
terms of Prides long-term incentive plan and the
applicable award agreements, as a result of the merger, all
remaining performance-based restricted stock units will fully
vest and will be earned based on actual performance as
determined by Prides Compensation Committee prior to the
merger. Further, as a result of the merger, all earned
performance-based restricted stock units will be paid on the
effective date of the merger. |
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Represents the increase in SERP benefit as a result of the
merger. Mr. Raspino is fully vested in his SERP and not
entitled to enhanced SERP benefits as a result of the merger. |
Prides directors will not receive any additional or
enhanced payments as a result of the merger. All of the
outstanding restricted stock unit and option awards of
Prides directors are fully vested as of January 31,
2011.
93
Indemnification
and Insurance
The merger agreement provides for indemnification and
advancement of expenses in favor of the current and former
directors and officers of Pride and its subsidiaries and for the
purchase of directors and officers liability
insurance and fiduciary liability insurance tail policies with
respect to matters existing or occurring at or prior to the
effective time of the merger. These interests are described in
more detail below at The Merger Agreement
Additional Agreements Indemnification and
Insurance.
Directors
and Executive Officers of Ensco After the Merger
The directors and executive officers of Ensco prior to the
merger will continue as the directors and executive officers of
Ensco immediately after the merger, except that the merger
agreement provides that Ensco shall take such actions as are
necessary to expand the size of the Ensco board of directors and
to appoint two non-employee members of the current Pride board
of directors designated by Pride and reasonably acceptable to
Ensco to fill such vacancies effective as of the effective time
of the merger. Pride has not yet determined which of its current
directors will be its designees on the Ensco board of directors
as of the date of this joint proxy statement/prospectus. Upon
determination of such designees by Pride, the Ensco Nominating,
Governance and Compensation Committee will review the
independence and qualifications of such candidates in accordance
with Enscos Corporate Governance Policy and make a
recommendation to the Ensco board of directors. Assuming a
favorable recommendation, the Ensco board of directors will
increase the size of the board by two and appoint the Pride
designees to the newly-created vacancies in such classes of
directors as the Ensco board may determine and provide that such
directors shall stand for election for the remaining portion of
the term of office for such classes at the next annual general
meeting of shareholders for which a notice of the meeting has
not been sent at the time of appointment.
In addition, it is currently expected that certain executive
officers of Pride will become members of the Ensco executive
management team following the merger. As of the date of this
joint proxy statement/prospectus, it has not been determined
which executive officers of Pride will join the Ensco executive
management team, or what positions such executive officers will
hold, following the merger.
Ownership
of Ensco After the Merger
Ensco will issue approximately 87 million Class A
ordinary shares represented by Ensco ADSs pursuant to the merger
based on the number of outstanding shares of Pride common stock.
Immediately following the completion of the merger, Ensco
expects to have approximately 231 million ADSs outstanding.
Ensco shareholders and Pride stockholders are expected to hold
approximately 62% and 38%, respectively, of the Ensco ADSs
outstanding immediately after the merger based on the same
assumptions. Consequently, Pride stockholders, as a general
matter, will have less influence over the management and
policies of Ensco than they currently exercise over the
management and policies of Pride.
Regulatory
Approvals
Antitrust
Approvals
The merger is subject to review by the Antitrust Division of the
U.S. Department of Justice, which is referred to as the
Antitrust Division, under the HSR Act. Under the HSR Act, Ensco
and Pride are required to make premerger notification filings
and to await the expiration or early termination of the
statutory waiting period (and any extension of the waiting
period) prior to completing the merger. On February 28,
2011, Ensco and Pride each filed a Premerger Notification and
Report Form with the Antitrust Division and the Federal Trade
Commission, which is referred to as the FTC. On March 30,
2011, Ensco and Pride received notice from the Antitrust
Division and the FTC granting early termination of the waiting
period under the HSR Act.
The merger is also subject to antitrust review by government
authorities in Brazil, which does not require governmental
approval prior to the closing of the transaction.
94
There can be no assurance that the merger will not be challenged
on antitrust or competition grounds or, if a challenge is made,
what the outcome would be. The Antitrust Division, the FTC, any
U.S. state and other applicable U.S. or
non-U.S. regulatory
bodies may challenge the merger on antitrust or competition
grounds at any time, including after the termination of the
waiting period under the HSR Act or other applicable process, as
they may deem necessary or desirable or in the public interest.
Accordingly, at any time before or after the completion of the
merger, any such party could take action under the antitrust
laws, including, without limitation, by seeking to enjoin the
effective time of the merger or permitting completion subject to
regulatory concessions or conditions. Private parties may also
seek to take legal action under antitrust or competition laws
under certain circumstances.
Other
Regulatory Procedures
The merger may be subject to certain regulatory requirements of
other municipal, state and federal, domestic or foreign,
governmental agencies and authorities, including those relating
to the offer and sale of securities. Ensco and Pride are
currently working to evaluate and comply in all material
respects with these requirements, as appropriate, and do not
currently anticipate that they will hinder, delay or restrict
completion of the merger.
It is possible that one or more of the regulatory approvals
required to complete the merger will not be obtained on a timely
basis or at all. In addition, it is possible that any of the
governmental entities with which filings are made may seek
regulatory concessions as conditions for granting approval of
the merger. Under the merger agreement, Ensco and Pride have
each agreed to use its reasonable best efforts to take all
actions necessary, proper or advisable to complete the merger
and the other transactions contemplated by the merger agreement,
including to gain clearance from antitrust authorities and
obtain other required approvals. See The Merger
Agreement Additional Agreements Efforts
Related to Consents and Approvals of Governmental Entities and
Third Parties.
Although Ensco and Pride do not expect antitrust or other
regulatory authorities to raise any significant objections to
the merger that would result in the failure to satisfy the
conditions to closing the merger by the termination date, Ensco
and Pride can provide no assurance that all required regulatory
approvals will be obtained or that these approvals will not
contain terms, conditions or restrictions that would be
detrimental to Ensco after the effective time of the merger.
Ensco and Pride have not yet obtained any of the regulatory
approvals required to complete the merger.
Material
U.S. Federal Income Tax Consequences of the Merger
Scope
of Discussion
The following discussion summarizes the material
U.S. federal income tax consequences of the merger and of
holding and disposing of Ensco ADSs that may be relevant to
Pride stockholders. This discussion does not address any aspects
of U.S. taxation other than U.S. federal income
taxation, is not a complete analysis or listing of all potential
tax consequences of the merger or of holding and disposing of
Ensco ADSs, and does not address all tax considerations that may
be relevant to Pride stockholders. In particular, the discussion
below addresses only the U.S. federal income tax
consequences to Pride stockholders who hold their shares of
Pride common stock, and who will hold their Ensco ADSs, solely
as capital assets. The discussion below does not address any tax
consequences to Pride stockholders who are subject to special
rules under U.S. federal income tax laws, such as:
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banks, financial institutions or insurance companies;
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tax-exempt entities, including an individual retirement
account or Roth IRA;
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persons who hold shares as part of a straddle, hedge, wash sale,
integrated transaction or conversion transaction;
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persons who have been, but are no longer, citizens or residents
of the U.S.;
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persons holding shares through a partnership or other fiscally
transparent person;
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dealers or traders in securities, commodities or currencies;
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grantor trusts;
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persons subject to the alternative minimum tax;
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U.S. persons whose functional currency is not
the U.S. dollar;
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regulated investment companies and real estate investment trusts;
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persons who received their shares of Pride common stock through
the exercise of incentive stock options or through the issuance
of restricted stock under an equity incentive plan or through a
tax qualified retirement plan or otherwise as
compensation; or
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persons who, after the merger, own (directly or through
attribution) 10 percent or more of the total combined
voting power of all classes of shares entitled to vote of Ensco.
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This discussion is based on the Internal Revenue Code of 1986,
as amended, the Treasury regulations promulgated thereunder, or
the Treasury Regulations, judicial and
administrative interpretations thereof and the Convention
Between the United States of America and the United Kingdom for
the Avoidance of Double Taxation with respect to Taxes on
Income, or the
U.S.-U.K.
Tax Treaty, in each case as in effect and available on the
date of this joint proxy statement/prospectus. Each of the
foregoing is subject to change, which change could apply with
retroactive effect and could affect the accuracy of the
statements and conclusions set forth in this discussion. Neither
Ensco nor Pride will request a ruling from the Internal Revenue
Service, or IRS, as to the U.S. federal tax consequences of
the merger, post-merger ownership and disposition of Ensco ADSs
or any other matter. There can be no assurance that the IRS will
not challenge any of the U.S. federal tax consequences
described below.
The determination of the actual tax consequences of the merger
and of holding and disposing of Ensco ADSs to a holder of Pride
common stock will depend on the holders specific
situation. Holders of Pride common stock should consult their
own tax advisors as to the tax consequences of the merger and
holding and disposing of Ensco ADSs in their particular
circumstances, including the applicability and effect of the
alternative minimum tax and any state, local, foreign or other
tax laws and of changes in those laws.
For purposes of this discussion, a U.S. holder
is a beneficial owner of shares of Pride common stock, or after
the completion of the merger, Ensco ADSs, that for
U.S. federal income tax purposes is:
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an individual citizen or resident of the U.S.;
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a corporation or other entity taxable as a corporation in or
under the laws of the U.S. or any state thereof or the
District of Columbia;
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust, if such trust has validly elected to be treated as a
U.S. person for U.S. federal income tax purposes or if
(1) a U.S. court can exercise primary supervision over
the trusts administration and (2) one or more
U.S. persons have the authority to control all substantial
decisions of the trust.
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A
non-U.S. holder
is a beneficial owner of shares of Pride common stock or, after
the completion of the merger, Ensco ADSs, other than a
U.S. holder or an entity or arrangement treated as a
partnership for U.S. federal income tax purposes, or a
Partnership. If a Partnership is a beneficial owner
of shares of Pride common stock or Ensco ADSs, the tax treatment
of a partner in that Partnership will generally depend on the
status of the partner and the activities of the Partnership.
Holders of shares of Pride common stock or Ensco ADSs that are
Partnerships and partners in such Partnerships should consult
their tax advisors regarding the U.S. federal income tax
consequences to them of the merger and the ownership and
disposition of Ensco ADSs. For purposes of this discussion,
holder or stockholder means either a
U.S. holder or a
non-U.S. holder
or both, as the context may require.
96
Tax
Consequences of the Merger to Pride Stockholders
Material
Tax Consequences to U.S. Holders
Consequences
of the Merger
The receipt of Ensco ADSs and cash in exchange for shares of
Pride common stock in the merger generally will be a taxable
transaction for U.S. federal income tax purposes. A
U.S. holder of Pride common stock who receives Ensco ADSs
and cash in the merger generally will recognize capital gain or
loss equal to the difference, if any, between (1) the sum
of the fair market value of Ensco ADSs and cash received in the
merger, including any cash received in lieu of fractional Ensco
ADSs, and (2) such holders adjusted tax basis in its
Pride common stock exchanged in the merger. A U.S. holder
must include the fair market value of the Ensco ADSs the
U.S. holder receives, as well as any cash received, in
calculating the U.S. holders gain or loss, even if
the U.S. holder receives an information return from the
U.S. holders broker reporting only the cash proceeds
as taxable consideration. Gain or loss and holding period will
be determined separately for each block of Pride common stock,
i.e., shares acquired at the same cost in a single
transaction, exchanged in the merger. Any capital gain or loss
generally will be long-term capital gain or loss if the
U.S. holders holding period for its Pride common
stock is more than one year at the time of the merger.
Currently, long-term capital gain for non-corporate taxpayers is
taxed at a maximum federal income tax rate of 15 percent.
If the U.S. holder has held its Pride common stock for one
year or less at the time of the merger, any capital gain or loss
generally will be short-term capital gain or loss. The
deductibility of capital losses is subject to certain
limitations. A U.S. holders aggregate tax basis in
its Ensco ADSs received in the merger will generally equal the
fair market value of such Ensco ADSs at the effective time of
the merger, and the holders holding period for such Ensco
ADSs will begin on the day after the merger. U.S. holders
should consult their tax advisors regarding the allowability of
any losses recognized in the transaction.
Dissenting
Stockholders
A U.S. holder who exercises appraisal rights with respect
to the merger will recognize capital gain or loss equal to the
difference, if any, between the cash received via appraisal and
such holders adjusted tax basis in its shares of Pride
common stock with respect to which the appraisal rights were
exercised. This capital gain or loss will be long-term or
short-term capital gain or loss depending upon such
holders holding period for its shares of Pride common
stock with respect to which the appraisal rights were exercised,
as described in the immediately preceding paragraph. For more
details regarding appraisal rights with respect to the merger,
see Appraisal Rights.
Receiving
Distributions on Ensco ADSs
Subject to the discussion below under Passive
Foreign Investment Company Provisions, U.S. holders
will be required to include in gross income the gross amount of
any distribution received on the Ensco ADSs to the extent that
the distribution is paid out of Enscos current or
accumulated earnings and profits as determined for
U.S. federal income tax purposes. We refer to such a
distribution herein as a dividend. With respect to non-corporate
U.S. holders, certain dividends received in taxable years
beginning before January 1, 2013 from a qualified foreign
corporation will be subject to U.S. federal income tax at a
maximum rate of 15 percent. As long as the Ensco ADSs are
listed on the New York Stock Exchange (or certain other stock
exchanges)
and/or Ensco
qualifies for benefits under the
U.S.-U.K.
Tax Treaty and Ensco is not a passive foreign investment
company, Ensco will be treated as a qualified foreign
corporation for this purpose. This reduced rate will not be
available in all situations, and U.S. holders should
consult their own tax advisors regarding the application of the
relevant rules to their particular circumstances.
U.S. corporate holders generally will not be eligible for a
dividends-received deduction with respect to dividends from
Ensco.
Distributions in excess of the current and accumulated earnings
and profits of Ensco will be applied first to reduce the
U.S. holders tax basis in its Ensco ADSs, and
thereafter will constitute gain from the sale or exchange of
such shares. In the case of a non-corporate U.S. holder,
the maximum U.S. federal income tax rate applicable to such
gain is 15 percent under current law if the
holders holding period for such Ensco ADSs exceeds twelve
months. This reduced rate is scheduled to expire effective for
taxable years beginning
97
after December 31, 2012. Special rules not described herein
may apply to U.S. holders who do not have a uniform tax
basis and holding period in all of their Ensco ADSs, and any
such U.S. holders are urged to consult their own tax
advisors with regard to such rules.
Dispositions
of Ensco ADSs
Subject to the discussion below under Passive
Foreign Investment Company Provisions, a U.S. holder
of Ensco ADSs generally will recognize capital gain or loss for
U.S. federal income tax purposes on the sale, exchange or
other taxable disposition of Ensco ADSs in an amount equal to
the difference between the amount realized from such sale,
exchange or other taxable disposition and the
U.S. holders tax basis in such Ensco ADSs. In the
case of a non-corporate U.S. holder, the maximum
U.S. federal income tax rate applicable to such gain is
15 percent under current law if the holders holding
period for such Ensco ADSs exceeds twelve months. This reduced
rate is scheduled to expire effective for taxable years
beginning after December 31, 2012. The deductibility of
capital losses is subject to limitations.
Medicare
Tax
For taxable years beginning after December 31, 2012, a
U.S. holder that is an individual or estate, or a trust
that does not fall into a special class of trusts that is exempt
from such tax, will be subject to a 3.8 percent tax (the
Medicare Tax) on the lesser of (a) the
U.S. holders net investment income for
the relevant taxable year and (b) the excess of the
U.S. holders modified adjusted gross income for the
taxable year over a certain threshold (which in the case of
individuals will be between $125,000 and $250,000 depending on
the individuals circumstances). A U.S. holders
net investment income will generally include dividends received
on the Ensco ADSs and net gains from the disposition of Ensco
ADSs, unless such dividend income or net gains are derived in
the ordinary course of the conduct of a trade or business (other
than a trade or business that consists of certain passive or
trading activities). A U.S. holder that is an individual,
estate or trust should consult the holders tax advisor
regarding the applicability of the Medicare Tax to the
holders dividend income and gains in respect of the
holders investment in the Ensco ADSs.
Passive
Foreign Investment Company Provisions
The treatment of U.S. holders of Ensco ADSs in some cases
could be materially different from that described above if, at
any relevant time, Ensco were a passive foreign investment
company, which we refer to as a PFIC.
For U.S. federal income tax purposes, a foreign corporation
is classified as a PFIC for any taxable year if either
(1) 75 percent or more of its gross income is
passive income (as defined for U.S. federal
income tax purposes) or (2) the average percentage (by
value) of assets held by such corporation which produce passive
income or which are held for the production of passive income is
at least 50 percent. For purposes of applying the tests in
the preceding sentence, the foreign corporation is deemed to own
its proportionate share of the assets, and to receive directly
its proportionate share of the income, of any other corporation
of which the foreign corporation owns, directly or indirectly,
at least 25 percent by value of the stock. Ensco believes
that it will not be a PFIC following the merger.
The tests for determining PFIC status are applied annually, and
it is difficult to accurately predict future income and assets
relevant to this determination. Accordingly, Ensco cannot assure
U.S. holders that it will not become a PFIC. If Ensco
should determine in the future that it is a PFIC, it will
endeavor to so notify U.S. holders of Ensco ADSs, although
there can be no assurance that it will be able to do so in a
timely and complete manner. U.S. holders of Ensco ADSs
should consult their own tax advisors about the PFIC rules,
including the availability of certain elections.
98
Material
Tax Consequences to
Non-U.S.
Holders
Consequences
of the Merger
A
non-U.S. holder
generally will not be subject to U.S. federal income tax on
gain realized, if any, on the exchange of shares of Pride common
stock for Ensco ADSs and cash, or on the receipt of cash in lieu
of fractional shares of Ensco ADSs, unless: (1) such gain
is effectively connected with the conduct by the
non-U.S. holder
of a trade or business within the U.S. (and, if a tax
treaty applies, is attributable to a permanent establishment or
fixed place of business maintained by the
non-U.S. holder
in the U.S.); (2) in the case of certain capital gains
recognized by a
non-U.S. holder
that is an individual, such individual is present in the
U.S. for 183 days or more during the taxable year in
which the capital gain is recognized and certain other
conditions are met; (3) the
non-U.S. holder
is subject to backup withholding (as discussed below); or
(4) Pride is or has been a U.S. real property
holding corporation within the meaning of
Section 897(c)(2) of the Code at any time within the
shorter of the five-year period preceding the merger or such
non-U.S. holders
holding period, and the
non-U.S. holder
holds, or has held at any time during such shorter period, more
than 5 percent of the Pride common stock. Pride does not
believe that it is or has been a U.S. real property holding
corporation within the last five years.
Consequences
of Owning and Disposing of Ensco ADSs
A
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax on dividends from Ensco unless: (1) the
dividends are effectively connected with the
non-U.S. holders
conduct of a trade or business in the U.S. (and, if a tax
treaty applies, the dividends are attributable to a permanent
establishment or fixed place of business maintained by the
non-U.S. holder
in the U.S.); or (2) such
non-U.S. holder
is subject to backup withholding.
In addition, a
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax on any gain recognized on the sale, exchange or
other disposition of Ensco ADSs unless: (1) such gain is
effectively connected with the conduct by the
non-U.S. holder
of a trade or business within the U.S. (and, if a tax
treaty applies, is attributable to a permanent establishment or
fixed place of business maintained by the
non-U.S. holder
in the U.S.); (2) in the case of certain capital gains
recognized by a
non-U.S. holder
that is an individual, such individual is present in the
U.S. for 183 days or more during the taxable year in
which the capital gain is recognized and certain other
conditions are met; or (3) the
non-U.S. holder
is subject to backup withholding.
Information
Reporting and Backup Withholding
Information reporting and backup withholding may apply to
payments made in connection with the merger. Backup withholding
will not apply, however, to a holder of Pride common stock who
(1) furnishes a correct taxpayer identification number, or
TIN, certifies that such holder is not subject to backup
withholding on the
Form W-9
(or substitute
Form W-9
or appropriate successor form) included in the letter of
transmittal that such holder will receive, and otherwise
complies with all applicable requirements of the backup
withholding rules; or (2) provides proof that such holder
is otherwise exempt from backup withholding. Backup withholding
is not an additional tax, and any amounts withheld under the
backup withholding rules generally may be refunded or credited
against a holders U.S. federal income tax liability,
if any, provided that such holder furnishes the required
information to the IRS in a timely manner. Pride stockholders
should consult their own tax advisors about the information
reporting requirements that could be applicable to the exchange
of shares of Pride common stock for Ensco ADSs and cash in the
merger and any potential penalties associated with a failure to
satisfy such requirements.
For a
non-U.S. holder
to not be subject to backup withholding on the exchange of
shares of Pride common stock for Ensco ADSs and cash in the
merger, the
non-U.S. holder
may be required to provide a TIN, certify the holders
foreign status or otherwise establish an exemption.
Dividends on Ensco ADSs paid within the U.S. or through
certain
U.S.-related
financial intermediaries are subject to information reporting
unless the holder is a corporation, other exempt recipient or
non-U.S. holder
99
who establishes such foreign status. Dividends subject to
information reporting are subject to backup withholding
(currently at a 28 percent rate but increasing to
31 percent for amounts paid after December 31,
2012) unless the payee furnishes the payor with a TIN and
satisfies certain certification requirements. Information
reporting and backup withholding may also apply to the payment
of proceeds from a sale of Ensco ADSs within the U.S. or
through certain
U.S.-related
intermediaries. Any amounts withheld under the backup
withholding rules generally may be allowed as a refund or a
credit against the holders U.S. federal income tax
liability, provided the holder furnishes certain required
information to the IRS. If a U.S. holder of Ensco ADSs does
not provide us (or our paying agent) with the holders
correct taxpayer identification number or other required
information, the holder may be subject to penalties imposed by
the IRS.
For a
non-U.S. holder
to not be subject to backup withholding on a subsequent
disposition of Ensco ADSs, or dividends paid on those Ensco
ADSs, the
non-U.S. holder
may be required to provide a TIN, certify the holders
foreign status or otherwise establish an exemption.
Individual holders who hold interests in specified foreign
financial assets, such as Ensco ADSs, may be required to
disclose certain information relating to each specified
foreign financial asset on their income tax return for the
year if the aggregate value of such assets exceeds $50,000,
subject to certain exceptions (including an exception for shares
held in accounts maintained by certain financial institutions).
Penalties may apply to the failure to properly disclose such
information.
Holders should consult their tax advisor regarding the
application of information reporting and backup withholding to
their particular situations.
The foregoing discussion is for general information only and
not intended to be legal or tax advice to any particular Pride
stockholder. Tax matters regarding the merger are very
complicated, and the tax consequences of the merger to any
particular Pride stockholder will depend on that
stockholders particular situation. Pride stockholders
should consult their own tax advisor to determine the specific
tax consequences of the merger, including tax return reporting
requirements, the applicability of U.S. federal, state,
local and foreign tax laws, and the effect of any proposed
change in the tax laws to them.
Material
U.K. Tax Consequences of the Merger
Material
U.K. Tax Consequences of the Merger to Pride
Stockholders
Scope of
Discussion
The following paragraphs are intended as a general guide to
current U.K. tax law and HMRCs generally published
practice applying as at the date of this document (both of which
are subject to change at anytime, possibly with retrospective
effect) in respect of certain limited aspects of the U.K.
corporation tax, income tax, capital gains tax and stamp duty
consequences of the merger to persons who are beneficial owners
of the Prides common stock, referred to as Pride
stockholders. These paragraphs may not relate to certain classes
of Pride stockholders, such as employees or directors of Pride
or its affiliates, persons who are connected with Pride,
insurance companies, charities, collective investment schemes,
pension schemes or persons who hold their common stock otherwise
than as an investment, or individuals who are not domiciled in
the U.K. They do not address the U.K. tax consequences for Pride
stockholders who are brokers, dealers or traders in shares or
securities. These paragraphs do not describe all of the
circumstances in which Pride stockholders may benefit from an
exemption or relief from taxation. It is recommended that all
Pride stockholders obtain their own taxation advice. In
particular, non-U.K. resident or domiciled Pride stockholders
are advised to consider the potential impact of any relevant
double tax agreements.
Taxation
of Merger
Withholding
Taxes
No U.K. tax will be deducted or withheld at source from the
payment of cash or delivery of Ensco ADSs to a Pride stockholder
pursuant to the merger, irrespective of the tax residence or
individual circumstances of the stockholder.
100
Capital
Gains Tax
At the effective time of the merger, an individual Pride
stockholder who is either resident or ordinarily resident in the
U.K. will be treated as disposing of his or her common stock in
Pride for a consideration equal to the cash and the market value
of the Ensco ADSs received by such Pride stockholder at that
time, which may, depending on the stockholders individual
circumstances, give rise to a chargeable gain or an allowable
loss for the purposes of capital gains tax. An individual Pride
stockholder who is neither resident nor ordinarily resident in
the U.K. will not be chargeable to capital gains tax on a
chargeable gain arising on the disposal of his or her Pride
common stock, unless the stockholder carries on a trade,
profession or vocation in the U.K. through a branch or agency in
the U.K. and the stock was acquired, used in or for the purposes
of the branch or agency or used in or for the purposes of the
trade, profession or vocation carried on by the stockholder
through the branch or agency. In these circumstances, the Pride
stockholder will be treated as disposing of their Pride common
stock for a consideration equal to the cash and the market value
of Ensco ADSs received by such Pride stockholder at that time.
The rate of capital gains tax on chargeable gains is
28 percent for the tax year 2010/2011 for higher rate or
additional rate taxpayers.
Corporation
Tax
At the effective time of the merger, a corporate Pride
stockholder which is resident in the U.K. will be treated as
disposing of its stock in Pride for a consideration equal to the
cash and the market value of the Ensco ADSs received by such
Pride stockholder at that time, which may, depending on the
stockholders individual circumstances, give rise to a
chargeable gain or an allowable loss for the purposes of
corporation tax. A corporate Pride stockholder which is not
resident in the U.K. will not be liable for corporation tax on
chargeable gains accruing on the disposal of its common stock in
Pride, unless it carries on a trade in the U.K. through a
permanent establishment in the U.K. and the stock was acquired,
used in or for the purposes of the permanent establishment or
used in or for the purposes of the trade carried on by the
stockholder through the permanent establishment. In these
circumstances, the non-U.K. resident stockholder may, depending
on its individual circumstances, be chargeable to corporation
tax on chargeable gains arising from a disposal of its common
stock in Pride.
The full rate of corporation tax on chargeable gains in
financial year 2011 is 27 percent, although small companies
may be entitled to claim the small companies rate of tax, in
which case chargeable gains will be subject to corporation tax
at rates of between 21 percent and 27 percent. A
corporate Pride stockholder may be entitled to an indexation
allowance in computing the amount of a chargeable gain accruing
on the disposal of its common stock in Pride, which will provide
relief for the effects of inflation by references to movements
in the U.K. retail price index. If the conditions of the
substantial shareholding exemption set out in s.192A and
Schedule 7AC of the Taxation of Chargeable Gains Act 1992
are satisfied in relation to a chargeable gain accruing to a
corporate Pride stockholder, the chargeable gain will be exempt
from corporation tax. The conditions of the substantial
shareholding exemption which must be satisfied will depend on
the individual circumstances of the stockholder. One of the
conditions of the substantial shareholding exemption which must
be satisfied is that the stockholder must have held a
substantial shareholding in Pride throughout a twelve-month
period beginning not more than two years before the day on which
the disposal takes place. Ordinarily, a stockholder will not be
regarded as holding a substantial shareholding in Pride unless
it (whether alone or together with other group companies) holds
not less than 10 percent of Prides ordinary share
capital.
Stamp
Duty and Stamp Duty Reserve Tax
No stamp duty or stamp duty reserve tax will be payable by Pride
stockholders as a consequence of the merger.
Material
U.K. Tax Consequences of Holding Ensco ADSs
The following paragraphs are intended to be a general guide to
current U.K. tax law and HMRC practice applying as of the date
of this report (both of which are subject to change at any time,
possibly with retrospective effect) in respect of certain
limited aspects the taxation of capital gains on a disposal of
Ensco
101
ADSs, the taxation of dividends paid by Ensco and stamp duty and
SDRT on the transfer of Class A ordinary shares,
uncertificated ADSs and ADSs evidenced by American depositary
receipts, or ADRs. In addition, the following paragraphs relate
only to persons who are beneficial owners of the ADSs, referred
to as ADS holders. These paragraphs may not relate to certain
classes of holders of the ADSs, such as employees or directors
of Ensco or its affiliates, persons who are connected with
Ensco, insurance companies, charities, collective investment
schemes, pension schemes or persons who hold ADSs other than as
an investment, or U.K. resident individuals who are not
domiciled in the U.K. They do not address the U.K. tax
consequences for Pride stockholders who are brokers, dealers or
traders in shares or securities. These paragraphs do not
describe all of the circumstances in which ADS holders may
benefit from an exemption or relief from taxation. It is
recommended that all ADS holders obtain their own taxation
advice. In particular, non-U.K. resident or domiciled ADS
holders are advised to consider the potential impact of any
relevant double tax treaties, including the Convention Between
the United States of America and the United Kingdom for the
Avoidance of Double Taxation with respect to Taxes on Income, to
the extent applicable.
U.K.
Taxation of Dividends
U.K. Withholding Tax. Dividends paid by Ensco will not be
subject to any withholding or deduction for or on account of
U.K. tax, irrespective of the residence or the individual
circumstances of the ADS holders.
U.K. Income Tax. An individual ADS holder who is resident or
ordinarily resident in the U.K. may, depending on his or her
individual circumstances, be subject to U.K. income tax on
dividends received from Ensco. An individual ADS holder who is
not resident or ordinarily resident in the U.K. will not be
subject to U.K. income tax on dividends received from Ensco,
unless the ADS holder carries on (whether solely or in
partnership) any trade, profession or vocation through a branch
or agency in the U.K. and the ADSs are used by or held by or for
that branch or agency. In these circumstances, the non-U.K.
resident ADS holder may, depending on his or her individual
circumstances, be subject to U.K. income tax on dividends
received from Ensco.
The rate of U.K. income tax which is payable with respect to
dividends received by higher rate taxpayers in the tax year
2010/2011 is 32.5%. Individuals whose total income subject to
income tax exceeds £150,000 will be subject to income tax
in respect of dividends in excess of that amount at the rate of
42.5% in the tax year 2010/2011. An individuals dividend
income is treated as the top slice of their total income which
is subject to income tax. Individual ADS holders who are
resident in the U.K. will be entitled to a tax credit equal to
one-ninth of the amount of the dividend received from Ensco,
which will be taken into account in computing the gross amount
of the dividend which is subject to income tax. The tax credit
will be credited against the ADS holders liability (if
any) to income tax on the gross amount of the dividend. An
individual ADS holder who is not subject to U.K. income tax on
dividends received from Ensco will not be entitled to claim
payment of the tax credit in respect of such dividends. The
right of an individual ADS holder who is not resident in the
U.K. to a tax credit will depend on his or her individual
circumstances.
U.K. Corporation Tax. Unless an exemption is available as
discussed below, a corporate ADS holder that is resident in the
U.K. will be subject to U.K. corporation tax on dividends
received from Ensco. A corporate ADS holder that is not resident
in the U.K. will not be subject to U.K. corporation tax on
dividends received from Ensco unless the ADS holder carries on a
trade in the U.K. through a permanent establishment in the U.K.
and the ADSs are used by, for or held by or for the permanent
establishment. In these circumstances, the non-U.K. resident
corporate ADS holder may, depending on its individual
circumstances and if the exemption discussed below is not
available, be subject to U.K. corporation tax on dividends paid
by Ensco.
The full rate of corporation tax payable with respect to
dividends paid by Ensco in financial years 2011 is 27%, although
small companies may be entitled to claim the small companies
rate of tax. If dividends paid by Ensco fall within an exemption
from U.K. corporation tax set out in Part 9A of the U.K.
Corporation Tax Act 2009, the receipt of the dividend by a
corporate ADS holder will be exempt from U.K. corporation tax.
Generally, the conditions for exemption from U.K. corporation
tax on dividends paid by Ensco should be satisfied, although the
conditions which must be satisfied in any particular case will
depend on the individual circumstances of the corporate ADS
holders.
102
ADS holders that are regarded as small companies should
generally be exempt from U.K. corporation tax on dividends
received from Ensco, unless the dividends are received as part
of a tax advantage scheme. ADS holders that are not regarded as
small companies should generally be exempt from U.K. corporation
tax on dividends received from Ensco on the basis that the
Class A ordinary shares underlying the ADSs should be
regarded as non-redeemable ordinary shares. Alternatively, ADS
holders that are not small companies should also generally be
exempt from U.K. corporation tax on dividends received from
Ensco if they hold ADSs which represent less than 10% of the
issued share capital of Ensco, would be entitled to less than
10% of the profits available for distribution to equity- holders
of Ensco and would be entitled on a winding up to less than 10%
of the assets of Ensco available for distribution to such
equity-holders. In certain limited circumstances, the exemption
from U.K. corporation tax will not apply to such ADS holders if
a dividend is made as part of a scheme which has a main purpose
of falling within the exemption from U.K. corporation tax.
U.K.
Taxation of Capital Gains
U.K. Withholding Tax. Capital gains accruing to non-U.K.
resident ADS holders on the disposal of ADSs will not be subject
to any withholding or deduction for or on account of U.K. tax,
irrespective of the residence or the individual circumstances of
the ADS holders.
U.K. Capital Gains Tax. A disposal of ADSs by an individual ADS
holder who is resident or ordinarily resident in the U.K. may,
depending on his or her individual circumstances, give rise to a
taxable capital gain or an allowable loss for the purposes of
U.K. capital gains tax. An individual ADS holder who temporarily
ceases to be resident or ordinarily resident in the U.K. for a
period of less than five years and who disposes of his or her
ADSs during that period of temporary non-residence may be liable
to U.K. capital gains tax on a taxable capital gain accruing on
the disposal on his or her return to the U.K. under certain
anti-avoidance rules.
An individual ADS holder who is neither resident nor ordinarily
resident in the U.K. will not be subject to U.K. capital gains
tax on capital gains arising on the disposal of their ADSs
unless the ADS holder carries on a trade, profession or vocation
in the U.K. through a branch or agency in the U.K. and the ADSs
were acquired, used in or for the purposes of the branch or
agency or used in or for the purposes of the trade, profession
or vocation carried on by the ADS holder through the branch or
agency. In these circumstances, the non-U.K. resident ADS holder
may, depending on his or her individual circumstances, be
subject to U.K. capital gains tax on taxable gains arising from
a disposal of their ADSs. The rate of U.K. capital gains tax on
taxable gains is 18% in the tax year 2010/2011, increasing to
28% for additional rate payers.
U.K. Corporation Tax. A disposal of ADSs by a corporate ADS
holder which is resident in the U.K. may give rise to a taxable
gain or an allowable loss for the purposes of U.K. corporation
tax. A corporate ADS holder that is not resident in the U.K.
will not be liable for U.K. corporation tax on taxable gains
accruing on the disposal of its ADSs unless it carries on a
trade in the U.K. through a permanent establishment in the U.K.
and the ADSs were acquired, used in or for the purposes of the
permanent establishment or used in or for the purposes of the
trade carried on by the ADS holder through the permanent
establishment. In these circumstances, the non-U.K. resident ADS
holder may, depending on its individual circumstances, be
subject to U.K. corporation tax on taxable gains arising from a
disposal of its ADSs.
The full rate of U.K. corporation tax on taxable gains in the
financial years 2011 is 27%, although small companies may be
entitled to claim the small companies rate of tax. Corporate ADS
holders will be entitled to an indexation allowance in computing
the amount of a taxable gain accruing on a disposal of the ADSs,
which will provide relief for the effects of inflation by
reference to movements in the U.K. retail price index. If the
conditions of the substantial shareholding exemption set out in
s.192A and Schedule 7AC of the U.K. Taxation of Chargeable
Gains Act 1992 are satisfied in relation to a taxable gain
accruing to a corporate ADS holder, the taxable gain will be
exempt from U.K. corporation tax.
The conditions of the substantial shareholding exemption which
must be satisfied will depend on the individual circumstances of
the corporate ADS holder. One of the conditions of the
substantial shareholding exemption which must be satisfied is
that the corporate ADS holder must have held a substantial
shareholding in Ensco throughout a twelve-month period beginning
not more than two years before the day on which the
103
disposal takes place. Ordinarily, a corporate ADS holder will
not be regarded as holding a substantial shareholding in Ensco
unless it (whether alone, or together with other group
companies) directly holds not less than 10% of Enscos
ordinary share capital (not represented by ADRs).
U.K.
Stamp Duty and Stamp Duty Reserve Tax
The discussion below relates to holders of Class A ordinary
shares or ADSs wherever resident (but not to holders such as
market makers, brokers, dealers and intermediaries, to whom
special rules apply).
Transfer of Class A Ordinary Shares and Uncertificated
ADSs. Provided that any instrument of transfer is not executed
in the U.K. and remains at all times outside the U.K. and the
transfer does not relate to any matter or thing done or to be
done in the U.K., no U.K. stamp duty is payable on the
acquisition or transfer of (i) Class A ordinary shares
not represented by ADSs and (ii) uncertificated ADSs (i.e.,
not evidenced by ADRs) held in a direct registration system.
Transfer of ADSs Evidenced by ADRs. No U.K. stamp duty need, in
practice, be paid on the acquisition or transfer of ADSs
evidenced by ADRs provided that any instrument of transfer or
contract for sale is not executed in the U.K. and remains at all
times outside the U.K. and the transfer does not relate to any
matter or thing done or to be done in the U.K. An agreement for
the transfer of ADSs evidenced by ADRs will not give rise to a
SDRT liability.
THE U.K. TAX CONSEQUENCES SUMMARIZED ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH PRIDE STOCKHOLDER SHOULD CONSULT HIS OR
HER TAX ADVISOR AS TO THE PARTICULAR U.K. TAX CONSEQUENCES THAT
MAY APPLY TO THEM.
Accounting
Treatment
Ensco will account for the merger under the acquisition method
of accounting for business combinations under GAAP with Ensco
being deemed to have acquired Pride. This means that the assets
and liabilities of Pride will be recorded, as of the completion
of the merger, at their fair values and added to those of Ensco,
including an amount for goodwill representing the difference
between the purchase price and fair value of the identifiable
net assets. Financial statements of Ensco issued after the
merger will reflect only the operations of Prides business
after the merger and will not be restated retroactively to
reflect the historical financial position or results of
operations of Pride.
All unaudited pro forma combined financial information contained
in this joint proxy statement/prospectus was prepared using the
purchase method of accounting for business combinations. The
final allocation of the purchase price will be determined after
the merger is completed and after completion of an analysis to
determine the fair value of the assets and liabilities of
Prides business. Accordingly, the final purchase
accounting adjustments may be materially different from the
unaudited pro forma adjustments. Any decrease in the fair value
of the assets or increase in the fair value of the liabilities
of Prides business as compared to the unaudited pro forma
combined financial information included in this joint proxy
statement/prospectus, in addition to any increases in the market
price of Ensco ADSs, will have the effect of increasing the
amount of the purchase price allocable to goodwill.
Listing
of Ensco American Depositary Shares
Ensco will cause the Ensco ADSs issuable pursuant to the merger
agreement to be approved for listing on the NYSE at or prior to
the completion of the merger, subject to official notice of
issuance. Approval of the listing on the NYSE of the Ensco ADSs
issuable pursuant to the merger, subject to official notice of
issuance, is a condition to each partys obligation to
complete the merger.
Delisting
and Deregistration of Pride Common Stock
If the merger is completed, Pride common stock will be delisted
from the NYSE and deregistered under the Exchange Act.
104
Restrictions
on Sales of Shares of Ensco American Depositary
Shares Received in the Merger
Ensco ADSs issued in the merger will not be subject to any
restrictions on transfer arising under the Securities Act or the
Exchange Act, except for Ensco ADSs issued to any Pride
stockholder who may be deemed to be an affiliate of
Ensco after the completion of the merger, such as the two Pride
directors who will join the Ensco board of directors upon the
completion of the merger. Except with respect to sales of Ensco
ADSs by an affiliate of the exchange agent as described in
The Merger Agreement Merger
Consideration, this joint proxy statement/prospectus does
not cover resales of Ensco ADSs received by any person upon the
completion of the merger, and no person is authorized to make
any use of this joint proxy statement/prospectus in connection
with any resale.
Litigation
Relating to the Merger
On February 9, 2011, the plaintiffs in a derivative class
action lawsuit related to Prides previously disclosed FCPA
investigation filed an amendment to their petition adding claims
related to the merger. See Note 12 of the Notes to
Consolidated Financial Statements in Prides Annual Report
on
Form 10-K
for the year ended December 31, 2010 for a discussion of
the FCPA investigation and the related derivative action. In the
amendment, the plaintiffs contend that the proposed merger was
motivated by a desire to extinguish Prides alleged
liability related to the derivative action. The plaintiffs also
contend that the proposed merger does not provide fair value to
Prides stockholders, and that various provisions of the
merger agreement are improperly designed to prevent any
competing bids. The plaintiffs assert claims for breach of
fiduciary duty, aiding and abetting such breaches, abuse of
control and mismanagement. They contend that their breach of
fiduciary duty claim with respect to the proposed merger should
be certified as a class action, that the merger agreement should
be declared unenforceable, and that the proposed merger should
be enjoined. The plaintiffs seek unspecified damages and other
relief. On March 23, 2011, the plaintiffs filed a second
amendment to their petition alleging that Prides current
directors also breached their fiduciary duties by failing to
disclose material information or making materially inadequate
disclosures concerning the proposed merger in the registration
statement on
Form S-4.
On April 14, 2011, the Harris County District Court entered
an order consolidating these actions with the Abrams and Astor
lawsuits (described below) under the case styled as Ferguson
v. Raspino, el al., Cause
No. 2010-23805.
On February 9, 2011, Cary Abrams, a purported stockholder
of Pride, filed a class action petition in state court in Harris
County, Texas requesting temporary and permanent injunctive
relief enjoining the merger and rescission of the merger if
consummated. On February 10, 2011, Astor BK Realty Trust,
another purported stockholder of Pride, filed a substantially
similar lawsuit in Harris County, Texas. The lawsuits allege
that all of Prides current directors breached their
fiduciary duties by agreeing to inadequate consideration for
Prides stockholders and by approving a merger agreement
that includes deal protection devices allegedly designed to
ensure that Pride will not receive a superior offer. The
lawsuits also allege that Pride and Ensco aided and abetted the
directors in the breaches of their fiduciary duties. The
plaintiffs seek unspecified damages and other relief. On
March 29, 2011, the plaintiffs filed a joint amendment to
their petitions alleging that Prides current directors
also breached their fiduciary duties by failing to disclose
material information or making materially inadequate disclosures
concerning the proposed merger in the registration statement on
Form S-4.
On April 14, 2011, the Harris County District Court entered
an order consolidating these actions with the previously
consolidated derivative class action lawsuits related to
Prides previously disclosed FCPA investigation (described
above) under the case styled as Ferguson v. Raspino, et
al., Cause
No. 2010-23805.
On February 10, 2011, Saratoga Advantage Trust, a purported
stockholder of Pride, filed a class action complaint in the
Delaware Court of Chancery seeking preliminary and permanent
injunctive relief enjoining the merger. On February 17,
2011, Elizabeth Wiggs-Jacques, another purported stockholder of
Pride, filed a substantially similar lawsuit in the Delaware
Court of Chancery. On March 1, 2011, Barry Smith, another
purported stockholder of Pride, filed a substantially similar
suit in the Delaware Court of Chancery. The plaintiffs allege
that all of Prides current directors breached their
fiduciary duties by approving the merger agreement because it
provides inadequate consideration to Prides stockholders
and contains provisions designed to ensure that Pride will not
receive a competing superior proposal. The plaintiffs also
allege that Pride and Ensco aided and abetted the directors in
purportedly breaching their fiduciary duties. In addition, the
plaintiffs seek rescission of the merger should it be
consummated, as well as other unspecified equitable relief. On
March 9, 2011, Elizabeth Wiggs-
105
Jacques amended her complaint adding allegations that
Prides current directors failed to disclose material
information concerning the proposed merger in the registration
statement on
Form S-4.
On March 18, 2011, the Delaware Court of Chancery entered
an order consolidating the three Delaware actions, which is
captioned In re Pride International, Inc. Shareholders
Litigation, Consolidated C.A.
No. 6201-VCS.
On April 11, 2011, Pride and Ensco filed separate motions
to dismiss the Delaware actions with a briefing schedule on the
merits to be determined by the Court.
On March 8, 2011, the Booth Family Trust, a purported
stockholder of Pride, filed a class action complaint in
U.S. District Court for the Southern District of Texas
(Houston Division) requesting injunctive relief preventing the
consummation of the merger, a directive to Prides current
directors to exercise their fiduciary duties to obtain a
transaction in the best interests of Prides stockholders
and rescission of the merger agreement to the extent it has been
implemented. The lawsuit alleges that the defendants violated
the Exchange Act by making untrue statements of material fact
and omitting to state material facts necessary to make the
statements that were made in the registration statement on
Form S-4
not misleading. The lawsuit further alleges that all of
Prides current directors breached their fiduciary duties
by agreeing to inadequate consideration for Pride stockholders
and by approving the merger agreement without regard to the
effect of the transaction on Pride stockholders. The lawsuit
also alleges that Pride and Ensco aided and abetted the
directors in the breaches of their fiduciary duties. The
plaintiffs seek unspecified damages and other relief. On
April 21, 2011, Pride and Ensco filed separate motions to
dismiss the lawsuit.
Pride, Prides directors, Ensco, Delaware Sub and Merger
Sub believe that the claims stated in the complaints relating to
the merger are all without merit, and they intend to defend such
actions vigorously.
106
THE
MERGER AGREEMENT
The following summary describes material provisions of the
merger agreement, as amended, a composite copy of which is
attached as Annex A to this joint proxy
statement/prospectus and is incorporated by reference herein.
Ensco shareholders and Pride stockholders are encouraged to
carefully read the merger agreement in its entirety.
As a stockholder, you are not a third party beneficiary of
the merger agreement, and therefore you may not directly enforce
any of its terms and conditions, other than the limited right of
Pride stockholders to receive the merger consideration if and
after the closing occurs. The representations and warranties
described below and included in the merger agreement were made
among Ensco, Merger Sub, Delaware Sub and Pride to the other and
were made as of specific dates and are subject to important
exceptions and limitations, including a contractual standard of
materiality different from that generally applicable under
federal securities laws. The representations and warranties in
the merger agreement are also qualified by information each of
Pride and Ensco filed with the SEC prior to the date of the
merger agreement, as well as by disclosure schedules each of the
parties delivered to the other prior to the signing of the
merger agreement. The disclosure schedules contain or refer to
information that has been included in prior filings by Ensco and
Pride with the SEC and may also include non-public information.
The disclosure schedules have not been made public because,
among other reasons, they include confidential or proprietary
information. The parties believe, however, that all information
material to a stockholders decision to approve the
proposals described in this joint proxy statement/prospectus is
included in or incorporated into this document. In addition, the
representations and warranties may have been included in the
merger agreement for the purpose of allocating risk between
Ensco and Pride, rather than to establish matters as facts.
The merger agreement is described below in this joint proxy
statement/prospectus and attached as Annex A hereto only to
provide Pride stockholders and Ensco shareholders with
information regarding its terms and conditions, and not to
provide any other factual information regarding Pride, Ensco,
Merger Sub, Delaware Sub or their respective businesses. You
should also be aware that none of the representations and
warranties has any legal effect among the parties to the merger
agreement after the effective time of the merger, nor will the
parties to the merger agreement be able to assert the inaccuracy
of certain representations and warranties as a basis for
refusing to close the transaction unless all such inaccuracies
as a whole have had or would reasonably be expected to have,
individually or in the aggregate, a material adverse effect on
the party that made the representations and warranties.
Accordingly, Pride stockholders and Ensco shareholders should
not rely on the representations and warranties in the merger
agreement as characterizations of the actual state of facts
about Pride, Ensco, Delaware Sub or Merger Sub, and Ensco
shareholders and Pride stockholders should also read the
information provided elsewhere in this joint proxy
statement/prospectus and in the documents incorporated by
reference into this joint proxy statement/prospectus for
additional information regarding Ensco and Pride and their
respective businesses. See Where You Can Find More
Information; Incorporation by Reference.
Ensco and Pride acknowledge that, notwithstanding the
inclusion of the foregoing cautionary statements, each of them
is responsible for considering whether additional specific
disclosures of material information regarding material
contractual provisions are required to make the statements in
this joint proxy statement/prospectus not misleading.
Structure
of the Merger
Pursuant to the terms and subject to the conditions of the
merger agreement, at the effective time of the merger, Merger
Sub will merge with and into Pride, with Pride surviving the
merger as a wholly owned subsidiary of Ensco. Pride as the
surviving entity of the merger is sometimes referred to as the
surviving entity.
Effective
Time of the Merger
The closing of the merger and the other transactions
contemplated by the merger agreement will occur on the first
business day after all of the conditions to the completion of
the merger contained in the merger
107
agreement have been satisfied or waived, or at such other time
as Ensco and Pride may agree. At the closing, the appropriate
parties will file a certificate of merger with the Secretary of
State of the State of Delaware relating to the merger. The
merger will become effective upon the filing of the certificate
of merger or at such later time as Ensco and Pride may agree in
writing and specify in the certificate of merger.
Merger
Consideration
Effect
on Securities
The merger agreement provides that at the effective time of the
merger, each outstanding share of Prides common stock
(other than (a) shares of common stock held directly or
indirectly by Ensco, Pride or any wholly-owned subsidiary of
Ensco or Pride (which will be cancelled as a result of the
merger), (b) shares with respect to which appraisal rights
under Delaware law are properly exercised and not withdrawn and
(c) other shares held by certain U.K. residents as
described below) will be converted into the right to receive
$15.60 in cash and 0.4778 American Depositary Shares (ADSs),
each whole ADS representing one Class A ordinary share of
Ensco, collectively referred to as the merger consideration.
Shares of Pride common stock held by persons who are unable or
fail to timely certify that they are not U.K. residents or, if
so, are qualified investors within the meaning of
Section 86(7) of the U.K. Financial Services and
Markets Act 2000 will not receive Ensco ADSs as part of the
merger consideration but will instead be converted into the
right to receive for each share of Pride common stock an amount
of cash equal to the $15.60 cash component of the merger
consideration plus an additional amount equal to the net
proceeds of the sale by the exchange agent, Citibank, N.A., of
0.4778 Ensco ADSs. These Pride shares are referred to as
cash-only shares. As soon as reasonably practicable after the
effective time of the merger, but in any event not later than
the second business day after the merger, the exchange agent
will send to each record holder of shares of Pride common stock
a letter of transmittal, which will include the form of such
certification. See Exchange of
Certificates Exchange Procedures. The exchange
agent will also arrange for a comparable certification process
using the agents message system to be
established in respect of the book entry Pride shares held in
the facilities of The Depository Trust Company. To be
considered timely, such certifications must be delivered to the
exchange agent no later than ten business days after the
exchange agent provides notice and means after the closing date
of the merger to deliver such certifications through the
facilities of the Depository Trust Company in the case of book
entry Pride shares and six months after the closing date of the
merger in the case of certificated Pride shares. With respect to
book entry Pride shares, if the exchange agent receives
certifications for less than 90% of the book entry Pride shares
by the end of the initial 10 business day period, Ensco will
extend the certification period by up to two additional 10
business day periods. The registration statement of which this
joint proxy statement/prospectus is a part covers the sale of
Ensco ADSs by the affiliate of the exchange agent and the effect
of any failure to timely deliver such certifications by any
record or beneficial owner of shares of Pride common stock.
Ensco will issue approximately 87 million Ensco ADSs, and
will pay approximately $2.9 billion in cash to Pride
stockholders based on the number of outstanding shares of Pride
common stock. Those amounts will be adjusted depending on the
actual number of shares of Pride common stock and options
outstanding at the effective time of the merger.
Treatment
of Employee Stock Options and Other Equity Awards
Under the terms of the Pride incentive plans and applicable
award agreements, all or substantially all outstanding options
to purchase Pride common stock will become fully vested and
exercisable at the effective time of the merger. As of the
effective time of the merger, each outstanding option to
purchase shares of Pride common stock granted under a Pride
incentive plan (other than the Pride Employee Stock Purchase
Plan) that is outstanding and unexercised immediately prior to
the effective time of the merger will be assumed by Ensco and
converted into an adjusted stock right to purchase, on the same
terms and conditions as applied to each such stock option
immediately prior to the effective time of the merger, Ensco
ADSs. Each such adjusted stock right will continue to have the
same terms and conditions as applied to each such option
immediately prior to the effective time of the merger, except
that (A) as of the effective time of the merger, the option
as so assumed and converted will be fully vested and exercisable
for that number of whole Ensco ADSs (rounded
108
down to the nearest whole Ensco ADS in the case of a fractional
ADS) equal to the product of (x) the number of shares of
Pride common stock subject to the assumed option immediately
prior to the effective time of the merger and (y) the
equity compensation exchange ratio and rounded down to the
nearest whole Ensco ADS and (B) the per share exercise
price under such stock right shall be adjusted by dividing the
per share exercise price under such Pride stock option
immediately prior to the effective time of the merger by the
equity compensation exchange ratio and rounding up to the
nearest whole cent. The equity compensation exchange
ratio is the sum of (a) 0.4778 and (b) the
quotient obtained by dividing $15.60 by the average of the
closing prices of a share of Ensco ADSs for the five consecutive
trading days immediately preceding the third trading day before
the closing of the merger. The exercise price
and/or
number of shares of Ensco common stock that may be purchased
under the assumed option will be further adjusted to the extent
required for the assumed option to remain compliant with, or
exempt from, the requirements of section 409A of the Code;
and in the case of a Pride stock option that is intended to
qualify as an incentive stock option within the meaning of
section 422 of the Code, the exercise price and the number
of shares of Ensco ADSs subject to the assumed option will be
determined in a manner consistent with the requirements of
section 424 of the Code.
To the extent a Pride restricted stock award becomes vested at
the effective time of the merger, subject to the terms of the
applicable Pride incentive plan, restricted stock award
agreement, or other agreement between Pride and the awardholder,
each share of Pride common stock subject to such award will be
treated at the effective time of the merger the same as, and
have the same rights and be subject to the same conditions as
applied to each share of Pride common stock. If a Pride
restricted stock award does not become vested at the effective
time of the merger, then each share of Pride common stock
subject to such unvested Pride restricted stock award will be
treated at the effective time of the merger the same as, and
have the same rights and be subject to the same conditions as,
each share of Pride common stock, except as set forth in the
applicable Pride restricted stock award agreement, the holder of
such Pride restricted stock award will receive $15.60 per share
at the same time as other holders of Pride common stock and with
respect to the number of Ensco ADSs received by such holder, the
Pride restricted stock award will continue to vest according to
the conditions of the applicable Pride incentive plan and Pride
restricted stock award agreement and will continue to be subject
to the applicable Pride incentive plan and Pride restricted
stock award agreement. Appropriate modifications will be made to
such agreements to comply with Section 409A of the Code and
to provide that, upon any applicable taxable event, the
awardholder may satisfy any tax withholding obligations by
transferring or selling to an employee benefit trust designated
by Ensco a sufficient number of Ensco ADSs equal in value to
such obligation.
To the extent a Pride restricted stock unit award becomes vested
at the effective time of the merger, subject to the terms of the
applicable Pride incentive plan, restricted stock unit award or
other agreement between Pride and awardholder, each share of
Pride common stock subject to such award will be treated at the
effective time of the merger the same as, and have the same
rights and be subject to the same conditions as, each share of
Pride common stock. If a Pride restricted stock unit does not
become vested in connection with the merger, Ensco will assume
each such Pride restricted stock unit award which will, as of
the effective time of the merger, represent the right to acquire
Ensco ADSs, subject to the terms of the applicable Pride
incentive plan and restricted stock unit award agreement. The
number of Ensco ADSs issuable upon vesting of such award shall
be equal to the number of shares of Pride common stock that were
subject to the Pride restricted stock unit award immediately
prior to the effective time of the merger multiplied by the
equity compensation exchange ratio described above, with any
fractional Ensco ADS that results from such calculation to be
settled in cash when the related Pride restricted stock unit
award vests. Appropriate modifications will be made to such
agreements.
Adjustments
The merger consideration will be equitably adjusted to provide
holders of shares of Pride common stock the same economic effect
contemplated by the merger agreement if at any time between the
signing and the effective time of the merger, there is any
change in the outstanding Class A ordinary shares of Ensco
or Ensco ADSs, by reason of any reclassification,
recapitalization, stock split,
split-up,
combination or exchange of
109
shares, merger, consolidation, reorganization or similar
transaction within such period, or stock dividend or
distribution with a record date during such period, or any
similar event shall have occurred.
Dividends
and Distributions
Until Pride stockholders surrender their Pride stock
certificates or book entry shares for exchange, any dividends or
other distributions declared after the effective time of the
merger with respect to Ensco ADSs, or Class A ordinary
shares of Ensco represented by Ensco ADSs, or into which any of
their shares of Pride common stock may have been converted will
not be paid. Following surrender of any such shares of Pride
common stock, the holder thereof will receive, without interest,
in addition to the applicable merger consideration, (a) the
amount of dividends or other distributions with a record date
after the effective time of the merger theretofore payable with
respect to the merger consideration, and (b) if the payment
date for any dividend or distribution payable with respect to
the merger consideration has not occurred prior to the surrender
of such shares of Pride common stock, at the appropriate payment
date, the amount of dividends or other distributions with a
record date after the effective time but prior to the surrender
of such shares of Pride common stock and a payment date
subsequent to such surrender.
Fractional
ADSs
No fractional Ensco ADSs will be delivered pursuant to the
merger. Instead, each holder of shares of Pride common stock who
would otherwise be entitled to receive a fractional Ensco ADS
pursuant to the merger will be entitled to receive a cash
payment, in lieu thereof, in an amount that will represent such
fraction multiplied by the market price of an Ensco ADS,
calculated based on the average of the closing prices of an
Ensco ADS on the NYSE for the five consecutive trading days
immediately preceding the third trading day before the closing
of the merger.
Appraisal
Rights
Holders of Pride common stock will be entitled to appraisal
rights under Delaware law and to obtain payment in cash for the
judicially-determined fair value of their shares of Pride common
stock in connection with the merger agreement if the merger is
consummated. If any such holder fails to perfect or waives,
withdraws or loses the right to appraisal under Delaware law,
then (a) such shares of Pride common stock that were
subject to the appraisal (appraisal shares) will cease to
constitute appraisal shares and (b) the right of such
holder to be paid the fair value of such holders appraisal
shares will be forfeited and cease. If such forfeiture occurs
following the effective time of the merger, each such appraisal
share will thereafter be deemed to have been converted into and
to have become, as of the effective time of the merger, the
right to receive the merger consideration (without interest
thereon). See Appraisal Rights.
Exchange
of Certificates
Exchange
Procedures
At the effective time of the merger, Ensco will make available
to the exchange agent in connection with the merger the number
of Ensco ADSs to be issued and the aggregate amount of cash to
be paid as merger consideration (together with any amounts
required to pay cash in lieu of fractional Ensco ADSs and any
distributions to which the holders thereof are entitled pursuant
to the merger agreement, without interest thereon).
As soon as reasonably practicable after the effective time of
the merger and no later than the two business days after the
closing date, the exchange agent will send a letter of
transmittal to each person who was a record owner of Pride
common stock at the effective time of the merger. This mailing
will contain instructions on how to surrender certificates
formerly representing shares of Pride common stock or book entry
shares of Pride common stock in exchange for the merger
consideration the holder is entitled to receive under the merger
agreement. The letter of transmittal will require each holder of
Pride common stock at the effective time of the merger to
certify whether such holder or beneficial owner is a resident of
the United Kingdom and, if a resident of the United Kingdom,
whether such holder or beneficial owner is a qualified
investor
110
within the meaning of Section 86(7) of the U.K. Financial
Services and Markets Act 2000. The exchange agent will also, as
soon as practicable after the effective time of the merger and
not later than two business days after the closing date, provide
notice to the Depository Trust Company and its participants and
means for holders of book entry Pride shares to deliver an
agents message through the facilities of the
Depository Trust Company to exchange such shares for the merger
consideration. The letter of transmittal and the notice to the
Depository Trust Company and its participants will specify that
shares of Pride common stock for which the foregoing
certification is not timely delivered to the exchange agent will
be treated as cash-only shares.
The exchange agent will cause the Ensco ADSs it receives and
holds in respect of cash-only shares to be sold on the NYSE and
will hold and distribute the net cash proceeds from such sale,
after deduction of applicable brokerage fees and commissions and
taxes, for the holders of cash-only shares upon receipt of a
duly completed letter of transmittal in the case of record
holders or an agents message with respect to
book entry shares. The exchange agent has advised that
applicable brokerage fees for such sales of Ensco ADSs will be
$50.00 per trade plus a commission of $0.03 per Ensco ADS for
sales of up to 100,000 Ensco ADSs, $0.02 per Ensco ADS for
sales of 100,000 to 500,000 Ensco ADSs and $0.015 per Ensco
ADS for sales of over 500,000 Ensco ADSs. Sales with
respect to more than one holder may be aggregated in order to
reduce the impact of the fees and commissions. In the case of
holders of shares of Pride common stock who timely certify that
they are U.K. residents and are not qualified
investors within the meaning of Section 86(7) of the
U.K. Financial Services and Markets Act 2000, the exchange agent
will cause such Ensco ADSs to be sold promptly following the
receipt of such certification, but no less frequently than once
per week. In the case of beneficial holders of book entry shares
of Pride common stock who fail to timely deliver any
certification within ten business days after the exchange agent
provides notice and means to deliver such certifications after
the closing date of the merger (subject to extension), the
exchange agent will cause such Ensco ADSs to be sold promptly
following such cut-off date. In the case of record owners of
shares of Pride common stock who fail to timely deliver any
certification within six months after the closing date of the
merger, the exchange agent will cause such Ensco ADSs to be sold
promptly following such cut-off date. Ensco will pay all
expenses of Ensco and the exchange agent, other than brokerage
fees and commissions and taxes payable by the holders, in
connection with sales of Ensco ADSs with respect to cash-only
shares.
Until each certificate or book entry share of Pride common stock
is surrendered, such certificate or book entry share will be
deemed at any time after the effective time of the merger to
represent only the right to receive the merger consideration
upon such surrender of such certificate or book entry share, any
cash in lieu of fractional shares and any distributions to which
the holders thereof are entitled pursuant to the merger
agreement, without interest thereon.
No
Further Ownership Rights in Pride Common Stock; Transfer
Books
After the effective time of the merger, there will be no
transfers on the stock transfer books of Pride of any shares of
Pride common stock. Certificates or book entry shares of Pride
common stock presented to the surviving entity after the
effective time of the merger will be cancelled and exchanged for
the merger consideration payable in respect of such certificates
or book entry shares, any cash in lieu of fractional Ensco ADSs
and any distributions with respect to Ensco ADSs to which the
holders thereof are entitled pursuant to the merger agreement,
without interest thereon.
Termination
of Exchange Fund
Any portion of the merger consideration, payable pursuant to the
merger agreement and made available to the exchange agent, that
remains unclaimed by holders of Pride common stock for
12 months after the effective time of the merger will be
returned to Ensco upon demand. Thereafter, a holder of Pride
common stock must look only to Ensco and the surviving entity
for payment of the merger consideration, any cash in lieu of
fractional Ensco ADSs and any distributions with respect to
Ensco ADSs, to which the holder is entitled under the terms of
the merger agreement, without interest thereon.
111
Lost
Stock Certificates
If a certificate formerly representing shares of Pride common
stock has been lost, stolen or destroyed, the exchange agent
will issue the merger consideration properly payable under the
merger agreement upon receipt of an affidavit as to that loss,
theft or destruction, and, if required by Ensco or the exchange
agent, the posting of a bond in such reasonable amount as Ensco
or the exchange agent will direct as indemnity.
Withholding
Taxes
Each of Ensco, the surviving entity and the exchange agent will
be entitled to deduct and withhold, or cause the exchange agent
to deduct and withhold, from the merger consideration payable to
any Pride stockholder the amounts it is required to deduct and
withhold under the Code, or any applicable state, local or
foreign tax law. Withheld amounts will be treated for all
purposes of the merger as having been paid to the Pride
stockholders from whom they were withheld if such amounts are
duly and timely paid to the appropriate tax authority.
Representations
and Warranties
The merger agreement contains generally customary
representations and warranties made by each of the parties
regarding aspects of their respective businesses, financial
condition and structure, as well as other facts pertinent to the
merger. These representations and warranties were made for the
purposes, and subject to the qualifications, limitations,
exceptions and disclosure schedules, described in the
introduction to The Merger Agreement. Each of Pride,
on the one hand, and Ensco, Merger Sub and Delaware Sub, on the
other hand, has made representations and warranties to the other
in the merger agreement with respect to the following subject
matters:
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corporate existence, good standing and qualification to conduct
business;
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corporate power and authority to execute and carry out the
obligations under the merger agreement and the enforceability of
the merger agreement;
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capitalization;
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with respect to each partys significant subsidiaries (as
defined in
Rule 1-02
of
Regulation S-X
of the Exchange Act), existence, good standing, qualification
and corporate authority to conduct its business, and
capitalization;
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compliance with laws and permits and compliance with
anti-corruption laws;
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absence of any conflict or violation of organizational
documents, third party agreements or law or regulation as a
result of entering into and carrying out the obligations under
the merger agreement;
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governmental and regulatory approvals or consents required to
complete the merger;
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filings and reports with the SEC, financial statements, internal
controls and disclosure controls and procedures;
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absence of litigation;
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absence of certain changes since December 31, 2009;
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tax matters;
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employee benefit plans and matters relating to the Employee
Retirement Income Security Act of 1976, as amended;
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labor matters;
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environmental matters;
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intellectual property;
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absence of material orders, writs, fines, injunctions, decrees,
judgments, awards or determinations;
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maintenance of insurance;
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brokers or finders fees;
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recommendation of the merger by board of directors and required
stockholder or shareholder vote and receipt of opinion of
financial advisor;
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beneficial ownership of the other partys capital shares;
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stockholder or shareholder votes required in connection with the
merger agreement;
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ownership of drilling units;
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undisclosed liabilities;
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certain contracts;
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capital expenditure program;
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derivative transactions;
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disclosure controls and procedures; and
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transactions with affiliates.
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Pride has made additional representations and warranties to
Ensco in the merger agreement with respect to the following
subject matters:
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state anti-takeover laws; and
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the Pride rights agreement.
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Certain representations and warranties of Ensco and Pride are
qualified as to materiality or as to material adverse
effect, which when used with respect to Ensco and Pride
means, as the case may be, a materially adverse effect on the
assets, properties, business results of operation or condition
(financial or otherwise) of such party and its subsidiaries
taken as a whole, except that no material adverse effect may be
caused by or arise from:
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changes or occurrences generally affecting the drilling services
industry or the economy or the financial or securities markets
in the United States, in any region in which such party operates
or elsewhere in the world, including any regulatory or political
conditions or developments, or any outbreak or escalation of
hostilities, declared or undeclared acts of war, terrorism or
insurrection (unless materially disproportionately impacting
such party relative to other comparable industry participants);
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events related to the impact of the Macondo well incident in the
U.S. Gulf of Mexico on deepwater and other offshore
drilling operations;
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the announcement of the merger agreement, any actions taken in
compliance with the merger agreement or the consummation of the
merger;
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fluctuations in the stock price or trading volume of such
partys securities (unless due to a circumstance which
would separately constitute a material adverse effect);
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a change in applicable law or GAAP, or interpretations thereof;
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any legal proceedings brought by any of the current or former
shareholders of such party (on their own behalf or on behalf of
such party) arising out of or related to the merger agreement or
any of the transactions contemplated by the merger
agreement; or
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the failure of such party to meet internal or analysts
expectations, projections or budgets (unless due to a
circumstance which would separately constitute a material
adverse effect).
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113
Conditions
to the Completion of the Merger
The completion of the merger is subject to various conditions.
While it is anticipated that all of these conditions will be
satisfied, there can be no assurance as to whether or when all
of the conditions will be satisfied or, where permissible,
waived.
Conditions
to Each Partys Obligations
Each partys obligation to complete the merger is subject
to the satisfaction or, to the extent permitted by law, waiver
of the following conditions:
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approval by Ensco shareholders of the issuance and delivery of
the Ensco ADSs pursuant to the merger agreement;
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adoption by Pride stockholders of the merger agreement;
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the expiration or termination of the waiting period (and any
extension thereof) applicable to the consummation of the merger
under the HSR Act (which was satisfied on March 30, 2011);
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the absence of (a) any pending or threatened in writing
claim, proceeding or action by an agency of the government of
the United States seeking to restrain, prohibit or rescind any
transactions contemplated by the merger agreement as an actual
or threatened violation of any antitrust law or seeking to
penalize a party for completing any such transaction and
(b) any final or preliminary administrative order that
remains in effect denying approval of or prohibiting the merger
issued by a governmental entity with jurisdiction to enforce any
applicable
non-U.S. antitrust
laws of a specified jurisdiction, in each case which is
reasonably likely to require any competition actions, which are
described in Additional AgreementsEfforts
Related to Consents and Approvals of Governmental Entities and
Third Parties;
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the absence of any decree, order or injunction of a U.S. or
non-U.S. court
of competent jurisdiction prohibiting the consummation of the
merger;
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the effectiveness of the
Form S-4
registration statement, of which this joint proxy
statement/prospectus is a part, the effectiveness of a
Form F-6 registration statement with respect to the Ensco
ADSs, the absence of any stop order suspending the effectiveness
of the
Form S-4
or
Form F-6,
and the U.K. Listing Authority having approved a prospectus for
residents of the United Kingdom, if such prospectus is
required; and
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the approval for listing on the NYSE of Ensco ADSs to be
delivered pursuant to the merger agreement, subject to official
notice of issuance.
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Additional
Conditions to Enscos and Merger Subs
Obligations
The obligation of Ensco and Merger Sub to complete the merger is
also subject to the satisfaction or, to the extent permitted by
law, waiver of the following conditions:
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Pride shall have performed in all material respects its
covenants and agreements contained in the merger agreement;
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the representations and warranties of Pride set forth in the
merger agreement concerning (a) existence, good standing
and authority shall be true and correct in all respects (except,
in each such case for any inaccuracies that are de minimis in
the aggregate) as of the closing date of the merger, as if made
at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date) and
(b) authorization and enforceability of the merger
agreement and capitalization shall be true and correct in all
respects (except, in each such case for any inaccuracies that
are de minimis in the aggregate) as of the date of the merger
agreement and as of the closing date of the merger, as if made
at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date);
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the other representations and warranties of Pride set forth in
the merger agreement shall be true and correct (without giving
effect to any limitation as to materiality or
material adverse effect set forth therein) as of the
closing date of the merger, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure to be so
true and correct individually or in the aggregate has not had
and would not be reasonably likely to have or result in a
material adverse effect on Pride; and
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Pride shall deliver to Ensco an officers certificate,
dated the closing date of the merger, certifying that certain
closing conditions have been satisfied.
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Additional
Conditions to Prides Obligations
The obligation of Pride to complete the merger is also subject
to the satisfaction or, to the extent permitted by law, waiver
of the following conditions:
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Ensco, Merger Sub and Delaware Sub shall have performed in all
material respects their respective covenants and agreements
contained in the merger agreement;
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the representations and warranties of Ensco, Merger Sub and
Delaware Sub set forth in the merger agreement concerning
(a) existence, good standing and authority shall be true
and correct in all respects (except, in each such case for any
inaccuracies that are de minimis in the aggregate) as of the
closing date of the merger, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in
which case as of such date) and (b) authorization and
enforceability of the merger agreement and capitalization shall
be true and correct in all respects (except, in each such case
for any inaccuracies that are de minimis in the aggregate) as of
the date of the merger agreement and as of the closing date of
the merger, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of
such date);
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the other representations and warranties of Ensco, Merger Sub
and Delaware Sub set forth in the merger agreement shall be true
and correct (without giving effect to any limitation as to
materiality or material adverse effect
set forth therein) as of the closing date of the merger, as if
made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such date), except
where the failure to be so true and correct individually or in
the aggregate has not had and would not be reasonably likely to
have or result in a material adverse effect on Ensco; and
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Ensco, Merger Sub and Delaware Sub shall deliver to Pride an
officers certificate, dated the closing date of the
merger, certifying that certain closing conditions have been
satisfied.
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Conduct
of Business Pending the Merger
Conduct
of Prides and Enscos Business
Prior to the effective time of the merger, except as stated in
the disclosure schedules of Pride or Ensco, as applicable,
expressly contemplated by the merger agreement or required by
law, unless the other party has consented in writing, each of
Pride and Ensco will, and will cause their respective
subsidiaries to:
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conduct operations according to their usual, regular and
ordinary course in substantially the same manner as previously
conducted;
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use reasonable best efforts to preserve intact their business
organizations and goodwill (except that any wholly owned
subsidiaries may be merged with or into, or be consolidated with
any wholly owned subsidiaries or may be liquidated into it or
any wholly owned subsidiaries), keep available the services of
their respective officers and employees and maintain
satisfactory relationships with those persons having business
relationships with them;
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promptly notify the other of (a) any material change in its
condition (financial or otherwise) or business or any
termination or material breach of any material contract,
(b) any material litigation or proceedings
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or material governmental complaints, investigations or hearings,
and (c) any occurrence reasonably likely to result in a
material adverse effect on such party;
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promptly deliver to the other correct copies of any report,
statement or schedule filed with the SEC other than those filed
via the SECs EDGAR system;
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use reasonable efforts to maintain with financially responsible
insurance companies insurance in such amounts and against such
risks and losses as are customary for it; and
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not terminate, amend, modify or waive any provision of any
agreement with a standstill covenant to which it is a party, and
to enforce, to the fullest extent permitted under applicable
law, the provisions of these standstill agreements, including by
obtaining injunctions to prevent any breaches of those
agreements and enforcing specifically the terms and provisions
of those agreements, unless, in each case, in the good faith
opinion of its board of directors after consultation with
outside legal counsel doing so would be inconsistent with its
fiduciary duties.
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Prior to the effective time of the merger, except as stated in
the disclosure schedules of Pride or Ensco, as applicable,
expressly contemplated by the merger agreement or required by
law, unless the other party has consented in writing, each of
Pride and Ensco will refrain from taking, and will cause their
respective subsidiaries to refrain from taking, the following
actions:
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amend, in the case of Pride, its certificate of incorporation or
bylaws or, in the case of Ensco, its articles of association;
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in the case of Ensco, allow Delaware Sub to amend its
certificate of incorporation or bylaws or Merger Sub to amend
its certificate of formation or limited liability company
agreement, or take or allow Delaware Sub to take any action that
is reasonably likely to cause Delaware Sub to be rendered
insolvent or to materially reduce its net assets;
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issue, grant, sell, transfer, pledge, dispose of or encumber any
additional shares of, securities convertible into or
exchangeable for, or warrants, options or other rights to
acquire, any of its capital shares, other than pursuant to
options, warrants, conversion rights or other contractual rights
or vesting of certain other equity awards that exist on the date
of the merger agreement or to new hires or promoted employees in
the ordinary course of business consistent with past practice;
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adjust, split, combine or reclassify any capital shares or other
equity interests or otherwise change its capitalization, other
than grants of options to new hires or promoted employees in the
ordinary course of business consistent with past practice;
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amend or modify any options, warrants or other rights to acquire
any of its capital shares that exist on the date of the merger
agreement;
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with respect to any of its employees, increase any compensation
or benefits or enter into, amend or extend any employment or
consulting agreement, except in the ordinary course of business
consistent with past practice;
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with respect to any of its officers at the vice president level
or above or any of its directors, increase any compensation or
benefits or enter into, amend or extend any employment or
consulting agreement;
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adopt any new employee benefit plan or agreement or amend any
existing employee benefit plan or agreement in any material
respect, except to the extent such change is less favorable to
participants or is deemed necessary to comply with
Section 409A of the Code;
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terminate any executive officer without cause or permit any
circumstance to exist that would give any executive officer a
right to terminate employment if the termination would require
enhanced separation payments upon consummation of the merger,
except as approved by good faith action of its board of
directors after the other party has received advance written
notice of, and been consulted with respect to, the proposed
action;
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in the case of Pride, permit any holder of an option to acquire
such partys capital shares to have shares withheld upon
exercise for tax purposes in excess of the minimum number needed
to satisfy federal and state tax withholding requirements or
otherwise required to satisfy the withholding requirements under
Prides policy with respect to foreign tax obligations;
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declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock (other than
a dividend, distribution or payment from a wholly owned
subsidiary to that party or one or more of its wholly owned
subsidiaries or, in the case of Ensco, its regular quarterly
dividend of $0.35 per Class A ordinary share) or redeem,
purchase or otherwise acquire any shares of its capital stock,
except as required by the terms of any outstanding capital
stock, as contemplated by such partys benefit plans or, in
the case of Pride, as contemplated by specified employment
agreements;
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sell, lease or otherwise dispose of any assets that are material
individually or in the aggregate to such party except for sales
of surplus equipment, sales of other assets in the ordinary
course of business, or sales, leases or other transfers between
such party and its wholly owned subsidiaries or between those
subsidiaries;
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acquire or agree to acquire in any manner any business, entity
or division of a business or entity for an aggregate
consideration in excess of $25 million or where a filing
under the HSR Act or any
non-U.S. competition,
antitrust or premerger notification laws is required, except
with respect to any contractual commitments in effect as of the
date of the merger agreement;
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change any of the material accounting principles or practices
used by it, except as may be required by a change in
U.S. GAAP;
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make or rescind any material tax election, settle any material
tax claim, suit, proceeding, arbitration, investigation, audit,
or controversy, or change in any material respect any of its
methods of reporting any item for tax purposes from those
employed in the preparation of its tax returns for the most
recent taxable year for which a return has been filed, except as
may be required by applicable law;
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incur any indebtedness for borrowed money (excluding
intercompany indebtedness) in excess of, in the case of Ensco,
the amount of available borrowing capacity under Enscos
existing revolving credit facility and the amounts contemplated
by the financing of the merger and, in the case of Pride, the
amount of available borrowing capacity under Prides
existing revolving credit facility;
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issue or sell any debt securities, warrants or rights to acquire
any debt securities of it, or guarantee any debt securities of
others;
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enter into any material lease or create any material mortgage,
lien, security interest or other encumbrance on its property
(other than certain permitted liens), except in the ordinary
course of business or with or between its subsidiaries;
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make or commit to make aggregate capital expenditures in excess
of $50 million per quarter over its previously disclosed
capital expenditure forecast for such quarter, excluding capital
expenditures to repair or replace equipment necessary to
continue operation on any drilling unit in a manner consistent
with the operation of such drilling unit as of the date of the
merger agreement;
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purchase or otherwise acquire either partys shares other
than in the ordinary course of business pursuant to employee
benefit plans;
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take any action reasonably likely to (a) prevent,
materially delay or materially impede the consummation of the
merger or the transactions contemplated by the merger agreement
or (b) delay materially or adversely affect the ability of
any of the parties to the merger agreement to obtain any
consent, authorization, order or approval of any governmental
commission, board or other regulatory body or the expiration of
any applicable waiting period required to consummate the
transactions contemplated by the merger agreement;
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mortgage, pledge, hypothecate, grant any security interest in
any of its assets or otherwise subject any of its assets to any
lien, other than certain permitted liens; or
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agree to take any of the foregoing actions.
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Additional
Agreements
No
Solicitation by Pride of Acquisition Proposals
Subject to certain exceptions described below, Pride has agreed
that neither it nor any of its subsidiaries will, and it will
not authorize or permit any officers, directors, employees,
agents or representatives of Pride or any of its subsidiaries
(including any investment banker, attorney or accountant
retained by it or any of its subsidiaries) to, (i) directly
or indirectly solicit, initiate, encourage or participate in any
discussions or knowingly encourage a Pride acquisition
proposal (as defined below), (ii) take any action
designed to approve, endorse, recommend, or facilitate, directly
or indirectly, any inquiry, proposal or offer (including any
proposal or offer to its stockholders) relating to a Pride
acquisition proposal, (iii) cooperate with, or assist,
participate or engage in any substantive discussions or
negotiations concerning a Pride acquisition proposal,
(iv) amend, terminate, waive or fail to enforce, or grant
any consent under, any confidentiality, standstill or similar
agreement, or (v) resolve to propose or agree to do any of
the foregoing. Pride has further agreed that it will immediately
cease and cause to be terminated any existing negotiations with
any parties conducted heretofore with respect to any of the
foregoing.
For purposes of the no solicitation provisions in the merger
agreement, the term Pride acquisition proposal means
any inquiry, proposal or offer relating to a tender or exchange
offer, merger, consolidation or business combination other than
the transactions contemplated by the merger agreement involving,
individually or in the aggregate, 20% or more of the assets, net
revenues or net income of Pride and its subsidiaries on a
consolidated basis or 20% or more of any class of the voting
securities of Pride, including any merger, consolidation,
business combination, purchase or similar transaction in which
20% or more of Prides voting securities is issued to a
third party or its stockholders.
Nothing in the merger agreement prevents Pride or its board of
directors from (i) complying with
Rule 14e-2
promulgated under the Exchange Act with regard to any Pride
acquisition proposal, (ii) prior to obtaining Pride
stockholder adoption of the merger agreement, providing
information (pursuant to a confidentiality agreement in
reasonably customary form with terms at least as restrictive in
all matters as the confidentiality agreement dated
December 18, 2010, between Ensco and Pride and which does
not contain terms that prevent Pride from complying with its
obligations under the no solicitation provisions of the merger
agreement) to or engaging in any negotiations or substantive
discussions with any person who has made an unsolicited bona
fide written Pride acquisition proposal that Prides board
of directors determines in good faith constitutes, or could
reasonably be expected to result in, a Pride superior
proposal (as described below), to the extent Prides
board of directors, after consultation with its outside legal
advisors, determines that the failure to do so would be
inconsistent with its fiduciary obligations, or (iii) prior
to obtaining Pride stockholder adoption of the merger agreement,
terminating, amending, modifying or waiving any provision of any
agreement containing a standstill covenant to the extent
permitted pursuant to the merger agreement.
Prior to participating in any substantive discussions or
negotiations and as promptly as practicable (and in any event
within 24 hours) after receipt of a Pride acquisition
proposal, any inquiry with respect to an acquisition proposal,
or any request for information in connection with such a
proposal, Pride has agreed to:
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notify Ensco orally and in writing of any such proposal, inquiry
or request, the identity of the person or group making such
proposal, inquiry or request, and the material terms and
conditions of any Pride acquisition proposal;
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keep Ensco reasonably informed on a timely basis of the status
and material details of any acquisition proposal;
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provide Ensco after receipt or delivery with copies of all
correspondence and other written material sent or provided to
Pride from any third party or sent or provided by Pride to a
third party in connection with any acquisition proposal; and
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provide or make available to Ensco any material nonpublic
information concerning itself or any of its subsidiaries that
Pride has provided to the third party making such acquisition
proposal that was not previously provided or made available to
Ensco.
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For purposes of the no solicitation provisions in the merger
agreement, the term superior proposal means an
unsolicited bona fide written Pride acquisition proposal with
respect to all the outstanding Pride common stock or all or
substantially all the assets of Pride that, in the good faith
judgment of Prides board of directors, taking into account
the likelihood of financing, stockholder approval and other
requirements for consummation, after consultation with a
financial advisor of recognized national reputation, is superior
to the merger contemplated by the merger agreement. For the
purposes of making a superior proposal determination, it is
understood by the parties that such determination necessarily
will (i) be based on limited information compared to a
termination determination made in connection with a superior
proposal as described under Termination of the
Merger Agreement below, (ii) require assumptions that
shall be made in the good faith judgment of such partys
board of directors and (iii) not be as complete or informed
as, and will be distinct from, a superior proposal determination
made for the purposes described under
Termination of the Merger Agreement
below.
Prides
Ability to Make a Change in its Recommendation to
Stockholders
Notwithstanding anything in the merger agreement to the
contrary, the board of directors of Pride may make an
adverse recommendation change (under the
circumstances described below under
Shareholders and Stockholders Meetings)
by:
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withdrawing or publicly proposing to withdraw (or amend or
modify in a manner adverse to Ensco) the approval,
recommendation or declaration of advisability of its board of
directors of the merger agreement or any of the transactions
contemplated by the merger agreement; or
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recommending, adopting or approving, or proposing publicly to
recommend, adopt or approve, a Pride acquisition proposal.
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No
Solicitation by Ensco of Alternative Proposals
Subject to certain exceptions described below, Ensco has agreed
that neither it nor any of its subsidiaries will, and it will
not authorize or permit any officers, directors, employees,
agents or representatives of the Ensco or any of its
subsidiaries (including any investment banker, attorney or
accountant retained by it or any of its subsidiaries) to,
(i) directly or indirectly solicit, initiate, encourage or
participate in any discussions or knowingly encourage an
Ensco alternative proposal (as defined below),
(ii) take any action designed to approve, endorse recommend
or facilitate, directly or indirectly, any inquiry, proposal or
offer (including any proposal or offer to its stockholders)
relating to an Ensco alternative proposal, (iii) cooperate
with, or assist, participate or engage in any substantive
discussions or negotiations concerning, an Ensco alternative
proposal, (iv) amend, terminate, waive or fail to enforce,
or grant any consent under, any confidentiality, standstill or
similar agreement, or (v) resolve to propose or agree to do
any of the foregoing. Ensco has further agreed that it will
immediately cease and cause to be terminated any existing
negotiations with any parties conducted heretofore with respect
to any of the foregoing.
For purposes of the no solicitation provisions in the merger
agreement, the term Ensco alternative proposal means
any inquiry, proposal or offer relating to a tender or exchange
offer, merger, consolidation or business combination other than
the transactions contemplated by the merger agreement involving,
individually or in the aggregate, 20% or more of the assets, net
revenues or net income of Ensco and its subsidiaries on a
consolidated basis or 20% or more of any class of the voting
securities of Ensco, including any merger, consolidation,
business combination, purchase or similar transaction in which
20% or more of Enscos voting securities is issued to a
third party or its stockholders.
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Nothing in the merger agreement prevents Ensco or its board of
directors from (i) complying with
Rule 14e-2
promulgated under the Exchange Act with regard to any Ensco
alternative proposal, (ii) prior to obtaining Ensco
shareholder approval of the issuance and delivery of Ensco ADSs
pursuant to the merger agreement, providing information
(pursuant to a confidentiality agreement in reasonably customary
form with terms at least as restrictive in all matters as the
confidentiality agreement dated December 18, 2010, between
Ensco and Pride and which does not contain terms that prevent
Ensco from complying with its obligations under the no
solicitation provisions of the merger agreement) or engaging in
any negotiations or substantive discussions with any person who
has made an unsolicited bona fide written Ensco alternative
proposal that Enscos board of directors determines in good
faith constitutes or could reasonably be expected to result in a
Ensco superior proposal (as described below), to the
extent Enscos board of directors, after consultation with
its outside legal advisors, determines that the failure to do so
would be inconsistent with its fiduciary obligations, or
(iii) prior to obtaining Ensco shareholder approval of the
issuance and delivery of Ensco ADSs pursuant to the merger
agreement, terminating, amending, modifying or waiving any
provision of any agreement containing a standstill covenant to
the extent permitted pursuant to the merger agreement.
Prior to participating in any substantive discussions or
negotiations and as promptly as practicable (and in any event
within 24 hours) after receipt of an Ensco alternative
proposal, any inquiry with respect to an alternative proposal,
or any request for information in connection with such a
proposal, Ensco has agreed to:
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notify Pride orally and in writing of any such proposal, inquiry
or request, the identity of the person or group making such
proposal, inquiry or request, and the material terms and
conditions of any Ensco alternative proposal;
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keep Pride reasonably informed on a timely basis of the status
and material details of any alternative proposal;
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provide Pride after receipt or delivery with copies of all
correspondence and other written material sent or provided to
Ensco from any third party or sent or provided by Ensco to a
third party in connection with any alternative proposal; and
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provide or make available to Pride any material nonpublic
information concerning itself or any of its subsidiaries that
Ensco has provided to the third party making such alternative
proposal that was not previously provided or made available to
Pride.
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For purposes of the no solicitation provisions in the merger
agreement, the term superior proposal means an
unsolicited bona fide written Ensco alternative proposal with
respect to all the outstanding Ensco ADSs or all or
substantially all the assets of Ensco that, in the good faith
judgment of Enscos board of directors, taking into account
the likelihood of financing, shareholder approval and other
requirements for consummation, after consultation with a
financial advisor of recognized national reputation, is superior
to the merger contemplated by the merger agreement. For the
purposes of making a superior proposal determination, it is
understood by the parties that such determination necessarily
will (i) be based on limited information compared to a
termination determination made in connection with a superior
proposal as described under Termination of the
Merger Agreement below, (ii) require assumptions that
shall be made in the good faith judgment of such partys
board of directors and (iii) not be as complete or informed
as, and will be distinct from, a superior proposal determination
made for the purposes described under
Termination of the Merger Agreement
below.
Enscos
Ability to Make a Change in its Recommendation to
Shareholders
Notwithstanding anything in the merger agreement to the
contrary, the board of directors of Ensco may make an
adverse recommendation change (under the
circumstances described below under
Shareholders and Stockholders
Meetings) by:
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withdrawing or publicly proposing to withdraw (or amend or
modify in a manner adverse to Pride) the approval,
recommendation or declaration of advisability of its board of
directors of the merger agreement or any of the transactions
contemplated by the merger agreement or
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recommending, adopting or approving, or proposing publicly to
recommend, adopt or approve, an Ensco alternative proposal.
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Registration
Statements
Pride and Ensco agreed to promptly prepare and file with the SEC
a
Form S-4
registration statement of which this joint proxy
statement/prospectus constitutes a part. Each of the parties
also agreed to use its reasonable best efforts to respond to any
comments received from the SEC and promptly notify the other
party upon the receipt of any comments or requests from the SEC
related to this joint proxy statement/prospectus. To the extent
necessary, Ensco shall cause the ADS Depositary to prepare and
file with the SEC, a registration statement on
Form F-6
with respect to the Ensco ADSs deliverable in connection with
the Merger.
Ensco and Pride will use all reasonable best efforts to have the
Form S-4
and
Form F-6
registration statements declared effective under the Securities
Act as promptly as practicable and to keep the registration
statements effective as long as necessary to consummate the
merger. Ensco will also take actions required to be taken under
any applicable state securities laws in connection with the
issuance of shares of Ensco common stock pursuant to the merger
agreement. Promptly after the effectiveness of the registration
statement, Ensco and Pride will cause the proxy
statement/prospectus to be mailed to their respective
stockholders, and if necessary, promptly circulate amended,
supplemented or supplemental proxy materials and, if required in
connection therewith, re-solicit proxies or written consents, as
applicable. If at any time prior to the effective time of the
merger, the officers and directors of Ensco or Pride discover
any statement which, in light of the circumstances in which it
is made, is false or misleading with respect to a material fact
or omits to state a material fact necessary to make the
statement not misleading, then such party will immediately
notify the other party of such misstatements or omissions.
If Ensco determines in its reasonable discretion that it is
necessary or advisable to deliver a prospectus to residents of
the United Kingdom pursuant to the U.K. Prospectus Rules made by
the U.K. Listing Authority under Part 6 of U.K. Financial
Services and Markets Act 2000, then Ensco will prepare and file
with the U.K. Listing Authority, on or before the date of the
initial filing of the
Form S-4,
for its approval a draft copy of such prospectus. Ensco will
cause the U.K. prospectus to comply as to form and substance in
all material respects with the requirements of all applicable
laws.
Shareholders
and Stockholders Meetings
Ensco and Pride have agreed to use their reasonable best efforts
to cause their respective shareholders and stockholders meetings
to be held on the same date.
Ensco has agreed to submit the issuance and delivery of Ensco
ADSs pursuant to the merger agreement to its shareholders
regardless of whether the Ensco board of directors makes an
adverse recommendation change. The board of directors of Ensco
will recommend approval of the issuance and delivery of Ensco
ADSs pursuant to the merger agreement, and solicit proxies from
its shareholders in favor of such matter; provided, however that
the board of directors of Ensco, prior to the approval of such
matter by its shareholders, and upon two business days
notice to Pride, may make an adverse recommendation change if
(i) in the good faith opinion of the board of directors of
Ensco the failure to withdraw its recommendation would be
inconsistent with its fiduciary obligations, (ii) during
the two business day period, Ensco shall, and shall cause its
respective financial and legal advisors to, consider any
adjustment in the terms and conditions of the merger agreement
that Pride may propose so as to enable the board of directors of
Ensco to proceed with its recommendation to approve the issuance
and delivery of Ensco ADSs in the merger, and (iii) at the
end of such two business day period, the board of directors of
Ensco maintains its determination that failure to make an Ensco
adverse recommendation change would be inconsistent with its
fiduciary obligations (after taking into account any proposed
modifications to the terms of the merger agreement). If, within
10 business days prior to the scheduled meeting date, the board
of directors of Ensco determines that failure to make a Ensco
adverse recommendation change would be inconsistent with its
fiduciary obligations, Ensco is permitted to adjourn or postpone
the Ensco shareholders meeting (including any postponements or
adjournments thereof) for up to 10 business days.
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Pride has agreed to submit the merger agreement to its
stockholders regardless of whether the Pride board of directors
makes an adverse recommendation change. The board of directors
of Pride will recommend adoption of the merger agreement, and
solicit proxies from its stockholders in favor of adoption of
the merger agreement; provided, however, that the board of
directors of Pride prior to the approval of such matters by its
stockholders, and upon two business days notice to Ensco,
may make an adverse recommendation change if (i) in the
good faith opinion of the board of directors of Pride the
failure to withdraw its recommendation would be inconsistent
with its fiduciary obligations, (ii) during the two
business day period, Pride shall, and shall cause its respective
financial and legal advisors to, consider any adjustment in the
terms and conditions of the merger agreement that Ensco may
propose so as to enable the board of directors of Pride to
proceed with its recommendation to adopt the merger agreement,
and (iii) at the end of such two business day period, the
board of directors of Pride maintains its determination that
failure to make a Pride adverse recommendation change would be
inconsistent with its fiduciary obligations (after taking into
account any proposed modifications to the terms of the merger
agreement). If, within 10 business days prior to the scheduled
meeting date, the board of directors of Pride determines that
failure to make a Pride adverse recommendation change would be
inconsistent with its fiduciary obligations, Pride is permitted
to adjourn or postpone the Pride stockholders meeting (including
any postponements or adjournments thereof) for up to 10 business
days.
Stock
Exchange Listing
Ensco has agreed to promptly prepare and submit to the NYSE a
listing application covering the Ensco ADSs deliverable in
connection with the merger and to obtain, prior to the effective
time of the merger, approval for the listing of such Ensco ADSs,
subject to official notice of issuance.
Efforts
Related to Consents and Approvals of Governmental Entities and
Third Parties
Each of Ensco and Pride has agreed to:
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make its respective required filings under the HSR Act and any
applicable
non-U.S. competition,
antitrust, or premerger notification laws, promptly and
thereafter make any other required submissions under the HSR Act
or other such laws;
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use its reasonable best efforts to cooperate with the other
party in:
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determining which filings, consents, approvals, permits, and
authorizations are required to be made with or obtained from any
governmental entity prior to the effective time of the merger;
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timely making all such filings and seeking all such consents,
approvals, permits or authorizations without causing a material
adverse affect;
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promptly notify the other party of any communication concerning
the merger agreement or the transactions contemplated by the
merger agreement from any governmental entity and permit the
other party to review in advance any proposed communication
concerning the merger agreement or the transactions contemplated
by the merger agreement to any governmental entity;
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not agree to participate in any meeting or material discussion
with any governmental entity regarding any filing, investigation
or other inquiry concerning the merger agreement or the
transactions contemplated by the merger agreement unless the
other party is consulted in advance and, to the extent permitted
by such governmental entity, is given the opportunity to
participate;
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furnish the other party with copies of all correspondence,
filings and communications between them and their affiliates and
their respective representatives and any governmental entity
regarding the merger agreement and the transactions contemplated
by the merger agreement; and
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furnish the other party with such necessary information and
reasonable assistance reasonably requested in connection with
the preparation of necessary filings, registrations or
submissions of information to any governmental entity.
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Subject to certain provisions of the merger agreement, if any
administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to
be instituted) challenging the merger or any other transaction
contemplated by the merger agreement, each of Pride and Ensco
will cooperate in all respects with each other and will use
their respective reasonable best efforts to contest and resist
any such action or proceeding and to have vacated, lifted,
reversed or overturned any decree, judgment, injunction or other
order, whether temporary, preliminary or permanent, that is in
effect and that prohibits, prevents or restricts consummation of
the merger or any other transactions contemplated hereby.
Nothing in the merger agreement requires either Ensco or Pride,
in an effort to comply with the HSR Act or
non-U.S. antitrust
laws, to take any competition actions, which means
to dispose of any of its assets or to limit its freedom of
action with respect to any of its businesses, or to consent to
any disposition of its assets or limits on its freedom of action
with respect to any of its businesses or to commit or agree to
any of the foregoing, other than dispositions, limitations or
consents, commitments or agreements which in each such case may
be conditioned upon the consummation of the merger and the
transactions contemplated by the merger agreement and which, in
the reasonable good faith judgment of both Ensco and Pride, do
not and are not reasonably likely to individually or in the
aggregate have a material adverse effect on either Ensco or
Pride. Ensco and Pride have further agreed not to take any such
actions without the prior written agreement of the other party.
Financing
Ensco has agreed to use its reasonable best efforts to:
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obtain financing on the terms and conditions set forth in the
financing commitments that are described under Description
of Debt Financing (or substitute financing commitments) or
on terms more favorable to Ensco;
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negotiate definitive agreements with respect to the financing on
the terms and conditions contained in the financing
commitments; and
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consummate the financing at or prior to the closing of the
merger.
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Ensco has agreed to give Pride prompt notice upon becoming aware
of any termination of the financing commitments and to keep
Pride informed on a reasonably current basis and in reasonable
detail of the status of its efforts to arrange financing. Each
party agrees to give the other party prompt notice upon becoming
aware of any event that makes procurement of any portion of the
financing unlikely in the manner or from the sources
contemplated in the financing commitments, in which case, Ensco
will use its reasonable best efforts to arrange as promptly as
practicable any such portion from alternate sources on terms and
conditions substantially no less favorable to Ensco. Ensco will
take and use reasonable best efforts to cause its subsidiaries
to take, and at the request of Ensco, Pride will take and use
its reasonable best efforts to cause its subsidiaries to take,
all actions reasonably necessary in connection with the
financing.
In connection with the financing, each of Ensco and Pride has
agreed to use its reasonable best efforts to:
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provide reasonably required information relating to it and its
subsidiaries to the parties providing financing;
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participate in meetings, drafting sessions and due diligence
sessions in connection with the financing;
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assist in the preparation of any offering documents and
materials for rating agency presentations;
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reasonably cooperate with the marketing efforts for any portion
of the financing;
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execute and deliver customary certificates, accounting comfort
letters, legal opinions, surveys, title insurance or other
documents and instruments relating to guarantees, the pledge of
collateral and other matters ancillary to the financing as may
be reasonably necessary in connection with the financing;
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enter into one or more secured or unsecured credit or other
agreements on terms satisfactory to Ensco that are reasonably
necessary in connection with the financing;
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furnish Ensco and its financing sources as promptly as
practicable with all financial and other information regarding
the parties and their respective subsidiaries as may be
reasonably necessary of a type generally used in connection with
a syndicated bank financing as well as a registered public
offering or an offering pursuant to Rule 144A of the
Securities Act;
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provide the financial information required by the financing
commitments;
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take all actions reasonably necessary in connection with the pay
off of existing indebtedness and the release of related
liens; and
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take all corporate actions reasonably necessary to permit the
consummation of the financing and the direct borrowing or
incurrence of all proceeds of the financing by Ensco immediately
following the effective time of the merger.
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Enscos obligation to complete the merger is not
conditioned upon its obtaining financing.
Employee
Matters
From and after the effective time of the merger, Ensco has
agreed to, and has agreed to cause the surviving entity or any
employing subsidiary to, provide any person employed by Pride or
any of its subsidiaries as of the day immediately prior to the
effective time of the merger employee benefits that are no less
favorable in the aggregate than those provided by Pride (with
the exception of the Pride Employee Stock Purchase Plan and its
supplemental executive retirement plans) immediately prior to
the effective time or, in the sole discretion of Ensco, those
provided by Ensco or its subsidiaries to similarly situated
employees.
From and after the effective time of the merger, with respect to
the year ended December 31, 2011, employees of Pride
immediately prior to effective time will be eligible to
participate in such annual bonus plans as are sponsored by Ensco
or its subsidiaries for similarly situated employees and will
have a bonus opportunity under such plan that is no less than
that of similarly situated employees of Ensco who are eligible
to participate in such plan but only with respect to the portion
of the calendar year in which such employees of Pride are
employed by Ensco or its subsidiaries. Ensco or its subsidiaries
have no obligation to continue to employ or engage employees of
Pride following the effective time of the merger, other than
obligations in accordance with applicable law or collective
bargaining contracts.
From and after the effective time of the merger, Ensco and the
surviving entity have agreed to honor all Pride benefit plans
and compensation arrangements and agreements in accordance with
their terms as in effect immediately before the effective time
of the merger, provided that this agreement will not limit the
right of Pride or Ensco and the surviving entity from amending
or terminating such plans, arrangements and agreements in
accordance with their terms.
Ensco will credit each employee for the period of employment and
service recognized by the applicable employer immediately prior
to the effective time of the merger for purposes of determining
such employees eligibility to join (subject to
satisfaction of all non-service related eligibility criteria)
and vesting under (but not benefit accrual for any purpose other
than vacation pay, severance and termination pay, sick leave,
post-retirement health coverage and satisfaction of early
retirement criteria) all employee benefit plans, programs,
policies or similar employment related arrangements of Ensco in
which such employee is eligible to participate.
Prior to the effective time of the merger, Ensco and Pride will
cooperate in good faith to establish a process to promptly
integrate the Ensco benefit plans and the Pride benefit plans
following the effective time of the merger.
In the event the merger closes prior to June 30, 2011 (the
next regularly scheduled purchase date for Prides Employee
Stock Purchase Plan), Pride will establish a date before the
effective time of the merger as the final purchase date under
the terms of Prides Employee Stock Purchase Plan, and will
cause all accumulated cash balances credited to the account of
each participant in the plan on such final purchase date to be
applied to purchase the number of shares of Pride common stock
that could be purchased with such amounts on such date pursuant
to the plan.
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Indemnification
and Insurance
From and after the effective time of the merger, Ensco and the
surviving entity will indemnify, defend and hold harmless, and
will advance expenses to, to the fullest extent permitted under
applicable law, each person who is, or has been at any time
prior to the effective time of the merger, an officer or
director of Pride (or any subsidiary thereof) and each person
who served at the request of Pride as a director, officer,
trustee or fiduciary of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or
enterprise against all losses, claims, damages, liabilities,
costs or expenses (including attorneys fees), judgments,
fines, penalties and amounts paid in settlement in connection
with any claim, action, suit, proceeding or investigation
arising out of or pertaining to acts or omissions, or alleged
acts or omissions, by them in their capacities as such, whether
commenced, asserted or claimed before or after the effective
time of the merger.
The rights to indemnification, including provisions relating to
advances of expenses incurred in defense of any action or suit,
in Prides certificate of incorporation and bylaws of the
indemnitees specified therein with respect to matters occurring
through the effective time, will survive the merger for a period
of no less than six years and will not be amended during such
period.
At or prior to the effective time of the merger, Pride will use
its reasonable best efforts to purchase a tail
directors and officers liability insurance policy
covering at least six years after the effective time the
indemnified parties on terms no less advantageous than such
existing insurance. If Pride does not purchase such a policy,
for a period of six years after the effective time of the
merger, Ensco and the surviving entity will maintain
directors and officers liability insurance covering
the indemnified parties who are, or at any time prior to the
effective time of the merger were, covered by Prides
existing directors and officers liability insurance
policies on terms substantially no less advantageous to the
indemnified parties than such existing insurance; provided, that
Ensco and the surviving entity are not required to pay annual
premiums in excess of 300% of the last annual premium paid by
Pride.
Publicity
Pride, Ensco, Merger Sub and Delaware Sub have agreed to use
reasonable best efforts to consult with each other before
issuing any press release or public announcement pertaining to
the merger agreement of the merger and will not issue any such
press release or make any such public announcement, except as
may be required by law or by obligations pursuant to any listing
agreement with any national securities exchange, in which case
the party proposing to issue such press release or make such
public announcement will use its reasonable best efforts to
consult in good faith with the other party before issuing any
such press releases or making any such public announcements.
Notice
of Certain Events
Each of Pride and Ensco agree to give prompt notice to the other
party, and to use commercially reasonable efforts to prevent or
promptly remedy, the occurrence or failure to occur, or the
impending or threatened occurrence or failure to occur, of any
event which would be reasonably likely to cause the failure of
any of the conditions to closing of the merger.
Access;
Confidentiality
Until the effective time of the merger and subject to the
requirements of applicable laws, Pride has agreed to
(i) provide to Ensco, its counsel, advisors and authorized
representatives reasonable access during normal business hours
to the offices, properties, books and records of Pride and any
of its subsidiaries, (ii) furnish to Ensco, its counsel,
advisors and authorized representatives such financial and
operating data and other information as such persons may
reasonably request (including, to the extent possible,
furnishing to Ensco the financial results of Pride and its
subsidiaries in advance of any filing with the SEC containing
such financial results), and (iii) instruct the employees,
counsel, advisors and other authorized representatives of Pride
and its subsidiaries to cooperate reasonably with Ensco in its
investigation of Pride and its subsidiaries. Pride and its
subsidiaries will not be required to disclose any information
that would cause a risk of a loss of privilege to
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Pride and its subsidiaries or which is required to be kept
confidential by an agreement with a third party. All non-public
information obtained by Ensco is subject to a confidentiality
agreement between Ensco and Pride, dated December 18, 2010.
Pride
Rights Agreement; State Anti-Takeover Laws
Prior to the effective time of the merger, Prides board of
directors will take any action (including, as necessary,
amending or terminating (but with respect to termination, only
as of immediately prior to the effective time) the rights
agreement between Pride and American Stock Transfer and
Trust Company, dated September 13,
2001) necessary to cause the Final Expiration Date (as
defined in the Pride rights agreement) of the Pride rights to
occur immediately prior to the effective time of the merger so
that the Pride rights will expire immediately prior to the
effective time. Other than (a) with the prior written
consent of Ensco or (b) pursuant to, and immediately prior
to, termination of the merger agreement by Pride in compliance
with certain provisions of the merger agreement, neither the
Prides board of directors nor Pride will (i) take any
other action to terminate the Pride rights agreement, redeem the
Pride rights, cause any person (other than Ensco and its
affiliates) not to be or become an Acquiring Person (as defined
in the Pride rights agreement), or otherwise amend rights
Agreement in a manner adverse to Ensco or its affiliates or
(ii) take any action so that the restrictions on business
combinations under Delaware law are not applicable to any
agreement, transaction or person.
Other
Agreements
Whether or not the merger is consummated, 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, except for costs relating to the
financing by Ensco, indemnification and insurance and fees and
termination fees payable as a result of the termination of the
merger agreement. Notwithstanding the foregoing, Ensco and Pride
have agreed that they will share equally (i) the fees
incident to the antitrust filings, (ii) the SEC and other
filing fees incident to the
Form S-4
and this joint proxy statement/prospectus and the costs and
expenses associated with printing and mailing this joint proxy
statement/prospectus, (iii) the U.K. Listing Authority and
other filing fees incident to Enscos U.K. prospectus and
the costs and expenses associated with printing and mailing
Enscos U.K. prospectus, if required, (iv) the fees
associated with the NYSE listing of Ensco ADSs,
and/or
(v) as otherwise agreed in writing by the parties.
Effective as of the effective time, Ensco has agreed to be
bound, and the surviving entity will continue to be bound, by
the obligations of Pride set forth in the Deferred Prosecution
Agreement, dated November 4, 2010, between Pride and the
U.S. Department of Justice, to the extent required thereby.
The Enscos board of directors or a committee thereof, at
or prior to the effective time of the merger, shall adopt
resolutions specifically approving, for purposes of
Rule 16b-3
under the Exchange Act, the receipt of Ensco ADSs and
Class A ordinary shares represented thereby, and of options
or other rights (to the extent provided in this Agreement) to
acquire Ensco ADSs and Class A ordinary shares represented
thereby, by executive officers of Pride who become executive
officers of Ensco subject to
Rule 16b-3.
Termination
of the Merger Agreement
Pride and Ensco may terminate the merger agreement at any time
by mutual written consent.
Either Pride or Ensco may terminate the merger agreement at any
time prior to the effective time of the merger if:
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the merger has not been consummated by February 3, 2012;
provided that the party desiring to terminate the merger
agreement for this reason has not failed to perform or observe
in any material respect any of its obligations under the merger
agreement in any manner that was the cause of, or resulted in,
the failure of the merger to occur on or before that date;
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there is a failure to obtain the requisite approval of the
shareholders or stockholders of either party at a meeting of
those shareholders or stockholders, provided that a party may
not terminate the merger
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agreement for this reason if the failure to obtain the approval
of such partys shareholders or stockholders, respectively,
is proximately caused by either a withdrawal, modification or
change in the recommendation of such partys board of
directors, except for an adverse recommendation change made in
accordance with the merger agreement, or a breach by such party
of its non-solicitation obligations; or
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a court of competent jurisdiction or governmental entity has
issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the merger agreement that has
become final and nonappealable. However, the party seeking to
terminate the merger agreement for this reason must have
complied with the covenants in the merger agreement that
generally relate to antitrust and other governmental filings and
approvals and, with respect to other matters, used its
reasonable best efforts to remove such injunction, decree or
order.
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Pride may terminate the merger agreement at any time, after
consultation with its outside legal advisors, if:
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Ensco, Merger Sub or Delaware Sub has breached any
representation, warranty, covenant or agreement in the merger
agreement, or any such representation or warranty has become
untrue, in either case such that such condition to Prides
obligations to consummate the merger would not be satisfied, and
such breach is not curable, or, if curable, is not cured within
30 days after Pride gives written notice of the breach to
Ensco, and Pride is not, at that time, in breach of any
representation, warranty, covenant or agreement in the merger
agreement such that such condition to Enscos obligation to
consummate the merger would not be satisfied;
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the board of directors of Ensco has made an adverse
recommendation change and the requisite approvals of the Ensco
shareholders have not yet been obtained; or
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before obtaining the requisite approval of its stockholders,
Pride concurrently enters into a binding definitive written
agreement providing for the implementation of a transaction that
constitutes a superior proposal for Pride after the board of
directors of Pride determines in good faith after consultation
with its outside legal and financial advisors that proceeding
with the merger would be inconsistent with its fiduciary
obligations. Pride may not terminate the merger agreement for
this reason, however, unless:
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it has complied in all material respects with its
non-solicitation obligations under the merger agreement;
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it has paid or concurrently pays the termination fee to Ensco
described under Termination Fees below;
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Ensco receives at least three business days (or two business
days with respect to any material revision to such superior
proposal) prior written notice from Pride of its intention to
effect that termination; and
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during that three business day period (or two business day
period, if applicable), Pride considers, and causes its legal
and financial advisors to consider, any adjustment in the terms
and conditions of the merger agreement that Ensco may propose.
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Ensco may terminate the merger agreement at any time, after
consultation with its outside legal advisors, if:
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Pride has breached any representation, warranty, covenant or
agreement in the merger agreement, or any such representation or
warranty has become untrue, in either case such that such
condition to Enscos and Merger Subs obligations to
consummate the merger would not be satisfied, and such breach is
not curable, or, if curable, is not cured within 30 days
after Ensco gives written notice of the breach to Pride, and
Ensco is not, at that time, in breach of any representation,
warranty, covenant or agreement in the merger agreement such
that such condition to Prides obligation to consummate the
merger would not be satisfied;
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the board of directors of Pride has made an adverse
recommendation change and the requisite approval of the Pride
stockholders has not yet been obtained; or
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before obtaining the requisite approval of its shareholders,
Ensco enters into a binding definitive written agreement
providing for the implementation of a transaction that
constitutes a superior proposal for Ensco after the board of
directors of Ensco determines in good faith after consultation
with its outside legal and financial advisors that proceeding
with the merger would be inconsistent with its fiduciary
obligations. Ensco may not terminate the merger agreement for
this reason, however, unless:
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it has complied in all material respects with its
non-solicitation obligations under the merger agreement;
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it has paid or concurrently pays the termination fee to Pride
described under Termination Fees below;
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Pride receives at least three business days (or two business
days with respect to any material revision to such superior
proposal) prior written notice from Ensco of its intention to
effect that termination; and
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during that three business day period (or two business day
period, if applicable), Ensco considers, and causes its legal
and financial advisors to consider, any adjustment in the terms
and conditions of the merger agreement that Pride may propose.
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Termination
Fees
Termination of the merger agreement may require Pride or
Delaware Sub to pay a cash termination fee in the amount and
under the following circumstances.
Pride will be required to pay to Ensco the termination fee of
$260,000,000 at the time of termination of the merger agreement
where the merger agreement is terminated:
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by either party due to failure to obtain the requisite approval
of Prides stockholders, where:
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the failure to obtain such approval occurs after the public
disclosure of an acquisition proposal for Pride by a third
party; and
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prior to such failure, the board of directors of Pride
determines that such proposal constitutes a superior proposal
for purposes of providing information to, or entering into
negotiations or discussions with, the party making such
acquisition proposal;
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by either party due to failure to obtain the requisite approval
of Prides stockholders, where the failure to obtain Pride
stockholder approval was proximately caused by Prides
breach of its non-solicitation obligations or obligations to
submit the Merger to its stockholders for approval;
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by Ensco due to an adverse recommendation change of Pride that
was in response to an acquisition proposal for Pride; or
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by Pride in connection with a superior proposal for Pride as
described under Termination of the Merger
Agreement above.
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Pride will also be required to pay the termination fee of
$260,000,000 at the time of entry into a definitive agreement or
consummation of an acquisition proposal for Pride where the
merger agreement is terminated by either party due to failure to
obtain the requisite approval of Prides stockholders,
where a termination fee is not otherwise payable upon such
termination as described above if:
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the failure to obtain such approval occurs after the public
disclosure of an acquisition proposal for Pride by a third
party; and
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within 12 months after such termination, Pride or any of
its subsidiaries enters into a definitive agreement providing
for an acquisition proposal for Pride or an acquisition proposal
for Pride is consummated.
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Delaware Sub will be required to pay to Pride the termination
fee of $260,000,000 at the time of termination of the merger
agreement where the merger agreement is terminated:
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by Pride due to an adverse recommendation change of Ensco that
was in response to an acquisition proposal for Ensco;
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by Ensco in connection with a superior proposal for Ensco as
described under Termination of the Merger
Agreement above;
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by either party due to failure to obtain the requisite approval
of Enscos shareholders, where:
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the failure to obtain such approval occurs after the public
disclosure of an acquisition proposal for Ensco by a third
party; and
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prior to such failure, the board of directors of Ensco
determines that such proposal constitutes a superior proposal
for purposes of providing information to, or entering into
negotiations or discussions with, the party making such
acquisition proposal; or
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by either party due to failure to obtain the requisite approval
of Enscos shareholders, where the failure to obtain Ensco
shareholder approval was proximately caused by Enscos
breach of its non-solicitation obligations or obligations to
submit the merger to its shareholders for approval.
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Delaware Sub will also be required to pay Pride the termination
fee of $260,000,000 at the time of entry into a definitive
agreement or consummation of an acquisition proposal for Ensco
where the merger agreement is terminated by either party due to
failure to obtain the requisite approval of Enscos
shareholders, where a termination fee is not otherwise payable
upon such termination as described above if:
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the failure to obtain such approval occurs after the public
disclosure of an acquisition proposal for Ensco by a third
party; and
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within 12 months after such termination, Ensco or any of
its subsidiaries enters into a definitive agreement providing
for an acquisition proposal for Ensco or an acquisition proposal
for Ensco is consummated.
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If the merger agreement is terminated (i) by Pride or Ensco
on or after February 3, 2012 and the merger agreement could
have been terminated by Ensco because of a breach of the merger
agreement by Pride or (ii) by Pride or Ensco because of a
failure to obtain approval of Prides stockholders, in
either case other than in any circumstances where a termination
fee is payable as described above, then Pride would be required
to pay to Ensco a fee of $50,000,000.
If the merger agreement is terminated by Pride or Ensco
(i) on or after February 3, 2012 and the merger
agreement could have been terminated by Pride because of a
breach of the merger agreement by Ensco or (ii) because of
a failure to obtain approval of Enscos shareholders, in
either case other than in any circumstances where a termination
fee is payable as described above, then Delaware Sub would be
required to pay to Pride a fee of $50,000,000.
If a $50,000,000 fee is paid by a party and a termination fee
later becomes payable by such party because such party enters
into or consummates a definitive agreement within 12 months
of termination as described above, the $50,000,000 fee that has
been paid will be offset against the $260,000,000 termination
fee payable.
Effect
of Termination
If the merger agreement is terminated in accordance with its
terms, it will become null and void and there will be no
liability or obligation on the part of Ensco, Merger Sub,
Delaware Sub, Pride or their respective affiliates or
representatives, provided that (i) certain customary
provisions will survive such termination and (ii) except as
described below, no party will be relieved from any liability
for any willful or intentional breach by any other party of any
of such partys representations, warranties, covenants or
other agreements set forth in the merger agreement or any action
for fraud.
129
APPRAISAL
RIGHTS
Holders of shares of Pride common stock who do not vote in favor
of the adoption of the merger agreement and who properly demand
appraisal of their shares will be entitled to appraisal rights
in connection with the merger under Section 262 of the
General Corporation Law of the State of Delaware, referred to as
the DGCL.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL and is qualified
in its entirety by the full text of Section 262, which is
attached to this joint proxy statement/prospectus as
Annex D. The following summary does not constitute any
legal or other advice nor does it constitute a recommendation
that stockholders exercise their appraisal rights under
Section 262. Only a holder of record of shares of Pride
common stock is entitled to demand appraisal rights for the
shares registered in that holders name. A person having a
beneficial interest in shares of common stock of Pride held of
record in the name of another person, such as a broker,
fiduciary, depositary or other nominee, must act promptly to
cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect appraisal rights.
Under Section 262, holders of shares of common stock of
Pride who do not vote in favor of the adoption of the merger
agreement and who otherwise follow the procedures set forth in
Section 262 will be entitled to have their shares appraised
by the Delaware Court of Chancery and to receive payment in cash
of the fair value of the shares, exclusive of any
element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, as
determined by the court.
Under Section 262, where a merger agreement is to be
submitted for adoption at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
must notify each of its stockholders entitled to appraisal
rights that appraisal rights are available and include in the
notice a copy of Section 262. This joint proxy
statement/prospectus shall constitute the notice, and the full
text of Section 262 is attached to this proxy statement as
Annex D. In connection with the merger, any holder of
common stock of Pride who wishes to exercise appraisal rights,
or who wishes to preserve such holders right to do so,
should review the following discussion and Annex D
carefully because failure to timely and properly comply with the
procedures specified will result in the loss of appraisal
rights. Moreover, because of the complexity of the procedures
for exercising the right to seek appraisal of shares of common
stock, Pride believes that if a stockholder considers exercising
such rights, such stockholder should seek the advice of legal
counsel.
Filing
Written Demand
Any holder of common stock of Pride wishing to exercise
appraisal rights must deliver to Pride, before the vote on the
adoption of the merger agreement at the special meeting at which
the proposal to adopt the merger agreement will be submitted to
the stockholders, a written demand for the appraisal of the
stockholders shares, and that stockholder must not vote in
favor of the adoption of the merger agreement. A holder of
shares of common stock of Pride wishing to exercise appraisal
rights must hold of record the shares on the date the written
demand for appraisal is made and must continue to hold the
shares of record through the effective time of the merger. The
stockholder must not vote in favor of the adoption of the merger
agreement. A proxy that is submitted and does not contain voting
instructions will, unless revoked, be voted in favor of the
adoption of the merger agreement, and it will constitute a
waiver of the stockholders right of appraisal and will
nullify any previously delivered written demand for appraisal.
Therefore, a stockholder who submits a proxy and who wishes to
exercise appraisal rights must submit a proxy containing
instructions to vote against the adoption of the merger
agreement or abstain from voting on the adoption of the merger
agreement. Neither voting against the adoption of the merger
agreement nor abstaining from voting or failing to vote on the
proposal to adopt the merger agreement will, in and of itself,
constitute a written demand for appraisal satisfying the
requirements of Section 262. The written demand for
appraisal must be in addition to and separate from any proxy or
vote on the adoption of the merger agreement. A proxy or vote
against the adoption of the merger agreement will not constitute
a demand. The demand must reasonably inform Pride of the
identity of the holder, as well as the intention of the holder
to demand an appraisal of the fair value of the
shares held by the holder. A stockholders failure to
deliver the written demand prior to the taking of the
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vote on the adoption of the merger agreement at the special
meeting of Pride stockholders will constitute a waiver of
appraisal rights.
Only a holder of record of shares of Pride common stock is
entitled to demand appraisal rights for the shares registered in
that holders name. A demand for appraisal in respect of
shares of common stock of Pride should be executed by or on
behalf of the holder of record, and must reasonably inform Pride
of the identity of the holder and state that the person intends
thereby to demand appraisal of the holders shares in
connection with the merger. If the shares are owned of record in
a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand should be made in that
capacity, and if the shares are owned of record by more than one
person, as in a joint tenancy and tenancy in common, the demand
should be executed by or on behalf of all joint owners. An
authorized agent, including an agent for two or more joint
owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or
owners and expressly disclose that, in executing the demand, the
agent is acting as agent for the record owner or owners.
Stockholders who hold their shares in brokerage accounts or
other nominee forms and who wish to exercise appraisal rights
are urged to consult with their brokers to determine the
appropriate procedures for the making of a demand for appraisal
by such a nominee.
All written demands for appraisal pursuant to Section 262
should be delivered to Pride at 5847 San Felipe,
Suite 3300, Houston, Texas 77057, Attention: Investor
Relations.
Any holder of common stock of Pride may withdraw his, her or its
demand for appraisal and accept the consideration offered
pursuant to the merger agreement by delivering to Pride a
written withdrawal of the demand for appraisal; however, any
such attempt to withdraw the demand made more than 60 days
after the effective date of the merger will require written
approval of the surviving entity. No appraisal proceeding in the
Delaware Court of Chancery will be dismissed without the
approval of the Delaware Court of Chancery, and such approval
may be conditioned upon such terms as the Delaware Court of
Chancery deems just.
Notice by
the Surviving Entity
If the merger is completed, within 10 days after the
effective time of the merger, the surviving entity will notify
each holder of common stock of Pride who has made a written
demand for appraisal pursuant to Section 262, and who has
not voted in favor of the adoption of the merger agreement, that
the merger has become effective and the effective date thereof.
Filing a
Petition for Appraisal
Within 120 days after the effective time of the merger, but
not thereafter, the surviving entity or any holder of common
stock of Pride who has so complied with Section 262 and is
entitled to appraisal rights under Section 262 may file a
petition in the Delaware Court of Chancery demanding a
determination of the fair value of the shares held by all
holders who have properly demanded appraisal of their shares.
The surviving entity is under no obligation to and has no
present intention to file a petition, and holders should not
assume that the surviving entity will file a petition or
initiate any negotiations with respect to the fair value of
shares of common stock of Pride. Accordingly, any holders of
common stock of Pride who desire to have their shares appraised
should initiate all necessary action to perfect their appraisal
rights in respect of shares of common stock of Pride within the
time prescribed in Section 262.
Within 120 days after the effective time of the merger, any
holder of common stock of Pride who has complied with the
requirements for exercise of appraisal rights will be entitled,
upon written request, to receive from the surviving entity a
statement setting forth the aggregate number of shares not voted
in favor of the adoption of the merger agreement and with
respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. The statement
must be mailed within 10 days after a written request
therefor has been received by the surviving entity or within
10 days after the expiration of the period for delivery of
demands for appraisal, whichever is later. A beneficial owner of
shares held either in a voting trust or by a nominee on behalf
of such person may file a petition seeking appraisal or request
the foregoing statements. As noted above, however, the demand
for appraisal can only be made by a stockholder of record.
131
If a petition for an appraisal is timely filed by a holder of
shares of common stock of Pride and a copy thereof is served
upon the surviving entity, the surviving entity will then be
obligated within 20 days to file with the Delaware Register
in Chancery a duly verified list containing the names and
addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their
shares have not been reached. After notice to the stockholders
as required by the court, the Delaware Court of Chancery is
empowered to conduct a hearing on the petition to determine
those stockholders who have complied with Section 262 and
who have become entitled to appraisal rights thereunder. The
Delaware Court of Chancery may require the stockholders who
demanded payment for their shares to submit their stock
certificates to the Register in Chancery for notation thereon of
the pendency of the appraisal proceeding, and if any stockholder
fails to comply with the direction, the Delaware Court of
Chancery may dismiss the proceedings as to such stockholder.
Determination
of Fair Value
After determining the holders of common stock of Pride entitled
to appraisal, the Delaware Court of Chancery will appraise the
fair value of their shares, exclusive of any element
of value arising from the accomplishment or expectation of the
merger, together with interest, if any, to be paid upon the
amount determined to be the fair value. In determining fair
value, the Delaware Court of Chancery will take into account all
relevant factors. In Weinberger v. UOP, Inc., the Supreme
Court of Delaware discussed the factors that could be considered
in determining fair value in an appraisal proceeding, stating
that proof of value by any techniques or methods which are
generally considered acceptable in the financial community and
otherwise admissible in court should be considered, and
that [f]air price obviously requires consideration of all
relevant factors involving the value of a company. The
Delaware Supreme Court stated that, in making this determination
of fair value, the court must consider market value, asset
value, dividends, earnings prospects, the nature of the
enterprise and any other facts that could be ascertained as of
the date of the merger that throw any light on future prospects
of the merged corporation. Section 262 provides that fair
value is to be exclusive of any element of value arising
from the accomplishment or expectation of the merger. In
Cede & Co. v. Technicolor, Inc., the Delaware
Supreme Court stated that such exclusion is a narrow
exclusion [that] does not encompass known elements of
value, but which rather applies only to the speculative
elements of value arising from such accomplishment or
expectation. In Weinberger, the Supreme Court of Delaware also
stated that elements of future value, including the nature
of the enterprise, which are known or susceptible of proof as of
the date of the merger and not the product of speculation, may
be considered.
Stockholders considering seeking appraisal should be aware that
the fair value of their shares as so determined could be more
than, the same as or less than the consideration they would
receive pursuant to the merger if they did not seek appraisal of
their shares and that an investment banking opinion as to the
fairness from a financial point of view of the consideration
payable in a merger is not an opinion as to fair value under
Section 262. Although Pride believes that the merger
consideration is fair, no representation is made as to the
outcome of the appraisal of fair value as determined by the
Delaware Court of Chancery, and stockholders should recognize
that such an appraisal could result in a determination of a
value higher or lower than, or the same as, the merger
consideration. Neither Pride nor Ensco anticipate offering more
than the applicable merger consideration to any stockholder of
Pride exercising appraisal rights, and each of Pride and Ensco
reserves the right to assert, in any appraisal proceeding, that
for purposes of Section 262, the fair value of
a share of common stock of Pride is less than the applicable
merger consideration, and that the methods which are generally
considered acceptable in the financial community and otherwise
admissible in court should be considered in the appraisal
proceedings. In addition, Delaware courts have decided that the
statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenters exclusive remedy. If a
petition for appraisal is not timely filed, then the right to an
appraisal will cease. The costs of the action (which do not
include attorneys fees or the fees and expenses of
experts) may be determined by the Delaware Court of Chancery and
taxed upon the parties as the Delaware Court of Chancery deems
equitable under the circumstances. The Delaware Court of
Chancery may also order that all or a portion of the expenses
incurred by a stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all the
shares entitled to be appraised.
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Unless the court in its discretion determines otherwise for good
cause shown, interest from the effective date of the merger
through the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period from the effective date of the merger
and the date of payment of the judgment.
If any stockholder who demands appraisal of shares of common
stock of Pride under Section 262 fails to perfect, or
successfully withdraws or loses, such holders right to
appraisal, the stockholders shares of common stock of
Pride will be deemed to have been converted at the effective
time of the merger into the right to receive the merger
consideration applicable to the shares. A stockholder will fail
to perfect, or lose or withdraw, the holders right to
appraisal if no petition for appraisal is filed within
120 days after the effective time of the merger or if the
stockholder delivers to the surviving entity a written
withdrawal of the holders demand for appraisal and an
acceptance of the merger consideration in accordance with
Section 262.
From and after the effective time of the merger, no dissenting
stockholder shall have any rights of a stockholder of Pride with
respect to that holders shares for any purpose, except to
receive payment of fair value and to receive payment of
dividends or other distributions on the holders shares of
common stock of Pride, if any, payable to stockholders of Pride
of record as of a time prior to the effective time of the
merger; provided, however, that if a dissenting stockholder
delivers to the surviving company a written withdrawal of the
demand for an appraisal within 60 days after the effective
time of the merger, or subsequently with the written approval of
the surviving company, then the right of that dissenting
stockholder to an appraisal will cease and the dissenting
stockholder will be entitled to receive the merger consideration
in accordance with the terms of the merger agreement. Once a
petition for appraisal is filed with the Delaware Court of
Chancery, however, the appraisal proceeding may not be dismissed
as to any stockholder of Pride without the approval of the
court, and such approval may be conditioned upon such terms as
the Court deems just; provided, that such restriction shall not
affect the right of any stockholder who has not commenced an
appraisal proceeding or joined the proceeding as a named party
to withdraw such stockholders demand for appraisal and to
accept the merger consideration within 60 days after the
effective time of the merger.
Failure to comply strictly with all of the procedures set
forth in Section 262 of the DGCL may result in the loss of
a stockholders statutory appraisal rights. Consequently,
any stockholder of Pride wishing to exercise appraisal rights is
urged to consult legal counsel before attempting to exercise
those rights.
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DESCRIPTION
OF DEBT FINANCING
Enscos obligation to complete the merger is not
conditioned upon its obtaining financing. As of
December 31, 2010, Ensco had $1,050.7 million in cash
and cash equivalents. In addition, Ensco has a
$700.0 million revolving credit facility with a syndicate
of commercial banks. The revolving credit facility expires in
May 2014 unless it is extended.
Ensco anticipates that approximately $2.9 billion will be
required to pay the aggregate cash portion of the merger
consideration to the Pride stockholders based on the number of
outstanding shares of Pride common stock. On February 6,
2011, Ensco entered into a bridge commitment letter with
Deutsche Bank AG Cayman Islands Branch, or DBCI, Deutsche Bank
Securities Inc. and Citigroup Global Markets Inc., or Citi.
Pursuant to the commitment letter, DBCI and Citi committed to
provide a $2.75 billion unsecured bridge term loan facility
to fund a portion of the cash consideration in the merger. On
March 17, 2011, in connection with its financing of the
merger, Ensco issued two series of senior notes in a public
offering: $1.0 billion aggregate principal amount of
3.25% senior notes due 2016 and $1.5 billion aggregate
principal amount of 4.70% senior notes due 2021. Due to the
issuance of the senior notes and the availability of cash on
hand, which totaled approximately $3.4 billion as of
March 31, 2011, the bridge commitment letter was terminated
on March 23, 2011. Ensco may seek additional sources of
debt financing in the future to fund future operating and
capital expenditures and for general corporate purposes.
There can be no assurance that any additional sources of debt
financing may be completed on commercially acceptable terms if
at all. In addition, Ensco intends to use such internal cash
resources and financing as well as cash on hand of Pride
following the merger, which at December 31, 2010 was
$485.0 million, to pay for the estimated direct merger
transaction costs and professional services as well as
pre-existing change of control severance payments to certain
Pride employees.
134
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On February 6, 2011, Ensco and Pride entered into a merger
agreement pursuant to which, subject to the conditions set forth
therein, a wholly-owned subsidiary of Ensco will merge with and
into Pride, with Pride as the surviving entity and an indirect,
wholly-owned subsidiary of Ensco. Pursuant to the merger
agreement, at closing each outstanding share of Prides
common stock will be converted into the right to receive $15.60
in cash and 0.4778 Ensco ADSs. Under certain circumstances, UK
residents may receive all cash consideration as a result of
compliance with legal requirements. The merger will be accounted
for using the acquisition method of accounting with Ensco
identified as the acquirer. Under the acquisition method of
accounting, Ensco will record all assets acquired and
liabilities assumed at their respective acquisition-date fair
values at the effective time of closing.
Basis of
Pro Forma Presentation
The following unaudited pro forma condensed combined financial
statements and related notes combine the historical consolidated
balance sheet and statement of income of Ensco and of Pride. The
pro forma balance sheet gives effect to the merger as if it had
occurred on December 31, 2010. The pro forma statement of
income for the year ended December 31, 2010 gives effect to
the merger as if the merger had occurred on January 1,
2010. The pro forma statement of income for the year ended
December 31, 2010 was prepared by combining Enscos
historical consolidated statement of income for the year ended
December 31, 2010 and Prides historical consolidated
statement of income for the year ended December 31, 2010.
The unaudited pro forma condensed combined financial statements
are provided for illustrative purposes only and are not intended
to represent or be indicative of the consolidated results of
operations or financial position of the combined company that
would have been recorded had the merger been completed as of the
dates presented and should not be taken as representative of
future results of operations or financial position of the
combined company. The unaudited pro forma condensed combined
financial statements do not reflect the impacts of any potential
operational efficiencies, cost savings or economies of scale
that Ensco may achieve with respect to the combined operations
of Ensco and Pride. Additionally, the pro forma statement of
income does not include non-recurring charges or credits and the
related tax effects which result directly from the transaction.
Furthermore, certain reclassifications have been made to
Prides historical financial statements presented herein to
conform to Enscos historical presentation.
The unaudited pro forma condensed combined financial statements
reflect the estimated merger consideration expected to be
transferred, which does not purport to represent what the actual
merger consideration transferred will be at the effective time
of the closing. In accordance with FASB ASC Topic 805, Business
Combinations, as amended (FASB ASC Topic 805),
the fair value of equity securities issued as part of the
consideration transferred will be measured on the closing date
of the merger at the then-current market price. Ensco has
estimated the total consideration expected to be issued and paid
in the merger to be approximately $7.6 billion, consisting
of approximately $2.8 billion to be paid in cash,
approximately $4.8 billion to be paid through the issuance
and delivery of approximately 86 million Ensco ADSs valued
at the April 19, 2011 closing share price of $55.68 per
share and the estimated fair value of $30 million of Pride
employee stock options assumed by Ensco, based on the assumption
that no Pride employee stock options are exercised prior to the
merger closing.
The cash portion of the merger consideration is expected to be
financed through existing cash and cash equivalents, including
proceeds from the issuance in a public offering on
March 17, 2011 of $1.0 billion aggregate principal
amount of 3.25% senior notes due 2016 and $1.5 billion
aggregate principal amount of 4.70% senior notes due 2021,
which are collectively referred to as the senior
notes, and additional short-term debt financing. Pro forma
interest expense assumes the proceeds from the senior notes were
outstanding for the full year, in addition to anticipated
short-term debt financing outstanding for the full year with an
estimated average interest rate of 0.5%. A 0.125% change in the
estimated interest rate would have a nominal corresponding
effect on interest expense for the year ended December 31,
2010.
Under FASB ASC Topic 805, acquisition-related transaction
costs (i.e. advisory, legal, valuation and other professional
fees) are not included as a component of consideration
transferred but are accounted for as
135
expenses in the periods in which the costs are incurred. Ensco
estimates that advisory, legal, valuation, and other
professional fees and expenses will total approximately
$31 million, debt issuance costs will total approximately
$25 million, ADS issuance costs will total approximately
$70 million and change in control severance for certain
Pride employees will total approximately $39 million.
Professional fees and expenses incurred by Pride related to the
transaction are estimated to total approximately
$52 million. Moreover, retention awards in the form of
non-vested shares were granted in February 2011 to officers and
certain key employees of Ensco with a total grant-date fair
value of $22 million. This amount will be recognized as
compensation expense on a straight-line basis over a three-year
period, the non-recurring effect of which is not included in the
unaudited pro forma condensed combined financial statements.
After closing, Ensco expects to incur additional charges and
expenses related to restructuring and integrating the operations
of Pride and Ensco, the amount of which has not yet been
determined.
As of the date of this joint proxy statement/prospectus, the
assets and liabilities of Pride are recorded at their
preliminary estimated fair values at the assumed date of
completion of the merger, with the excess of the purchase price
over the sum of these fair values recorded as goodwill. The
preliminary estimates of fair values are subject to change based
on the fair values and the final valuations that will be
determined as of the closing date of the merger. Actual results
will differ from this unaudited pro forma condensed combined
financial information once Ensco has determined the final merger
consideration and completed the detailed valuation analysis and
calculations necessary to finalize the required purchase price
allocations. Accordingly, the final allocations of merger
consideration and their effects on our results of operations may
differ materially from the preliminary allocations and unaudited
pro forma combined amounts included herein.
The unaudited pro forma condensed combined financial statements
do not constitute statutory accounts required by the U.K.
Companies Act 2006, which for the year ended December 31,
2010 will be prepared in accordance with generally accepted
accounting principles in the U.K. and delivered to the Registrar
of Companies in the U.K. following the annual general meeting of
shareholders. The U.K. statutory accounts are expected to
include an unqualified auditors report, which is not
expected to contain any references to matters to which the
auditors drew attention by way of emphasis without qualifying
the report or any statements under Sections 498(2) or
498(3) of the U.K. Companies Act 2006.
The unaudited pro forma condensed combined financial statements
should be read in conjunction with the historical consolidated
financial statements and accompanying notes contained in the
Ensco and Pride Annual Reports on
Form 10-K.
136
ENSCO PLC
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ensco
|
|
|
Pride
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Historical
|
|
|
Adjustments
|
|
|
Combined
|
|
|
ASSETS
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,051
|
|
|
$
|
485
|
|
|
$
|
(69
|
)(a)
|
|
$
|
1,467
|
|
Accounts receivable, net
|
|
|
215
|
|
|
|
252
|
|
|
|
|
|
|
|
467
|
|
Other
|
|
|
171
|
|
|
|
86
|
|
|
|
50
|
(b)
|
|
|
307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,437
|
|
|
|
823
|
|
|
|
(19
|
)
|
|
|
2,241
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
5,050
|
|
|
|
5,961
|
|
|
|
371
|
(c)
|
|
|
11,382
|
|
GOODWILL AND OTHER INTANGIBLE ASSETS
|
|
|
336
|
|
|
|
10
|
|
|
|
3,383
|
(d)
|
|
|
3,729
|
|
OTHER ASSETS, NET
|
|
|
229
|
|
|
|
78
|
|
|
|
(31
|
)(e)
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,052
|
|
|
$
|
6,872
|
|
|
$
|
3,704
|
|
|
$
|
17,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities and other
|
|
$
|
332
|
|
|
$
|
330
|
|
|
$
|
250
|
(f)
|
|
$
|
912
|
|
Short-term debt
|
|
|
|
|
|
|
|
|
|
|
300
|
(g)
|
|
|
300
|
|
Current maturities of long-term debt
|
|
|
17
|
|
|
|
30
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
349
|
|
|
|
360
|
|
|
|
550
|
|
|
|
1,259
|
|
LONG-TERM DEBT
|
|
|
240
|
|
|
|
1,833
|
|
|
|
2,771
|
(h)
|
|
|
4,844
|
|
DEFERRED INCOME TAXES
|
|
|
358
|
|
|
|
61
|
|
|
|
(61
|
)(i)
|
|
|
358
|
|
OTHER LIABILITIES
|
|
|
140
|
|
|
|
102
|
|
|
|
295
|
(j)
|
|
|
537
|
|
TOTAL EQUITY
|
|
|
5,965
|
|
|
|
4,516
|
|
|
|
149
|
(k)
|
|
|
10,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,052
|
|
|
$
|
6,872
|
|
|
$
|
3,704
|
|
|
$
|
17,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
137
ENSCO PLC
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ensco
|
|
|
Pride
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Historical
|
|
|
Adjustments
|
|
|
Combined
|
|
|
OPERATING REVENUES
|
|
$
|
1,697
|
|
|
$
|
1,460
|
|
|
$
|
48
|
(l)
|
|
$
|
3,205
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract drilling (exclusive of depreciation)
|
|
|
768
|
|
|
|
897
|
|
|
|
|
|
|
|
1,665
|
|
Depreciation
|
|
|
216
|
|
|
|
184
|
|
|
|
31
|
(m)
|
|
|
431
|
|
General and administrative
|
|
|
86
|
|
|
|
104
|
|
|
|
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,070
|
|
|
|
1,185
|
|
|
|
31
|
|
|
|
2,286
|
|
OPERATING INCOME
|
|
|
627
|
|
|
|
275
|
|
|
|
17
|
|
|
|
919
|
|
OTHER INCOME (EXPENSE), NET
|
|
|
18
|
|
|
|
(23
|
)
|
|
|
(30
|
)(n)
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
|
|
|
645
|
|
|
|
252
|
|
|
|
(13
|
)
|
|
|
884
|
|
PROVISION FOR INCOME TAXES
|
|
|
96
|
|
|
|
9
|
|
|
|
5
|
(o)
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS
|
|
$
|
549
|
|
|
$
|
243
|
|
|
$
|
(18
|
)
|
|
$
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO ENSCO SHARES
|
|
$
|
535
|
|
|
|
|
|
|
|
|
(p)
|
|
$
|
761
|
|
EARNINGS PER SHARE FROM CONTINUING OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
3.80
|
|
|
$
|
1.37
|
|
|
|
|
(q)
|
|
$
|
3.36
|
|
Diluted
|
|
$
|
3.80
|
|
|
$
|
1.37
|
|
|
|
|
(q)
|
|
$
|
3.35
|
|
WEIGHTED-AVERAGE SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
141
|
|
|
|
176
|
|
|
|
86
|
(r)
|
|
|
227
|
|
Diluted
|
|
|
141
|
|
|
|
176
|
|
|
|
86
|
(r)
|
|
|
227
|
|
See Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
138
ENSCO PLC
AND SUBSIDIARIES
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS
|
|
Note 1.
|
Basis of
Presentation
|
The unaudited pro forma condensed combined consolidated
financial statements were prepared in accordance with Securities
and Exchange Commission
Regulation S-X
Article 11, using the acquisition method of accounting in
accordance with FASB ASC Topic 805 and are based on the
historical financial statements of Ensco and Pride as of and for
the year ended December 31, 2010 after giving effect to the
consideration paid by Ensco to consummate the merger and related
financing, as well as pro forma adjustments.
FASB ASC Topic 805 requires, among other things, that most
assets acquired and liabilities assumed be recognized at their
fair values, as determined in accordance with FASB ASC Topic
820, Fair Value Measurements (FASB ASC
Topic 820), as of the acquisition date. In addition,
FASB ASC Topic 805 establishes that the consideration
transferred be measured at the closing date of the acquisition
at the then-current market price, which may be different than
the amount of consideration disclosed in these unaudited pro
forma condensed combined consolidated financial statements.
FASB ASC Topic 820 defines the term fair value
and sets forth the valuation requirements for any asset or
liability measured at fair value and specifies a hierarchy of
valuation techniques based on the nature of the inputs used to
develop the fair value measures. Fair value is defined by FASB
ASC Topic 820 as the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement
date. This is an exit price concept for the valuation of
the asset or liability and market participants are assumed to be
buyers and sellers in the principal (or the most advantageous)
market for the asset or liability. Fair value measurements for
an asset assume the highest and best use by these market
participants. As a result of these standards, Ensco may be
required to record assets which are not intended to be used or
sold and/or
to value assets at fair value measures that do not reflect
Enscos intended use of those assets. Many of these fair
value measurements can be highly subjective, and it is also
possible that other professionals, applying reasonable judgment
to the same facts and circumstances, could develop and support a
range of alternative estimated amounts.
Under the acquisition method of accounting, the assets acquired
and liabilities assumed will be recorded as of the completion of
the acquisition, primarily at their respective fair values and
added to those of Ensco. Financial statements and reported
results of operations of Ensco issued after completion of the
acquisition will reflect these values, but will not be
retroactively restated to reflect the historical financial
position or results of operations of Pride.
Under FASB ASC Topic 805, acquisition-related transaction
costs (i.e., advisory, legal, valuation and other
professional fees) and certain acquisition-related restructuring
charges impacting the target company are expensed in the period
in which the costs are incurred.
|
|
Note 2.
|
Accounting
Policies
|
The unaudited pro forma financial information has been compiled
in a manner consistent with the accounting policies of Ensco.
Certain reclassifications have been made to Prides
historical financial statements presented herein to conform to
Enscos historical presentation.
|
|
Note 3.
|
Estimated
Merger Consideration and Allocation
|
The estimated merger consideration is expected to total
approximately $7.6 billion based on Enscos share
price of $55.68, which is the closing price of Ensco ADSs traded
on the New York Stock Exchange on April 19, 2011 assuming
no exercise of any options to purchase Pride common stock prior
to completion of the merger and that all such options are
assumed by Ensco. The value of the merger consideration will
139
ENSCO PLC
AND SUBSIDIARIES
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS (Continued)
fluctuate based upon changes in the price of shares of Ensco and
the number of Pride common shares and options outstanding at the
closing date.
The following table summarizes the components of the estimated
merger consideration (dollars in millions, except per share
amounts):
|
|
|
|
|
Estimated share consideration payable upon closing:
|
|
|
|
|
180 million outstanding shares of Pride common stock
converted to 86 million of Ensco ADSs using the exchange
ratio of 0.4778 and valued at $55.68 per share
|
|
$
|
4,788
|
|
Estimated cash consideration payable upon closing:
|
|
|
|
|
180 million outstanding shares of Pride common stock at
$15.60 per share
|
|
|
2,807
|
|
Estimated fair value of 3 million vested Pride employee
stock options assumed by Ensco
|
|
|
30
|
|
|
|
|
|
|
Merger consideration
|
|
$
|
7,625
|
|
|
|
|
|
|
The cash portion of the merger consideration is expected to be
financed through existing cash and cash equivalents, including
proceeds from Enscos issuance in a public offering on
March 17, 2011 of $1.0 billion aggregate principal
amount of 3.25% senior notes due 2016 and $1.5 billion
aggregate principal amount of 4.70% senior notes due 2021,
and additional short-term debt financing.
The table below illustrates the potential impact to the
estimated merger consideration payable resulting from a 10%
increase or decrease in the price of Enscos share price as
of April 19, 2011 of $55.68. For the purpose of this
calculation, the total number of shares has been assumed to be
the same as in the table above (in millions).
|
|
|
|
|
|
|
|
|
|
|
10% increase
|
|
|
10% decrease
|
|
|
|
in Ensco
|
|
|
in Ensco
|
|
|
|
share price
|
|
|
share price
|
|
|
Share consideration
|
|
$
|
5,267
|
|
|
$
|
4,309
|
|
Cash consideration
|
|
|
2,807
|
|
|
|
2,807
|
|
Pride employee stock option consideration
|
|
|
30
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Merger consideration
|
|
$
|
8,104
|
|
|
$
|
7,146
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
3,448
|
|
|
$
|
2,491
|
|
|
|
|
|
|
|
|
|
|
The estimated goodwill included in the pro forma adjustments is
calculated as the difference between the estimated merger
consideration expected to be transferred and the estimated fair
values assigned to the assets acquired and liabilities assumed.
The following table summarizes the estimated goodwill
calculation as of December 31, 2010 (in millions):
|
|
|
|
|
Current assets
|
|
$
|
872
|
|
Noncurrent assets
|
|
|
6,779
|
|
|
|
|
|
|
Total assets acquired
|
|
|
7,651
|
|
Liabilities assumed
|
|
|
(2,995
|
)
|
|
|
|
|
|
Net assets acquired
|
|
|
4,656
|
|
Less: Estimated merger consideration
|
|
|
(7,625
|
)
|
|
|
|
|
|
Estimated goodwill
|
|
$
|
2,969
|
|
|
|
|
|
|
This preliminary allocation of the merger consideration is based
upon managements estimates, judgments and assumptions.
These estimates, judgments and assumptions are subject to change
upon final valuation and
140
ENSCO PLC
AND SUBSIDIARIES
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS (Continued)
should be treated as preliminary values. The final allocation of
consideration will include changes in (1) Enscos
share price, (2) estimated fair values of property and
equipment, (3) allocations to intangible assets and
liabilities and (4) other assets and liabilities.
Therefore, actual results may differ once Ensco has determined
the final merger consideration and completed the detailed
valuation analysis and calculations necessary to finalize the
required purchase price allocations. Accordingly, the final
allocations of merger consideration, which will be determined
subsequent to the closing of the merger, may differ materially
from the estimated allocations and unaudited pro forma combined
amounts included herein.
|
|
Note 4.
|
Pro Forma
Adjustments
|
(a) Cash and cash equivalents Represents the
pro forma adjustments to cash and cash equivalents as follows
(in millions):
|
|
|
|
|
Cash provided by financing, net of debt issuance costs
|
|
$
|
2,738
|
|
Cash paid to Pride shareholders
|
|
|
(2,807
|
)
|
|
|
|
|
|
|
|
$
|
(69
|
)
|
|
|
|
|
|
(b) Other current assets Represents the pro
forma adjustments to record the estimated fair value of other
current assets as follows (in millions):
|
|
|
|
|
Estimated fair value of inventory
|
|
$
|
73
|
|
Deferred tax effect of certain pro forma adjustments
|
|
|
14
|
|
Elimination of Pride historical debt issuance costs
|
|
|
(4
|
)
|
Elimination of Pride historical deferred expenses related to
contract drilling
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
$
|
50
|
|
|
|
|
|
|
The pro forma adjustment to record the estimated fair value of
inventory arises from a difference in Enscos and
Prides accounting policy. Inventory consists of consumable
parts and supplies maintained on drilling rigs for use in
operations and generally is comprised of items of low per unit
cost and high reorder frequency. The pro forma adjustment to
record the estimated fair value of inventory reflects
Enscos estimate of the fair value of consumable parts and
supplies maintained on Prides drilling rigs for use in
their operations. Ensco recognizes inventory for consumable
parts and supplies when purchased and subsequently expenses the
inventory when consumed on the drilling rig. Pride has stated
its policy is to recognize an expense for consumable parts and
supplies as a period cost when received for use on the drilling
rig and, therefore, Prides historical financial statements
do not include an inventory balance.
The pro forma adjustment for the elimination of Pride historical
deferred expenses associated with contract drilling primarily
relates to deferred mobilization costs. Costs incurred for the
mobilization of equipment and personnel prior to the
commencement of drilling services are deferred and subsequently
amortized by Pride over the term of the related drilling
contract. These deferred costs provide no future economic
benefit to Ensco.
(c) Property and equipment, net Represents the
pro forma adjustments to historical amounts to record the
estimated fair value of property and equipment, net.
141
ENSCO PLC
AND SUBSIDIARIES
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS (Continued)
(d) Goodwill and other intangible assets
Represents the pro forma adjustments to record the estimated
fair value of goodwill and other intangible assets as follows
(in millions):
|
|
|
|
|
Estimated goodwill
|
|
$
|
2,969
|
|
Estimated fair value of Pride drilling contracts
|
|
|
412
|
|
Estimated fair value of Pride operating leases
|
|
|
2
|
|
|
|
|
|
|
|
|
$
|
3,383
|
|
|
|
|
|
|
The pro forma adjustment to record the estimated fair value of
Pride drilling contracts represents the intangible assets
recognized for firm drilling contracts in place at the pro forma
balance sheet date that have favorable contract terms as
compared to current market day rates for comparable drilling
rigs. The various factors considered in the pro forma adjustment
are (1) the contracted day rate for each contract,
(2) the remaining term of each contract, (3) the rig
class and (4) the market conditions for each respective rig
class at the pro forma balance sheet date. The intangible assets
are calculated based on the present value of the difference in
cash inflows over the remaining contract term as compared to a
hypothetical contract with the same remaining term at an
estimated current market day rate using a risk-adjusted discount
rate and an estimated effective income tax rate. The calculated
amount is subject to change based on contract positions and
market conditions at the closing date of the merger. This
balance will be amortized to operating revenues over the
respective remaining contract terms on a straight-line basis.
(e) Other assets, net Represents the pro forma
adjustments to record the estimated fair value of other assets
as follows (in millions):
|
|
|
|
|
Deferral of estimated Ensco debt issuance costs
|
|
$
|
25
|
|
Elimination of Pride historical debt issuance costs
|
|
|
(18
|
)
|
Elimination of Pride historical deferred expenses related to
contract drilling
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
$
|
(31
|
)
|
|
|
|
|
|
The pro forma adjustment for the elimination of Pride historical
deferred costs associated with contract drilling primarily
relates to deferred mobilization costs and deferred regulatory
inspection costs. Costs incurred for the mobilization of
equipment and personnel prior to the commencement of drilling
services are deferred and subsequently amortized by Pride over
the term of the related drilling contract. Deferred regulatory
inspection costs are related to periodic inspections and surveys
of each drilling rigs condition. Deferred regulatory
inspection costs are deferred and amortized by Pride over the
corresponding inspection periods. These deferred costs provide
no future economic benefit to Ensco.
(f) Accounts payable and accrued liabilities and
other Represents the pro forma adjustments to record
the estimated fair value of current liabilities associated with
the merger as follows (in millions):
|
|
|
|
|
Estimated fair value of Pride drillship construction contracts
|
|
$
|
83
|
|
Estimated ADS issuance costs
|
|
|
70
|
|
Estimated Pride transaction costs
|
|
|
52
|
|
Change in control provisions on Pride benefit plans
|
|
|
39
|
|
Estimated Ensco transaction costs
|
|
|
31
|
|
Elimination of Pride historical deferred revenues
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
$
|
250
|
|
|
|
|
|
|
The pro forma adjustment for the estimated fair value of Pride
drillship construction contracts relates to an unfavorable
construction contract liability recorded as a result of
comparing the firm obligations for the
142
ENSCO PLC
AND SUBSIDIARIES
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS (Continued)
remaining construction of two Pride drillships as of
December 31, 2010 to current market rates for the
construction of similar design drilling rigs. The unfavorable
construction contract liability is calculated based on the
present value of the difference in cash outflows for the
remaining contractual payments as compared to a hypothetical
contract with the same remaining contractual payments at current
market rates using a risk-adjusted discount rate and estimated
effective income tax rate.
The pro forma adjustment for change in control provisions in
Pride benefit plans relates to the additional liability that
will be incurred upon a change in control for benefits payable
to certain executive officers of Pride as a result of
pre-existing employee arrangements. These benefits include
estimated cash severance payments under pre-existing employee
arrangements and other severance benefits, including SERP and
tax gross-up
payments assuming the transaction occurred on December 31,
2010.
(g) Short-term debt Represents the pro forma
adjustment to record Enscos estimated short-term debt
financing associated with the merger in lieu of using a portion
of existing cash on hand.
(h) Long-term debt Represents the pro forma
adjustments to adjust Prides debt to its estimated fair
value and record Enscos estimated
long-term
debt financing associated with the merger as follows (in
millions):
|
|
|
|
|
Estimated Ensco
long-term
debt financing
|
|
$
|
2,463
|
|
Estimated fair value of Pride debt
|
|
|
308
|
|
|
|
|
|
|
|
|
$
|
2,771
|
|
|
|
|
|
|
The pro forma adjustment to record the estimated Ensco long-term
debt financing represents the proceeds from Enscos
issuance in a public offering on March 17, 2011 of
$1.0 billion aggregate principal amount of
3.25% senior notes due 2016 and $1.5 billion aggregate
principal amount of 4.70% senior notes due 2021, which are
expected to be used to fund a portion of the merger
consideration.
The pro forma adjustment to adjust Prides debt to its
estimated fair value was based on quoted market prices for
Prides publicly traded debt and an income approach
valuation model for Prides non-publicly traded debt.
(i) Deferred income tax liabilities Represents
the pro forma adjustment to record the estimated incremental
deferred income taxes, which reflects the tax effect of the
difference between the preliminary fair value of Prides
assets, other than goodwill, and liabilities recorded under the
acquisition method of accounting and the carryover tax basis of
those assets and liabilities.
(j) Other liabilities Represents the pro forma
adjustments to record the estimated fair value of other
liabilities as follows (in millions):
|
|
|
|
|
Estimated fair value of Pride drilling contracts
|
|
$
|
312
|
|
Elimination of Pride historical deferred revenues
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
$
|
295
|
|
|
|
|
|
|
The pro forma adjustment to record the estimated fair value of
Pride drilling contracts represents the intangible liabilities
recognized for firm drilling contracts in place at the pro forma
balance sheet date that have unfavorable contract terms as
compared to current market day rates for comparable drilling
rigs. The various factors considered in the pro forma adjustment
are (1) the contracted day rate for each contract,
(2) the remaining term of each contract, (3) the rig
class and (4) the market conditions for each respective rig
class at the pro forma balance sheet date. The intangible
liabilities are calculated based on the present value of the
difference in cash inflows over the remaining contract term as
compared to a hypothetical contract with the same remaining term
at an estimated current market day rate using a risk-adjusted
discount rate and an
143
ENSCO PLC
AND SUBSIDIARIES
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS (Continued)
estimated effective income tax rate. The calculated amount is
subject to change based on contract positions and market
conditions at the closing date of the merger. This balance will
be amortized to operating revenues over the respective remaining
contract terms on a straight-line basis.
(k) Total equity Represents the pro forma
adjustments as follows (in millions):
|
|
|
|
|
Ensco share consideration recorded as capital in excess of par
value
|
|
$
|
4,779
|
|
Estimated ADS issuance costs
|
|
|
(70
|
)
|
Estimated fair value of Pride employee stock options assumed
|
|
|
30
|
|
Ensco shares issued as part of the merger consideration, par
value
|
|
|
9
|
|
Estimated Ensco transaction costs
|
|
|
(31
|
)
|
Estimated Pride transaction costs
|
|
|
(52
|
)
|
Elimination of Prides historical shareholders equity
|
|
|
(4,516
|
)
|
|
|
|
|
|
|
|
$
|
149
|
|
|
|
|
|
|
(l) Operating revenues Represents the pro forma
adjustments for the amortization of intangible assets and
liabilities associated with the estimated fair value of Pride
drilling contracts.
(m) Depreciation Represents the pro forma
adjustment for depreciation of Prides drilling rigs and
equipment. Prides property and equipment consists
primarily of drilling rigs and related equipment. The pro forma
depreciation adjustment relates to the pro forma adjustment to
record the estimated fair value of Prides drilling rigs
and related equipment after conforming depreciable lives and
salvage values and computing depreciation using the
straight-line method. Ensco estimated remaining useful lives for
Prides drilling rigs ranged from 15 to 30 years based
on original estimated useful lives of 30 years, consistent
with Enscos accounting policies.
(n) Other income (expense), net Represents the
pro forma adjustments for incremental interest expense incurred
on the estimated financing to be obtained by Ensco to fund the
merger for the year ended December 31, 2010 as follows (in
millions):
|
|
|
|
|
Incremental interest expense on Ensco debt financing
|
|
$
|
(105
|
)
|
Amortization of Ensco debt issuance costs, discounts and other
|
|
|
(19
|
)
|
Amortization of fair value adjustment to Prides debt
|
|
|
27
|
|
Assumed additional interest capitalized
|
|
|
67
|
|
|
|
|
|
|
|
|
$
|
(30
|
)
|
|
|
|
|
|
The pro forma adjustment for incremental interest expense
incurred assumes the proceeds from Enscos senior notes
were outstanding for the full year, in addition to anticipated
short-term debt financing outstanding for the full year with an
estimated average interest rate of 0.5%. A 0.125% change in the
estimated interest rate would have a nominal corresponding
effect on interest expense for the year ended December 31,
2010.
(o) Provision for income taxes Represents the
incremental income tax provision associated with Enscos
pro forma adjustments.
144
ENSCO PLC
AND SUBSIDIARIES
NOTES TO
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL
STATEMENTS (Continued)
(p) The following is a reconciliation of pro forma income
from continuing operations attributable to Ensco shares (in
millions):
|
|
|
|
|
Pro forma income from continuing operations
|
|
$
|
774
|
|
Pro forma income from continuing operations attributable to
non-vested shares
|
|
|
(7
|
)
|
Pro forma income from continuing operations attributable to
noncontrolling interests
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
$
|
761
|
|
|
|
|
|
|
(q) Earnings per share Pro forma adjustment to
reflect the effect of Ensco ADSs issued to Pride stockholders in
connection with the merger.
(r) Weighted average shares
outstanding Represents pro forma adjustments as
follows (in millions):
|
|
|
|
|
Ensco historical weighted average shares
outstanding basic
|
|
|
141
|
|
ADSs issued to Pride shareholders
|
|
|
86
|
|
|
|
|
|
|
Pro forma weighted average shares
outstanding basic
|
|
|
227
|
|
|
|
|
|
|
Ensco historical weighted average shares
outstanding diluted
|
|
|
141
|
|
ADSs issued to Pride shareholders and dilutive effect of options
assumed in connection with the merger
|
|
|
86
|
|
|
|
|
|
|
Pro forma weighted average shares
outstanding diluted
|
|
|
227
|
|
|
|
|
|
|
145
DESCRIPTION
OF CLASS A ORDINARY SHARES OF ENSCO
General
Pursuant to the merger agreement, with certain exceptions, each
issued and outstanding share of common stock of Pride will be
converted into the right to receive 0.4778 Ensco ADSs and $15.60
in cash. Each whole Ensco ADS represents one Class A
ordinary share.
Enscos Class A ordinary shares that are currently
outstanding and Enscos Class A ordinary shares to be
issued in connection with the merger will comprise a single
class of ordinary shares with a nominal value of $0.10 per share
each, with the same rights (including voting and dividend rights
and rights on a return of capital) and restrictions as each
Ensco Class A ordinary share currently outstanding, as set
out in the Ensco Articles of Association.
The following information is a summary of Enscos
Class A ordinary shares:
|
|
|
|
|
All of the issued Ensco Class A ordinary shares are fully
paid and not subject to any further calls or assessments by
Ensco.
|
|
|
|
Enscos Class A ordinary shares carry the right to
receive dividends and distributions paid by Ensco.
|
|
|
|
The holders of Enscos Class A ordinary shares have
the right to receive notice of, and to attend and vote at, all
general meetings of Ensco.
|
|
|
|
Subject to the U.K. Companies Act 2006, any equity securities
issued by Ensco for cash must first be offered to Ensco
shareholders in proportion to their existing holdings of
Enscos Class A ordinary shares unless waived by a
special resolution of Ensco shareholders, either generally or
specifically, for a maximum period not exceeding five years.
|
|
|
|
Ensco Class A ordinary shares are not redeemable; however,
Ensco may purchase or contract to purchase any of its ordinary
shares off-market, subject to the U.K. Companies Act 2006. Ensco
may only purchase its ordinary shares out of distributable
reserves or the proceeds of a new issue of shares made for the
purpose of funding the repurchase.
|
|
|
|
If Ensco is wound up (whether the liquidation is voluntary,
under supervision of the Court or by the Court), the liquidator
is under a duty to collect in and realize the assets of Ensco
and to distribute them to Enscos creditors and, if there
is a surplus, to Ensco shareholders according to their
entitlements. This applies whether the assets consist of
property of one kind or of different kinds.
|
See also Description of American Depositary Shares of
Ensco and Comparison of Rights of Pride Stockholders
and Ensco Shareholders.
Under English law, persons who are neither residents nor
nationals of the U.K. may freely hold, vote and transfer the
Ensco shares in the same manner and under the same terms as U.K.
residents or nationals.
Share
Capital
As of the date of this proxy statement/prospectus and on the
date of the Ensco general meeting there are, and will be:
|
|
|
|
|
50,000 Class B ordinary shares, par value £1.00 per
share, in issue, which are held by Delaware Sub; and
|
|
|
|
150,000,000 Class A ordinary shares in issue (all of which
are and will continue to be represented by Ensco ADSs).
|
As of the date of this proxy statement/prospectus and
immediately prior to the consummation of the merger, the Ensco
board is authorized to allot and issue up to $30,000,000 of
aggregate par value of additional shares, which may be
Class A ordinary shares, Class B ordinary shares or a
class of shares with such rights as the Ensco board shall
determine at the time of allotment and issuance.
146
The Class A ordinary shares and the Class B ordinary
shares, or together the ordinary shares, have the
same rights and privileges in all respects. The outstanding
Class B ordinary shares have no voting rights or rights to
dividends or distributions for so long as they are held by Ensco
or one of its subsidiaries.
Dividends
Subject to the U.K. Companies Act 2006, or the Companies Act,
the Ensco board may declare a dividend to be paid to the
shareholders according to their respective rights and interests
in Ensco, and may fix the time for payment of such dividend. The
Ensco board may from time to time declare and pay (on any class
of shares of any amounts) such dividends as appear to them to be
justified by the financial position of Ensco. There are no fixed
dates on which entitlement to dividends arise on any of the
ordinary shares. The Ensco board may direct the payment of all
or any part of a dividend to be satisfied by distributing
specific assets, in particular paid up shares or debentures of
any other company. The Ensco Articles of Association also permit
a scrip dividend scheme under which shareholders may be given
the opportunity to elect to receive fully paid ordinary shares
instead of cash, with respect to all or part of future
dividends. Shares held by or for the benefit of an Ensco
subsidiary will have no voting rights and will not be entitled
to any dividends or distributions, including any scrip
dividends, bonus shares or dividends or distributions of
property or debentures of any other company.
To the extent that any Class A ordinary shares held by the
custodian are represented by ADSs held by or for the benefit of
any of Enscos subsidiaries, such Class A ordinary
shares are not be entitled to receive dividends or
distributions, including any scrip dividends, bonus shares or
dividends or distributions of property or debentures of any
other company, and therefore the holder of such ADSs shall not
be entitled to any such dividends or distributions while such
ADSs representing those Class A ordinary shares are held by
or for the benefit of such subsidiaries.
If a shareholder owes any money to Ensco relating in any way to
any class of Ensco shares, the Ensco board may deduct any of
this money from any dividend on any shares held by the
shareholder, or from other money payable by Ensco in respect of
the shares. Money deducted in this way may be used to pay the
amount owed to Ensco.
Unclaimed dividends and other amounts payable by Ensco in
respect of an ordinary share can be invested or otherwise used
by directors for the benefit of Ensco until they are claimed
under English law. A dividend or other money remaining unclaimed
for a period of twelve years after it first became due for
payment will be forfeited and cease to remain owed by Ensco.
Voting
Rights
At a general meeting any resolutions put to a vote must be
decided on a poll rather than by show of hands.
Subject to any rights or restrictions as to voting attached to
any class of shares in accordance with the Articles of
Association of Ensco and subject to disenfranchisement
(i) in the event of non-payment of any call or other sum
due and payable in respect of any shares not fully paid,
(ii) in the event of any non-compliance with any statutory
notice requiring disclosure of an interest in shares or
(iii) with respect to any shares held by any subsidiary of
Ensco, every shareholder (other than any subsidiary of Ensco)
who (being an individual) is present in person or (being a
corporation) is present by a duly authorized corporate
representative at a general meeting of Ensco will have one vote
for every share of which he or she is the holder, and every
person present who has been appointed as a proxy shall have one
vote for every share in respect of which he or she is the proxy,
except that any proxy who has been appointed by the depositary
shall have such number of votes as equals the number of shares
in relation to which such proxy has been appointed.
In the case of joint holders, the vote of the person whose name
stands first in the register of shareholders and who tenders a
vote, whether in person or by proxy, is accepted to the
exclusion of any votes tendered by any other joint holders.
147
The necessary quorum for a general shareholder meeting is the
shareholders who together represent at least the majority of the
voting rights of all the shareholders entitled to vote present
in person or by proxy (i.e., any shares whose voting
rights have been disenfranchised (whether pursuant to the
Companies Act
and/or under
the Articles of Association) shall be disregarded for the
purposes of determining a quorum).
An annual general meeting shall be called by not less than 21
clear days notice and no more than 60 days
notice. For all other general meetings except general meetings
properly requisitioned by shareholders, such meetings shall be
called by not less than 14 clear days notice and no more
than 60 days notice. The notice of meeting must also
specify a time (which shall not be more than 60 days nor
less than 10 days before the date of the meeting) by which
a person must be entered on the register in order to have the
right to attend or vote at the meeting. The number of shares
then registered in their respective names shall determine the
number of votes a person is entitled to cast at that meeting.
An appointment of proxy (whether in hard copy form or electronic
form) must be received by Ensco before the time for holding the
meeting or adjourned meeting at which the person named in the
appointment of proxy proposes to vote; in the case of a poll
taken more than 48 hours after the meeting at which the
relevant vote was to be taken, an appointment of proxy must be
received after such meeting and not less than 24 hours (or
such shorter time as the Ensco board may determine) before the
time appointed for taking the poll; or in the case of a poll not
taken immediately but taken not more than 48 hours after
the meeting, the appointment of proxy must be delivered at the
meeting at which the poll is to be taken. An appointment of
proxy not received or delivered in accordance with the Articles
of Association is invalid under English law.
Return of
Capital
In the event of a voluntary
winding-up
of Ensco, the liquidator may, on obtaining any sanction required
by law, divide among the shareholders the whole or any part of
the assets of Ensco, whether or not the assets consist of
property of one kind or of different kinds.
The liquidator may also, with the same authority, transfer the
whole or any part of the assets to trustees upon any trusts for
the benefit of the shareholders as the liquidator decides. No
past or present shareholder can be compelled to accept any asset
which could subject him or her to a liability or potential
liability.
Preemptive
Rights and New Issues of Shares
Under Section 549 of the Companies Act, directors are, with
certain exceptions, unable to allot securities without being
authorized either by the shareholders in a general meeting or by
the Ensco Articles of Association pursuant to Section 551
of the Companies Act. In addition, under the Companies Act, the
issuance of equity securities that are to be paid for wholly in
cash (except shares held under an employees share scheme)
must be offered first to the existing equity shareholders in
proportion to the respective nominal (i.e., par)
values of their holdings on the same or more favorable terms,
unless a special resolution (i.e., 75 percent of
votes cast) to the contrary has been passed in a general meeting
of shareholders or the articles of association otherwise provide
an exclusion from this requirement (which exclusion can be for a
maximum of five years after which shareholders approval would be
required to renew the exclusion). In this context, equity
securities generally means, in relation to Ensco, ordinary
shares (being shares other than shares which, with respect to
dividends or capital, carry a right to participate only up to a
specified amount in a distribution) and all rights to subscribe
for or convert securities into such shares.
In December 2009, shareholder resolutions were adopted which
authorized the directors (generally and unconditionally), for a
period up to five years from the date on which the resolutions
were passed, to allot shares of Ensco, or to grant rights to
subscribe for or to convert or exchange any security into shares
of Ensco, up to an aggregate nominal amount of $30,000,000 and
to exclude preemptive rights in respect of such issuances for
the same period of time. Such authority will continue until
December 2014 and thereafter it must be renewed, but Ensco may
seek renewal for additional five year terms more frequently.
Ensco may, before the expiration of any such authority, make an
offer or agreement which would or might require Ensco shares to
be allotted (or rights to be granted) after such expiration, and
the directors may allot shares or grant rights in pursuance of
such an offer or agreement as if the authority to allot had not
expired.
148
Subject to the provisions of the Companies Act and to any rights
attached to any existing shares, any Ensco shares may be issued
with, or have attached to them, such rights or restrictions as
the shareholders of Ensco may by ordinary resolution determine,
or, where the above authorizations are in place, the Ensco board
may determine such rights or restrictions.
The Companies Act prohibits an English company from issuing
shares for no consideration, including with respect to grants of
restricted stock made pursuant to equity incentive plans.
Accordingly, the nominal value of the shares issued upon the
lapse of restrictions or the vesting of any restricted stock
award or any other share-based grant underlying any Ensco ADS
must be paid pursuant to the Companies Act.
Disclosure
of Interests in Shares
Section 793 of the Companies Act gives Ensco the power to
require a person whom it knows has, or whom it has reasonable
cause to believe has, or within the previous three years has
had, any ownership interest in any shares (which are referred to
as the default shares) to disclose prescribed
particulars of those shares. For this purpose default
shares includes any shares allotted or issued after the
date of the Section 793 notice in respect of those shares.
Failure to provide the information requested within the
prescribed period after the date of sending the notice will
result in sanctions being imposed against the holder of the
default shares as provided within the Companies Act.
Under the Ensco Articles of Association, Ensco will also
withdraw voting and certain other rights, place restrictions on
the rights to receive dividends and transfer default
shares if the relevant holder of default
shares has failed to provide the information requested
within 14 days after the date of sending the notice,
depending on the level of the relevant shareholding (and unless
the Ensco board decides otherwise).
Alteration
of Share Capital/Repurchase of Shares
Ensco may from time to time:
|
|
|
|
|
increase its share capital by allotting new shares in accordance
with the authority contained in the shareholder resolution
referred to above, the Companies Act and the Articles of
Association;
|
|
|
|
by ordinary resolution of its shareholders, consolidate and
divide all or any of its share capital into shares of a larger
nominal amount than the existing shares; and
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by ordinary resolution of its shareholders, subdivide any of its
shares into shares of a smaller nominal amount than its existing
shares.
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Subject to the Companies Act and to any rights the holders of
any Ensco shares may have, Ensco may purchase any of its own
shares of any class (including any redeemable shares, if the
Ensco board should decide to issue any) by way of off
market purchases with the prior approval of
75 percent of shareholders by special resolution. Such
approval lasts for up to five years from the date of the special
resolution, and renewal of such approval for additional five
year terms may be sought more frequently. A special resolution
was adopted in December 2009, which authorizes the repurchase of
up to 30 percent per annum of the share capital outstanding
as of the beginning of each fiscal year (subject to an overall
aggregate maximum of 119,000,000 shares). However, shares
may only be repurchased out of distributable profits or the
proceeds of a fresh issue of shares made for that purpose, and,
if a premium is paid, it must be paid out of distributable
profits.
Transfer
of Shares
The Ensco Articles of Association allow shareholders to transfer
all or any of their shares by instrument of transfer in writing
in any usual form or in any other form which is permitted by the
Companies Act and is approved by the Ensco board. The instrument
of transfer must be executed by or on behalf of the transferor
and (in the case of a transfer of a share which is not fully
paid) by or on behalf of the transferee and must be delivered to
the registered office or any other place the directors decide.
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The Ensco board may refuse to register a transfer:
(1) if the shares in question are not fully paid;
(2) if it is with respect to more than one class of shares;
(3) if it is with respect to shares on which Ensco has a
lien;
(4) if it is in favor of more than four persons jointly;
(5) if it is not duly stamped (if such a stamp is required);
(6) if it is not presented for registration together with
the share certificate and evidence of title as the Ensco board
reasonably requires; or
(7) in certain circumstances, if the holder has failed to
provide the required particulars to Ensco.
If the Ensco board refuses to register a transfer of a share, it
shall, within two months after the date on which the transfer
was lodged with Ensco, send to the transferee notice of the
refusal, together with its reasons for refusal.
General
Meetings and Notices
The notice of a general meeting shall be given to the
shareholders (other than any who, under the provisions of the
Ensco Articles of Association or the terms of allotment or issue
of shares, are not entitled to receive notice), to the Ensco
board and to the auditors. Holders of ADSs are entitled to
receive notices under the terms of the deposit agreement
relating to ADSs. See Description of American Depositary
Shares of Ensco Voting Rights.
Under English law, Ensco is required to hold an annual general
meeting of shareholders within 6 months from the day
following the end of its fiscal year and, subject to the
foregoing, the meeting may be held at a time and place
determined by the Ensco board.
Liability
of Ensco and its Directors and Officers
The Ensco Articles of Association provide that English courts
have exclusive jurisdiction with respect to any suits brought by
shareholders against Ensco or its directors. See
Comparison of Rights of Pride Stockholders and Ensco
Shareholders Liability of Directors and
Officers for a discussion of the inability of an English
company to exempt directors and officers from certain
liabilities.
Anti-takeover
Provisions
The level of anti-takeover provisions with respect to Ensco
differs from that with respect to Pride by virtue of the
differences between the DGCL and the Companies Act, the
differences between the certificate of incorporation and bylaws
of Pride and the Articles of Association of Ensco and the
differences between the rights of holders of Pride common stock
and the terms and conditions related to the Ensco ADSs as
described in the deposit agreement. The provisions summarized
below do not include those provisions required by the Companies
Act. The provisions of the Ensco Articles of Association
summarized below may have the effect of discouraging, delaying
or preventing hostile takeovers, including those that might
result in a premium being paid over the market price of
Class A ordinary shares or Ensco ADSs, as applicable, and
discouraging, delaying or preventing changes in control or
management of Ensco.
Takeover offers and certain other transactions in respect of
certain public companies are regulated by the U.K. City Code on
Takeovers and Mergers, referred to as the Takeover Code, which
is administered by the Takeover Panel, a body consisting of
representatives of the City of London financial and professional
institutions which oversees the conduct of takeovers. An English
public limited company is potentially subject to the Takeover
Code if, among other factors, its central place of management
and control is within the U.K., the Channel Islands or the Isle
of Man. The Takeover Panel will generally look to the residency
of a companys directors to determine where it is centrally
managed and controlled. Prior to the redomestication in
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2009, the Takeover Panel confirmed that, based upon Enscos
then-current and intended plans for its directors and
management, for purposes of the Takeover Code, Ensco would be
considered to have its place of central management and control
outside the U.K., the Channel Islands or the Isle of Man and,
therefore, that the Takeover Code would not apply to Ensco. It
is possible that in the future circumstances could change that
may cause the Takeover Code to apply to Ensco.
Classified
Board of Directors
The Ensco board is divided into three classes, with the members
of each class serving for staggered three-year terms. As a
result, only one class of directors will be elected at each
annual general meeting of shareholders, with the other classes
continuing for the remainder of their respective three-year
terms. Under English law, shareholders have no cumulative voting
rights. In addition, the Ensco Articles of Association
incorporate similar provisions to those contained in
Prides bylaws and certificate of incorporation, which
regulate shareholders ability to nominate directors for
election. Although shareholders have the ability to remove a
director without cause under English law, the classification of
the directors, the lack of cumulative voting and the limitations
on shareholders powers to nominate directors will have the
effect of making it more difficult not only for any party to
obtain control of Ensco by replacing the majority of the Ensco
board but also to force an immediate change in the composition
of the Ensco board. However, under the Ensco Articles of
Association, if the shareholders remove the entire board, a
shareholder may then convene a general meeting for the purpose
of appointing directors. It should be noted that holders of
Ensco ADSs may have to surrender their Ensco ADSs and withdraw
their Class A ordinary shares in order to exercise their
rights to nominate and remove directors.
Issuance
of Further Shares
The Ensco board has the authority, without further action of its
shareholders, for a period of five years from December 2009, but
subject to its statutory and fiduciary duties, to allot shares
of Ensco, or to grant rights to subscribe for or to convert or
exchange any security into shares of Ensco, up to an aggregate
nominal amount of $30,000,000 and to exclude preemptive rights
in respect of such issuances for the same period of time. Such
authority will continue until December 2014 and thereafter it
must be renewed, but Ensco may seek renewal for additional five
year terms more frequently. The issuance of further shares on
various terms could adversely affect the holders of Class A
ordinary shares or Ensco ADSs. The potential issuance of further
shares may discourage bids for Class A ordinary shares or
Ensco ADSs at a premium over the market price, may adversely
affect the market price of Ensco ADSs and may discourage, delay
or prevent a change of control of Ensco.
Shareholder
Rights Plan
The Ensco board has the necessary corporate authority, without
further action of its shareholders for a period of five years
from December 2009, but subject to its statutory and fiduciary
duties, to give effect to a shareholder rights plan and to fix
the terms thereof. Such a plan could make it more difficult for
another party to obtain control of Ensco by threatening to
dilute a potential acquirers ownership interest in the
company under certain circumstances. The Ensco board may adopt a
shareholder rights plan at any time, including in conjunction
with the consummation of the merger or sometime thereafter. See
Comparison of Rights of Pride Stockholders and Ensco
Shareholders Anti-Takeover Matters.
The anti-takeover and other provisions of the Ensco Articles of
Association, as well as the adoption of a shareholder rights
plan, could discourage potential acquisition proposals and could
delay or prevent a change in control. These provisions are
intended to enhance shareholder value by discouraging certain
types of abusive takeover tactics. However, these provisions
could have the effect of discouraging others from making tender
offers for Class A ordinary shares or Ensco ADSs and, as a
consequence, also may inhibit fluctuations in the market price
of Ensco ADSs that could result from actual or rumored takeover
attempts.
151
DESCRIPTION
OF AMERICAN DEPOSITARY SHARES OF ENSCO
Citibank acts as the depositary for the Ensco ADSs representing
the Class A ordinary shares. Citibanks depositary
offices are located at 388 Greenwich Street, New York, New York
10013. Ensco ADSs represent ownership interests in securities
that are on deposit with the depositary. Ensco ADSs are normally
evidenced by ADRs. The depositary typically appoints a custodian
to safekeep the securities on deposit. In this case, the
custodian is Citibank, N.A. (London Branch), located at 25
Molesworth Street, Lewisham, London, England SE13 7EX.
Ensco appointed Citibank as depositary pursuant to a deposit
agreement. A copy of the deposit agreement is on file with the
SEC under cover of a Registration Statement on
Form F-6.
A copy of the deposit agreement may be obtained from the
SECs Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549 and from the SECs
website (www.sec.gov).
Below is a summary description of the material terms of the
Ensco ADSs and of the material rights of an owner of Ensco ADSs.
Summaries by their nature lack the precision of the information
summarized, and as such the rights and obligations of a holder
of Ensco ADSs will be determined by reference to the terms of
the deposit agreement and not by this summary. Holders are urged
to review the deposit agreement in its entirety.
Each Ensco ADS represents the right to receive one Class A
ordinary share of Ensco on deposit with the custodian. An Ensco
ADS also represents the right to receive any other property
received by the depositary or the custodian on behalf of the
owner of the Ensco ADS but that has not been distributed to the
holders of Ensco ADSs because of legal restrictions or practical
considerations.
Each holder of an Ensco ADS will become a party to the deposit
agreement and therefore will be bound by its terms and by the
terms of any ADR that evidences Ensco ADSs. The deposit
agreement and the ADR specify Enscos rights and
obligations as well as the rights and obligations of holders of
Ensco ADSs and those of the depositary. An Ensco ADS holder
appoints the depositary to act on its behalf in certain
circumstances. The deposit agreement and the ADRs are governed
by New York law. However, Enscos obligations to the
holders of Class A ordinary shares will continue to be
governed by English law.
A holder of Ensco ADSs may hold his or her Ensco ADSs either by
means of one or more ADRs registered in such holders name,
through a brokerage or safekeeping account, or through an
account established by the depositary in such holders name
reflecting the registration of uncertificated Ensco ADSs
directly on the books of the depositary (commonly referred to as
the direct registration system or DRS).
The direct registration system reflects the uncertificated
(book-entry) registration of ownership of Ensco ADSs by the
depositary. Under the direct registration system, ownership of
Ensco ADSs is evidenced by periodic statements issued by the
depositary to the holders of the ADSs. The direct registration
system includes automated transfers between the depositary and
The Depository Trust Company, or DTC, the
central book-entry clearing and settlement system for equity
securities in the U.S.
If Ensco ADSs are held through a brokerage or safekeeping
account, the holder must rely on the procedures of such
holders broker or bank to assert such holders rights
as Ensco ADS owner. Banks and brokers typically hold securities
such as the ADSs through clearing and settlement systems such as
DTC. The procedures of such clearing and settlement systems may
limit a holders ability to exercise rights as an owner of
Ensco ADSs. A holder of Ensco ADSs is encouraged to consult with
such holders broker or bank with respect to any questions
concerning these limitations and procedures. All ADSs held
through DTC will be registered in the name of a nominee of DTC.
This summary description assumes a holder has opted to own the
Ensco ADSs directly by means of an Ensco ADS registered in such
holders name.
Dividends
and Distributions
Holders of Ensco ADSs generally have the right to receive the
distributions Ensco makes on the securities deposited with the
custodian. Receipt of these distributions may be limited,
however, by practical considerations and legal limitations.
Holders will receive such distributions under the terms of the
deposit agreement in proportion to the number of Ensco ADSs held
as of a specified record date.
152
Distributions
of Cash
Whenever Ensco makes a cash distribution for the securities on
deposit with the custodian, Ensco will deposit the funds with
the custodian. Upon receipt of confirmation of the deposit of
the requisite funds, the depositary will arrange for the funds
to be converted into U.S. dollars, if necessary, and for
the distribution of the U.S. dollars to the holders,
subject to English law.
The conversion into U.S. dollars will take place only if
practicable and if the U.S. dollars are transferable to the
U.S., which Ensco expects them to be. The amounts distributed to
holders will be net of the fees, expenses, taxes and
governmental charges payable by holders under the terms of the
deposit agreement. The depositary will apply the same method for
distributing the proceeds of the sale of any property (such as
undistributed rights) held by the custodian in respect of
securities on deposit.
Distributions
of Class A Ordinary Shares
If Ensco elects to make a free distribution of Class A
ordinary shares for the securities on deposit with the
custodian, Ensco will deposit the applicable number of
Class A ordinary shares with the custodian. Upon receipt of
confirmation of such deposit, the depositary will either
distribute to holders new Ensco ADSs representing the
Class A ordinary shares deposited or modify the Ensco
ADS-to-Class A ordinary shares ratio, in which case each
Ensco ADS held will represent rights and interests in the
additional Class A ordinary shares so deposited. Only whole
new Ensco ADSs will be distributed. Fractional entitlements will
be sold and the proceeds of such sale will be distributed as in
the case of a cash distribution.
The distribution of new Ensco ADSs or the modification of the
Ensco ADS-to-Class A ordinary shares ratio upon a
distribution of Class A ordinary shares will be made net of
the fees, expenses, taxes and governmental charges payable by
holders under the terms of the deposit agreement. In order to
pay such taxes or governmental charges, the depositary may sell
all or a portion of the new Class A ordinary shares so
distributed.
No such distribution of new Ensco ADSs will be made if it would
violate a law (i.e., the U.S. securities laws) or if
it is not operationally practicable. If the depositary does not
distribute new Ensco ADSs as described above, it may sell the
Class A ordinary shares received upon the terms described
in the deposit agreement and will distribute the proceeds of the
sale as in the case of a distribution of cash.
Distributions
of Rights
Whenever Ensco intends to distribute rights to purchase
additional Class A ordinary shares, Ensco will give prior
notice to the depositary and Ensco will assist the depositary in
determining whether it is lawful and reasonably practicable to
distribute rights to purchase additional Ensco ADSs to holders.
The depositary will establish procedures to distribute rights to
purchase additional Ensco ADSs to holders and to enable such
holders to exercise such rights if it is lawful and reasonably
practicable to make the rights available to holders of Ensco
ADSs, and if Ensco provides all of the documentation
contemplated in the deposit agreement (such as opinions to
address the lawfulness of the transaction). The holder may have
to pay fees, expenses, taxes and other governmental charges to
subscribe for the new Ensco ADSs upon the exercise of such
holders rights. The depositary is not obligated to
establish procedures to facilitate the distribution and exercise
by holders of rights to purchase new Class A ordinary
shares other than in the form of Ensco ADSs.
The depositary will not distribute the rights to a holder
if:
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Ensco does not timely request that the rights be distributed to
such holder or Ensco requests that the rights not be distributed
to such holder;
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Ensco fails to deliver satisfactory documents to the
depositary; or
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it is not reasonably practicable to distribute the rights.
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153
The depositary will sell the rights that are not exercised or
not distributed if such sale is lawful and reasonably
practicable. The proceeds of such sale will be distributed to
holders as in the case of a cash distribution. If the depositary
is unable to sell the rights, it will allow the rights to lapse.
Elective
Distributions
Whenever Ensco intends to distribute a dividend payable at the
election of shareholders either in cash or in additional shares,
Ensco will give prior notice thereof to the depositary and will
indicate whether Ensco wishes the elective distribution to be
made available to holders. In such case, Ensco will assist the
depositary in determining whether such distribution is lawful
and reasonably practicable.
The depositary will make the election available to a holder only
if it is reasonably practicable and if Ensco has provided all of
the documentation contemplated in the deposit agreement. In such
case, the depositary will establish procedures to enable such
holder to elect to receive either cash or additional Ensco ADSs,
in each case as described in the deposit agreement.
If the election is not made available to a holder, such holder
will receive either cash or additional ADSs, depending on what a
shareholder under English law would receive upon failing to make
an election, as more fully described in the deposit agreement.
Other
Distributions
Whenever Ensco intends to distribute property other than cash,
Class A ordinary shares or rights to purchase additional
Class A ordinary shares, Ensco will notify the depositary
in advance and will indicate whether Ensco wishes such
distribution to be made to holders. If so, Ensco will assist the
depositary in determining whether such distribution to holders
is lawful and reasonably practicable.
If it is reasonably practicable to distribute such property to
holders and if Ensco provides all of the documentation
contemplated in the deposit agreement, the depositary will
distribute the property to the holders in a manner it deems
practicable.
The distribution will be made net of fees, expenses, taxes and
governmental charges payable by holders under the terms of the
deposit agreement. In order to pay such taxes and governmental
charges, the depositary may sell all or a portion of the
property received.
The depositary will not distribute the property to
holders and will sell the property if:
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Ensco does not request that the property be distributed to
holders or if Ensco asks that the property not be distributed to
holders;
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Ensco does not deliver satisfactory documents to the
depositary; or
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the depositary determines that all or a portion of the
distribution to holders is not reasonably practicable.
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The proceeds of such a sale will be distributed to holders as in
the case of a cash distribution.
Redemption
Whenever Ensco decides to redeem any of the securities on
deposit with the custodian, Ensco will notify the depositary in
advance. If it is practicable and if Ensco provides all of the
documentation contemplated in the deposit agreement, the
depositary will provide notice of the redemption to the holders.
The custodian will be instructed to surrender the Class A
ordinary shares being redeemed against payment of the applicable
redemption price. The depositary will convert the redemption
funds received into U.S. dollars, if necessary, upon the
terms of the deposit agreement and will establish procedures to
enable holders to receive the net proceeds from the redemption
upon surrender of their Ensco ADSs to the depositary. Holders
may have to pay fees, expenses, taxes and other governmental
charges upon the redemption of such holders ADSs.
154
If less than all Ensco ADSs are being redeemed, the Ensco ADSs
to be retired will be selected by lot or on a pro rata
basis, as the depositary may determine.
Changes
Affecting Class A Ordinary Shares
The Class A ordinary shares held on deposit for Ensco ADSs
may change from time to time. For example, there may be a change
in nominal or par value, a
split-up,
cancellation, consolidation or reclassification of such
Class A ordinary shares or a recapitalization,
reorganization, merger, consolidation or sale of assets.
If any such change were to occur, Ensco ADSs would, to the
extent permitted by law, represent the right to receive the
property received or exchanged in respect of the Class A
ordinary shares held on deposit. The depositary may in such
circumstances deliver new Ensco ADSs to holders, amend the
deposit agreement, the ADRs and the applicable Registration
Statement(s) on
Form F-6,
call for the exchange of existing Ensco ADSs for new Ensco ADSs
and take any other actions that are appropriate to reflect as to
the Ensco ADSs the change affecting the Class A ordinary
shares. If the depositary may not lawfully distribute such
property to holders, the depositary may sell such property and
distribute the net proceeds to such holders as in the case of a
cash distribution.
Issuance
of Ensco ADSs upon Deposit of Class A Ordinary
Shares
The depositary may create Ensco ADSs on behalf of a holder if
such holder or its broker deposits Class A ordinary shares
with the custodian. The depositary will deliver these Ensco ADSs
to the person indicated by a holder only after payment of any
applicable issuance fees and any charges and taxes payable for
the transfer of the Class A ordinary shares to the
custodian. A holders ability to deposit Class A
ordinary shares and receive Ensco ADSs may be limited by
U.S. and English law considerations applicable at the time
of deposit.
The issuance of Ensco ADSs may be delayed until the depositary
or the custodian receives confirmation that all required
approvals have been given and that the Class A ordinary
shares have been duly transferred to the custodian. The
depositary will only issue Ensco ADSs in whole numbers.
When a holder makes a deposit of Class A ordinary shares,
such holder will be responsible for transferring good and valid
title to the depositary. Accordingly, such holder will be deemed
to represent and warrant that:
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The Class A ordinary shares are duly authorized, validly
issued, fully paid, non-assessable and legally obtained.
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All preemptive (and similar) rights, if any, with respect to
such Class A ordinary shares have been validly waived or
exercised.
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The holder is duly authorized to deposit the Class A
ordinary shares.
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The Class A ordinary shares presented for deposit are free
and clear of any lien, encumbrance, security interest, charge,
mortgage or adverse claim, and are not, and the Ensco ADSs
issuable upon such deposit will not be, restricted
securities (as defined in the deposit agreement).
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The Class A ordinary shares presented for deposit have not
been stripped of any rights or entitlements.
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If any of the representations or warranties are incorrect in any
way, Ensco and the depositary may, at such holders cost
and expense, take any and all actions necessary to correct the
consequences of the misrepresentations.
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Transfer,
Combination and Split Up of ADRs
An ADR holder will be entitled to transfer, combine or split up
such holders ADRs and the Ensco ADSs evidenced thereby.
For transfers of ADRs, a holder will have to surrender the ADRs
to be transferred to the depositary and also must:
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ensure that the surrendered ADR certificate is properly endorsed
or otherwise in proper form for transfer;
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provide such proof of identity and genuineness of signatures as
the depositary deems appropriate;
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provide any transfer stamps required by the State of New York or
the U.S.; and
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pay all applicable fees, charges, expenses, taxes and other
government charges payable by ADR holders pursuant to the terms
of the deposit agreement, upon the transfer of ADRs.
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To have ADRs either combined or split up, a holder must
surrender the ADRs in question to the depositary with such
holders request to have them combined or split up, and
such holder must pay all applicable fees, charges and expenses
payable by ADR holders, pursuant to the terms of the deposit
agreement, upon a combination or split up of ADRs.
Withdrawal
of Class A Ordinary Shares Upon Cancellation of Ensco
ADSs
A holder will be entitled to present such holders ADSs to
the depositary for cancellation and then receive the
corresponding number of underlying Class A ordinary shares
at the custodians offices. A holders ability to
withdraw the Class A ordinary shares may be limited by
U.S. and English legal considerations applicable at the
time of withdrawal. A holder assumes the risk for delivery of
all funds and securities upon withdrawal. Once canceled, the
Ensco ADSs will not have any rights under the deposit agreement.
The depositary may ask a holder of Ensco ADSs registered in his,
her or its name to provide proof of identity and genuineness of
any signature and such other documents as the depositary may
deem appropriate before it will cancel such holders ADSs.
The withdrawal of the Class A ordinary shares represented
by a holders ADSs may be delayed until the depositary
receives satisfactory evidence of compliance with all applicable
laws and regulations. The depositary will only accept Ensco ADSs
for cancellation that represent a whole number of securities on
deposit.
A holder will have the right to withdraw the securities
represented by such holders ADSs at any time except for:
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Temporary delays that may arise because (i) the transfer
books for the Class A ordinary shares or ADSs are closed,
or (ii) Class A ordinary shares are immobilized on
account of a shareholders meeting or a payment of
dividends.
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Obligations to pay fees, taxes and similar charges.
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Restrictions imposed because of laws or regulations applicable
to Ensco ADSs or the withdrawal of securities on deposit.
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The deposit agreement may not be modified to impair a
holders right to withdraw the securities represented by
such holders ADSs except to comply with mandatory
provisions of law.
Voting
Rights
A holder of Ensco ADSs (or ADRs evidencing ADSs) generally has
the right under the deposit agreement to instruct the depositary
to exercise the voting rights for the Class A ordinary
shares represented by such holders ADSs. The voting rights
of holders of Class A ordinary shares are described in
Description of Class A Ordinary Shares of
Ensco Voting Rights.
156
At Enscos request, the depositary will distribute to a
holder any notice of shareholders meeting received from
Ensco together with information explaining how to instruct the
depositary to exercise the voting rights of the Class A
ordinary shares of Ensco represented by ADSs.
If the depositary timely receives voting instructions from a
holder of Ensco ADSs, it will endeavor to vote Class A
ordinary shares represented by the holders ADSs in
accordance with such voting instructions.
The ability of the depositary to carry out voting instructions
may be limited by practical and legal limitations and the terms
of the Class A ordinary shares on deposit. Ensco cannot
assure holders that they will receive voting materials in time
to enable holders to return voting instructions to the
depositary in a timely manner. Class A ordinary shares for
which no voting instructions have been received will not be
voted.
Fees and
Charges
Ensco has agreed to pay certain fees to the depositary and to
reimburse the depositary for certain expenses, including all
U.K. stamp duties and stamp duty reserve taxes.
An Ensco ADS holder will be responsible to pay certain fees and
expenses incurred by the depositary and certain taxes and
governmental charges (other than U.K. stamp duties and stamp
duty reserve taxes) such as:
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Fees for the transfer and registration of Class A ordinary
shares charged by the registrar and transfer agent for the
Class A ordinary shares in England (i.e., upon deposit and
withdrawal of Class A ordinary shares).
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Expenses incurred for converting foreign currency into
U.S. dollars.
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Expenses for cable, telex and fax transmissions and for delivery
of securities.
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Taxes and duties upon the transfer of securities (i.e., when
Class A ordinary shares are deposited or withdrawn from
deposit).
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Fees and expenses incurred in connection with the delivery or
servicing of Class A ordinary shares on deposit.
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Ensco shall pay to the depositary such fees and charges and
reimburse the depositary for such
out-of-pocket
expenses as the depositary and Ensco may agree from time to time.
Amendments
and Termination
Ensco may agree with the depositary to modify the deposit
agreement at any time without consent of the holders of Ensco
ADSs. Ensco undertakes to give holders 30 days prior
notice of any modifications that would materially prejudice any
of their substantial rights under the deposit agreement. Ensco
will not consider to be materially prejudicial to a
holders substantial rights any modifications or
supplements that are reasonably necessary for the Ensco ADSs to
be registered under the Securities Act or to be eligible for
book-entry settlement, in each case without imposing or
increasing the fees and charges holders are required to pay. In
addition, Ensco may not be able to provide holders with prior
notice of any modifications or supplements that are required to
accommodate compliance with applicable provisions of law.
Holders of Ensco ADSs will be bound by the modifications to the
deposit agreement if such holders continue to hold Ensco ADSs
after the modifications to the deposit agreement become
effective. The deposit agreement cannot be amended to prevent a
holder from withdrawing the Class A ordinary shares
represented by such holders ADSs (except as permitted by
law).
Ensco has the right to direct the depositary to terminate the
deposit agreement. Similarly, the depositary may in certain
circumstances on its own initiative terminate the deposit
agreement. In either case, the depositary must give notice to
the holders at least 30 days before termination. Until
termination, a holders rights under the deposit agreement
will be unaffected during such notice period.
After termination, the depositary will continue to collect
distributions received (but will not distribute any such
property until a holder requests the cancellation of such
holders ADSs) and may sell the securities held
157
on deposit. After the sale, the depositary will hold the
proceeds from such sale and any other funds then held for the
holders of Ensco ADSs in a non-interest bearing account. At that
point, the depositary will have no further obligations to
holders other than to account for the funds then held for the
holders of Ensco ADSs still outstanding (after deduction of
applicable fees, taxes and expenses).
Books of
Depositary
The depositary will maintain ADS holder records at its
depositary office. Holders may inspect such records at such
office during regular business hours but solely for the purpose
of communicating with other holders in the interest of business
matters relating to the Ensco ADSs and the deposit agreement.
The depositary will maintain in New York facilities to record
and process the issuance, cancellation, combination,
split-up and
transfer of Ensco ADSs. These facilities may be closed from time
to time, to the extent not prohibited by law.
Limitations
on Obligations and Liabilities
The deposit agreement limits Enscos obligations and the
depositarys obligations to holders of Ensco ADSs. Please
note the following:
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Ensco and the depositary are obligated only to take the actions
specifically stated in the deposit agreement without negligence
or bad faith.
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The depositary disclaims any liability for any failure to carry
out voting instructions, for any manner in which a vote is cast
or for the effect of any vote, provided it acts in good faith
and in accordance with the terms of the deposit agreement.
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The depositary disclaims any liability for any failure to
determine the lawfulness or practicality of any action, for the
content of any document forwarded to holders of Ensco ADSs on
Enscos behalf or for the accuracy of any translation of
such a document, for the investment risks associated with
investing in Class A ordinary shares, for the validity or
worth of the Class A ordinary shares, for any tax
consequences that result from the ownership of Ensco ADSs, for
the credit-worthiness of any third party, for allowing any
rights to lapse under the terms of the deposit agreement, for
the timeliness of any of its notices or for its failure to give
notice.
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Ensco and the depositary will not be obligated to perform any
act that is inconsistent with the terms of the deposit agreement.
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Ensco and the depositary disclaim any liability if Ensco or the
depositary are prevented or forbidden from or subject to any
civil or criminal penalty or restraint on account of, or delayed
in, doing or performing any act or thing required by the terms
of the deposit agreement, by reason of any provision, present or
future of any law or regulation, or by reason of present or
future provision of any provision of the Ensco Articles of
Association, as amended from time to time, or any provision of
or governing the securities on deposit, or by reason of any act
of God or war or other circumstances beyond their control.
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Ensco and the depositary disclaim any liability by reason of any
exercise of, or failure to exercise, any discretion provided for
in the deposit agreement or in the Ensco Articles of
Association, as amended from time to time, or in any provisions
of or governing the securities on deposit.
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Ensco and the depositary further disclaim any liability for any
action or inaction in reliance on the advice or information
received from legal counsel, accountants, any person presenting
Class A ordinary shares for deposit, any holder of Ensco
ADSs or authorized representatives thereof, or any other person
believed by either of us in good faith to be competent to give
such advice or information.
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Ensco and the depositary also disclaim liability for the
inability by a holder of Ensco ADSs to benefit from any
distribution, offering, right or other benefit that is made
available to holders of Class A
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ordinary shares but is not, under the terms of the deposit
agreement, made available to holders of Ensco ADSs.
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Ensco and the depositary may rely without any liability upon any
written notice, request or other document believed to be genuine
and to have been signed or presented by the proper parties.
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Ensco and the depositary also disclaim liability for any
consequential or punitive damages for any breach of the terms of
the deposit agreement.
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Pre-Release
Transactions
The depositary may, in certain circumstances, issue Ensco ADSs
before receiving a deposit of Class A ordinary shares or
release Class A ordinary shares before receiving Ensco ADSs
for cancellation. These transactions are commonly referred to as
pre-release transactions. The deposit agreement
limits the aggregate size of pre-release transactions and
imposes a number of conditions on such transactions
(i.e., the need to receive collateral, the type of
collateral required, the representations required from brokers,
etc.). The depositary may retain the compensation received from
the pre-release transactions.
Taxes
Holders will be responsible for the taxes and other governmental
charges payable on the ADSs and the securities represented by
the Ensco ADSs. Ensco, the depositary and the custodian may
deduct from any distribution the taxes and governmental charges
payable by holders and may sell any and all property on deposit
to pay the taxes and governmental charges payable by holders.
Holders will be liable for any deficiency if the sale proceeds
do not cover the taxes that are due.
The depositary may refuse to issue Ensco ADSs, to deliver,
transfer, split and combine ADRs or to release securities on
deposit until all taxes and charges are paid by the applicable
holder. The depositary and the custodian may take reasonable
administrative actions to obtain tax refunds and reduced tax
withholding for any distributions on holders behalf.
However, holders may be required to provide to the depositary
and to the custodian proof of taxpayer status and residence and
such other information as the depositary and the custodian may
require to fulfill legal obligations.
Holders are required to indemnify Ensco, the depositary and the
custodian for any claims with respect to taxes based on any tax
benefit obtained for such holder.
Foreign
Currency Conversion
Ensco intends to make distributions in U.S. dollars. To the
extent any distributions are made in currencies other than
U.S. dollars, the depositary will arrange for the
conversion of all
non-U.S. currency
received into U.S. dollars if such conversion is practical,
and it will distribute the U.S. dollars in accordance with
the terms of the deposit agreement. Holders may have to pay fees
and expenses incurred in converting foreign currency, such as
fees and expenses incurred in complying with currency exchange
controls and other governmental requirements.
If the conversion of foreign currency is not practical or
lawful, or if any required approvals are denied or not
obtainable at a reasonable cost or within a reasonable period,
the depositary may take the following actions in its discretion:
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Convert the foreign currency to the extent practical and lawful
and distribute the U.S. dollars to the holders for whom the
conversion and distribution is lawful and practical.
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Distribute the foreign currency to holders for whom the
distribution is lawful and practical.
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Hold the foreign currency (without liability for interest) for
the applicable holders.
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COMPARISON
OF RIGHTS OF PRIDE STOCKHOLDERS
AND ENSCO SHAREHOLDERS
The rights of stockholders of Pride are governed by the DGCL and
Prides certificate of incorporation and bylaws. The rights
of shareholders of Ensco are governed by the laws of England and
the Ensco Articles of Association. After the merger, the former
stockholders of Pride, through ownership of Ensco ADSs and
subject to the terms of the deposit agreement, will have the
rights of shareholders of Ensco, and their rights will generally
be governed by English law and the Ensco Articles of Association.
There are differences between stockholder rights under the DGCL
and shareholder rights under applicable English law. In
addition, there are differences between Prides certificate
of incorporation and bylaws and the Ensco Articles of
Association. The following discussion is a summary of the
material differences between the current rights of Pride
stockholders and the current rights of Ensco shareholders. This
summary does not cover all the differences between applicable
English law and the DGCL affecting corporations and their
stockholders or all of the differences between Prides
certificate of incorporation and bylaws and the Ensco Articles
of Association. While we believe this summary is accurate in all
material respects, the following descriptions are qualified in
their entirety by reference to the complete text of the relevant
provisions of applicable English law, the DGCL, Prides
certificate of incorporation and bylaws and the Ensco Articles
of Association. We encourage you to read those laws and
documents. For information as to how you can obtain a copy of
Prides certificate of incorporation and bylaws or the
Ensco Articles of Association, see Where You Can Find More
Information.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Share Capital
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The authorized capital stock of Pride
consists of (i) 400,000,000 shares of Pride common
stock and (ii) 50,000,000 shares of preferred stock,
of which 4,000,000 shares have been designated as Series A
Junior Participating Preferred Stock.
Prides board of directors has the
authority to issue one or more series of preferred stock, having
terms designated by Prides board of directors.
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The share capital of Ensco consists of
(i) 50,000 Class B ordinary shares in issue, which are
held by a subsidiary of Ensco and (ii) 150,000,000 Class A
ordinary shares in issue.
Preference shares can be issued by
English companies, giving the holders rights of priority over
ordinary shareholders.
Subject to there being an unexpired
authority to allot shares, the Ensco Articles of Association
permit the directors to issue shares with rights to be
determined by the directors at the time of issuance, which may
include preferred rights. Enscos board of directors is
currently authorized to allot and issue up to $30,000,000 of
aggregate par value of additional shares, which may be Class A
ordinary shares, Class B ordinary shares or a class of shares
with such rights as the Ensco board shall determine at the time
of allotment and issuance.
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Voting Rights
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Voting, Generally
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Each stockholder is entitled to one
vote for each share of capital stock held by the stockholder.
If issued, the voting rights of holders
of preferred stock will be determined by the Pride board of
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Each shareholder of Ensco is entitled
to one vote for each Class A ordinary share held by such
shareholder.
The voting rights of holders of any
additional
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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directors.
Prides bylaws provide that, as a
general matter, when a quorum is present, action on a matter
will be approved by a majority of shares present in person or
represented by proxy at the meeting.
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shares that may be issued will be determined by the Ensco board
of directors in accordance with the Ensco Articles of
Association.
Under English law and the Ensco Articles of
Association, certain matters require ordinary
resolutions, which must be approved by at least a majority
of the votes cast by shareholders, and certain other matters
require special resolutions, which require the
affirmative vote of at least 75 percent of the votes cast
at the meeting.
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An ordinary resolution is needed to
(among other matters): remove a director; provide, vary or renew
a directors authority to allot shares; and appoint
directors (where appointment is by shareholders).
A special resolution is needed to (among
other matters): alter a companys articles of association,
exclude statutory preemptive rights on allotment of securities
for cash; reduce a companys share capital; re- register a
public company as a private company (or vice versa); approve a
scheme of arrangement.
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The Ensco board of directors has the
authority under the Ensco Articles of Association to change the
companys name.
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Quorum
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Holders of at least a majority of the
stock issued and outstanding and entitled to vote, present at a
meeting or represented by proxy, shall constitute a quorum.
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Holders of at least a majority of the
shares issued and outstanding and entitled to vote, present at a
general meeting, shall constitute a quorum.
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Cumulative Voting
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Prides certificate of
incorporation specifically prohibits cumulative voting of common
stock, and cumulative voting for a series of preferred stock is
only permitted if specifically provided for in a board of
directors resolution relating to such series of preferred
stock.
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Cumulative voting is not recognized
under English law or permitted under the Ensco Articles of
Association.
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Prides bylaws provide that directors
shall be elected by a plurality of the votes cast by holders of
outstanding shares entitled to vote in the election of directors
at meeting of stockholders where a quorum is present.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Action by Written Consent
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Prides certificate of
incorporation prohibits stockholder action by written consent.
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Under English law, a public limited
companys shareholders cannot pass a resolution by written
consent; they can only pass resolutions taken at shareholder
meetings.
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Stockholder and Shareholder Proposals Nominations of
Directors
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Shareholders Ability to Call a Special
Meeting
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Prides bylaws provide that
special meetings of stockholders may only be called by the
chairman of the board of directors, the chief executive officer
or a majority of the board of directors. Under Delaware law, any
stockholder may petition the Court of Chancery to order a
meeting to elect directors if such meeting, or action to elect
directors by written consent in lieu of a meeting, has not been
held within thirteen months.
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Under English law, the ownership of
shares (by one or more shareholders) representing 5 percent
of the paid-up capital of Ensco carrying voting rights gives the
right to requisition the holding of a general meeting of
shareholders.
See Meetings of Shareholders
below.
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Shareholder Proposals: Director Nominations,
Generally
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Under Prides bylaws,
stockholders have an express right to nominate candidates for
election to the board of directors and bring other business
before an annual meeting, provided the shareholder was a
stockholder of record at the time notice was given of the
meeting and is a stockholder at the time of the meeting, is
entitled to vote at the meeting and complies with the notice
procedures set forth below.
(A) A
stockholders notice must set forth, as to the stockholder
giving the notice, the beneficial owner, if any, on whose behalf
the notice is made, or the nominee, if applicable, (i) the
name and address of such persons, and the name and address of
any other stockholders known to be supporting such proposal or
nomination, (ii) the class or series and number of shares
of capital stock of Pride owned by such persons, (iii) any
derivative instruments owned by such persons, (iv) any
proxy, contract, arrangement or understanding that increases or
decreases the voting power of such persons, (v) any pledge
by such persons of any security of Pride or any short interest
of such persons, (vi) any rights to dividends on shares of
Pride common stock owned by such persons, (vii) any
proportionate interest in Pride stock or derivative owned by a
partnership in which such
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One or more shareholders holding at
least 5 percent of the paid-up capital of Ensco carrying
voting rights can require resolutions to be put before the
annual general meeting. The request must be received at least
6 weeks before the relevant annual general meeting. If so
requested, the company is required to give notice of a
resolution in the same manner and at the same time (or as soon
as reasonably practical thereafter) as the notice of the annual
general meeting.
All shareholder resolutions thus
proposed must not be:
(A) if
passed, ineffective (whether by reason of inconsistency with any
enactment or with the Ensco Articles of Association);
(B) defamatory
of any person; or
(C) frivolous
or vexatious.
One or more shareholders holding at
least 5 percent of the paid-up capital of Ensco carrying
voting rights, or at least 100 shareholders who have a
right to vote and hold (on average) at least £100 per
shareholder of paid-up share capital, can require the company to
circulate to shareholders a statement of up to 1,000 words
relating to a matter referred to in
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162
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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person is a general partner, (viii) the right to any
performance-related fees held by such person based on the value
of capital stock of Pride or derivatives instruments related
thereto and (ix) any other information relating to such
person that would be required to be disclosed in a proxy
statement pursuant to Section 14 under the Exchange
Act.
(B) A stockholders notice of business
to be brought must set forth as to each matter, a description of
(i) the business desired to be brought before the meeting
along with the text of such proposal and the reasons for
conducting such business at the meeting, (ii) any
material interest of such stockholder and beneficial owner, if
any, in such business or proposal and (iii) all
agreements, arrangements and understandings between such
stockholder and beneficial owner, if any, and any other persons
(including their names) in connection with such business or
proposal by such stockholder.
(C) A stockholders notice of a
nomination must set forth, for each nominee, (i) name,
age, address and principal occupation of such person, (ii)
any other information relating to such person that is
required to be disclosed in solicitations for proxies for
election of directors, or is otherwise required, pursuant to
Section 14 under the Exchange Act (including the written
consent of such person to be named in the proxy statement as a
nominee and to serve as a director if elected), (iii) a
description of all direct and indirect compensation during the
past three years, and any other material relationships, between
or among such stockholder and beneficial owner on the one hand,
and each proposed nominee, on the other hand and (iv) a
completed and signed questionnaire, representation and agreement
for each nominee.
To be timely, a stockholders
notice must be delivered to the secretary of the corporation not
earlier than the close of business on the 120th day and not
later than the close of business on the 90th day prior to
the first anniversary of the date of the next preceding annual
meeting; provided, however, that if the scheduled annual meeting
date differs from such anniversary date by more than
30 days, notice by such stockholder, to be timely, must be
so delivered or received not earlier than the close of business
on the 120th day and not later than the close of business
on the later of the 90th day prior to the date of such
annual meeting
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a proposed resolution or any other business matter to be dealt
with in any type of general meeting. The request must be
received at least 1 week before the meeting to which it
relates. If so requested, the company is required to circulate a
statement in the same manner and at the same time (or as soon as
reasonably practical thereafter) as the notice of the relevant
general meeting.
Shareholders, whether individually or
collectively, who do not meet the 5 percent threshold will
not be entitled to nominate a director or propose a shareholder
resolution for consideration at a meeting of the shareholders
except for shareholder proposals required by SEC Rule 14a-8
under the Exchange Act.
Directors of Ensco that are proposed to
be elected at a shareholder meeting generally must be elected
individually pursuant to separate proposals at the meeting; more
than one director cannot be elected under the same shareholder
proposal.
Under the Ensco Articles of Association,
shareholders holding at least 5 percent of the paid-up
capital of Ensco carrying voting rights have an express right to
nominate candidates for election to the board and bring other
business before an annual general meeting, provided the
shareholder was a shareholder of record at the time notice was
given of the meeting and is a shareholder at the time of the
meeting, is entitled to vote at the meeting and complies with
the notice procedures set forth below as to such business or
nomination. The shareholder must give timely notice and the
notice must:
(A) set
forth, as to the shareholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such
shareholder, (ii) the class or series and number of shares
of the corporation owned, any option or convertible security and
certain other information regarding shareholder ownership of
shares and (iii) any other information relating to such
shareholder and beneficial owner that would be required to be
disclosed in a proxy;
(B) if
the notice relates to any business other than a nomination of a
director(s), set forth (i) a brief description of the
business desired to be brought before the meeting, the reasons
for conducting such business at the meeting and any material
interest of such shareholder and beneficial
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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or, if less than 100 days prior notice or public
disclosure of the scheduled meeting date is given or made, the
10th day following the earlier of the day on which the
notice of such meeting was mailed to stockholders or the day on
which such public disclosure was made.
Under Prides bylaws and except
as otherwise provided by law, the certificate of incorporation
or the bylaws, the Chairman of the meeting shall determine
whether a nomination or any business proposed to be brought
before the meeting was properly made and if not, to declare that
such defective proposal or nomination shall be disregarded.
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owner in such business and (ii) a description of all
agreements between such shareholder and beneficial owner and any
other person in connection with the proposal of such business by
such shareholder;
(C) set
forth, for each nominee (i) information relating to such person
that would be required to be disclosed in a proxy statement and
(ii) a description of all direct and indirect compensation
during the past three years, and any other material
relationships, between or among such shareholder and beneficial
owner on the one hand, and each proposed nominee, on the other
hand; and
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(D) include a completed and signed
questionnaire, representation and agreement for each nominee.
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To be timely, a shareholders
notice must be delivered to the secretary of the company not
earlier than the close of business on the 75th day and not
later than the close of business on the 50th day prior to
the first anniversary of the preceding years annual
general meeting, subject to any other requirements of law;
provided, however, that in the event that the date of the annual
general meeting is more than 30 days before or more than
60 days after such anniversary date, notice by the
shareholder to be timely must be so delivered not earlier than
the close of business on the 75th day prior to the date of
such annual general meeting and not later than the close of
business on the later of the 50th day prior to the date of
such annual general meeting or, if the first public announcement
of the date of such annual general meeting is less than
65 days prior to the date of such annual general meeting,
the 15th day following the day on which public announcement
of the date of such meeting is first made by the company.
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Under the Ensco Articles of
Association and except as otherwise provided by law, the
chairman of the meeting shall determine whether a nomination or
any business proposed to be brought before the meeting was
properly made and, if not, to declare that such defective
proposal or nomination shall be disregarded.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Sources and Payment of Dividends
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Sources of Dividends
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Under Delaware law, subject to certain
restrictions, the board of directors may declare and pay
dividends out of:
(1) surplus
of the corporation, which is defined as net assets less
statutory capital; or
(2) if
no surplus exists, out of the net profits of the corporation for
the year in which the dividend is declared and/or the preceding
year;
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Ensco may pay dividends on its
ordinary shares only out of its distributable profits, defined
as accumulated, realized profits less accumulated, realized
losses, and not out of share capital, which includes share
premiums (which are equal to the excess of the consideration for
the issue of shares over the aggregate nominal amount of such
shares).
In addition, under English law, Ensco is
not permitted to make a distribution if, at the time, the amount
of its net assets is less than the aggregate of its issued and
paid-up share capital and undistributable reserves or to the
extent that the distribution will reduce the net assets below
such amount.
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provided, however, that if the net assets of the corporation
have been diminished to an amount less than the aggregate amount
of capital represented by the issued and outstanding stock of
all classes having preference upon the distribution of assets,
the board of directors may not declare and pay dividends out of
the corporations net profits until the deficiency has been
repaired.
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Declaration of Dividends
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Under Delaware law, dividends may be
declared by the board of directors at any time, and may be paid
in cash, property or in shares of the companys capital
stock. Before payment of any dividend, there may be set aside
out of the funds of the corporation available for dividends such
sums as the directors think proper as a reserve to meet
contingencies, to equalize dividends or to repair or maintain
company property or for any other purpose.
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The Ensco Articles of Association
authorize the directors to declare dividends if the Ensco board
of directors consider that the financial position of Ensco
justifies such payment.
The Ensco Articles of Association
provide that dividends may be paid in cash or in property,
paid-up shares, or debentures of another company.
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The Ensco Articles of Association
provide that shares held by or for the benefit of subsidiaries
of Ensco will not be entitled to dividends, including any scrip
dividends, bonus shares or dividends or distributions of
property or debentures of any other company.
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Record Date
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Prides bylaws provide that for
dividends and other matters, the record date must be set not
more than 60 days prior to such action.
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The Ensco Articles of Association
provide that, subject to certain restrictions, the Ensco board
of directors may set the record date for a dividend or other
distribution, provided the date is not more than 60 days
before the date of declaration of the dividend.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Purchase and Redemption of Stock
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Purchase and Redemption of Stock, Generally
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Under Delaware law, a corporation may
purchase, redeem, receive, take or otherwise acquire, own and
hold, sell, lend, exchange, transfer or otherwise dispose of,
pledge, use and otherwise deal in and with its own shares;
provided, however, that no corporation shall:
(1) purchase
or redeem its own shares of capital stock for cash or other
property when the capital of the corporation is impaired or when
such purchase or redemption would cause any impairment of the
capital of the corporation, except that a corporation may
purchase or redeem out of capital any of its own shares which
are entitled upon any distribution of its assets, whether by
dividend or in liquidation, to a preference over another class
or series of its stock, or, if no shares entitled to such a
preference are outstanding, any of its own shares, if such
shares will be retired upon their acquisition and the capital of
the corporation reduced;
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The Ensco Articles of Association
provide that it may purchase its own shares, which, if purchased
off market, requires approval of the shareholders by special
resolution, and redeem outstanding redeemable shares. A special
resolution was adopted in December 2009 which authorized the
repurchase of up to 30 percent per annum of the share
capital outstanding as of the beginning of each fiscal year for
a five year period (subject to an overall aggregate maximum of
119,000,000 shares).
Ensco may redeem or purchase shares only
if the shares are fully paid and only out of
(1) distributable
profits; or
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(2) purchase, for more than the price at which
they may then be redeemed, any of its shares which are
redeemable at the option of the corporation; or
(3) redeem any of its shares unless their
redemption is authorized by a subsection of the DGCL and then
only in accordance with such section and the certificate of
incorporation.
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(2) the proceeds of a new issue of shares
made for the purpose of the purchase or redemption.
Under English law, any shares
(including redeemable shares) purchased by Ensco must then be
cancelled and cannot be resold by the company.
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Under Delaware law, a corporation has a right
to resell any of its shares theretofore purchased or redeemed
out of surplus and which have not been retired, for such
consideration as shall be fixed by the board of directors.
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Prides certificate of incorporation
provides that common stock is not convertible, redeemable or
assessable, or entitled to the benefits of any sinking fund.
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Voting Treasury Stock
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Under Delaware law, shares of its own
capital stock belonging to the corporation or to another
corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held,
directly or indirectly, by the corporation, are neither entitled
to vote nor counted
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Under English law, because Ensco is
not quoted on certain exchanges in the European Economic Area
(i.e., it will be listed only on the NYSE), it may not
hold treasury shares and any shares held by a subsidiary of
Ensco may not be voted or counted for determining quorum.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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for quorum purposes; however, a corporation has a right to vote
stock, including but not limited to its own stock, held by it in
a fiduciary capacity.
Under Delaware law, shares which have
been called for redemption shall not be deemed to be outstanding
shares for the purpose of voting or determining the total number
of shares entitled to vote on any matter on and after the date
on which written notice of redemption has been sent to holders
thereof and a sum sufficient to redeem such shares has been
irrevocably deposited or set aside to pay the redemption price
to the holders of the shares upon surrender of certificates
therefor.
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Any redeemable shares which are
redeemed by Ensco must be cancelled, but pending redemption
could be voted and deemed outstanding for the purpose of
determining the total number of shares entitled to vote on any
such matter unless the terms of issue provide otherwise.
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Meetings of Shareholders
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Prides bylaws provide that all
stockholder meetings may be held at any place designated by the
board of directors.
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The Ensco Articles of Association
provide that the Ensco board of directors, chairman, or chief
executive officer may convene general meetings of the
shareholders at any place they so designate.
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Prides bylaws provide that notice of
the annual meeting stating the place, date and hour of the
meeting must be given to each stockholder entitled to vote at
such meeting not less than 10 nor more than 60 days before
the date of the meeting.
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The notice of the general meeting must
state the time, date and place of the meeting and the general
nature of the business to be dealt with. The general meeting may
be within or outside the U.K.
Ensco must hold its annual general
meeting within 6 months from the day following the end of
its fiscal year.
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Under English law, an annual general
meeting must be called by at least 21 clear days notice.
It is possible to extend this notice period in the
companys articles of association. This notice period can
be shortened if all shareholders who are permitted to attend and
vote agree to the shorter notice. A meeting other than the
annual general meeting must be called by not less than 14 clear
days notice, but this too can be longer or shortened by
agreement. The maximum notice in the Ensco Articles of
Association is 60 days for both types of meeting.
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Clear days means calendar
days and excludes
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(1) the date of receipt or deemed receipt of
the notice; and
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(2) the date of the meeting itself.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Special Meetings of Shareholders
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Calling a Special Meeting
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Prides certificate of
incorporation and bylaws provide that special meetings of
stockholders may be called only on the order of:
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The Ensco Articles of Association
provide that general meetings of shareholders may be called on
the order of
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(1) the
board of directors; or
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(1) the Ensco board of directors; or
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(2) the
chairman of the Pride board of directors; or
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(2) the chairman of the Ensco board; or
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(3) the
chief executive officer.
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(3) the chief executive officer.
Under English law, one or more
shareholders representing at least 5 percent of the paid up
capital of Ensco carrying voting rights have the right to
requisition the holding of a general meeting.
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Notice
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Prides bylaws provide that
notice of a special meeting stating the place, date, hour of the
meeting and purpose or purposes for which the meeting is called
must be given to each stockholder entitled to vote at such
meeting not less than 10 nor more than 60 days before the
date of the meeting. Business transacted at any special meeting
of stockholders is limited to the purpose or purposes stated in
the notice.
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English law requires that notice of a
general meeting of shareholders (other than the annual general
meeting convened by the officers, which requires at least
21 clear days) must be delivered to the shareholders at
least 14 clear days prior to the meeting. Under the Ensco
Articles of Association the notice must be delivered not more
than 60 days prior to the meeting. This notice must state
the place, date and time of the meeting and the purpose or
purposes for which the meeting is called. Business transacted at
any general meeting of shareholders shall be limited to the
purposes stated in the notice.
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Where the meeting is properly
requisitioned by the shareholders of Ensco, the Ensco board of
directors must call the general meeting within 21 days, and
the meeting itself should be held not more than 28 days
after the date of the notice convening the meeting.
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Notice periods for general meetings
can be shortened for public companies if shareholders holding
95 percent of the voting rights agree to hold the meeting
at short notice. In the case of annual general meetings, all
shareholders entitled to attend and vote must agree to short
notice.
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Appraisal Rights
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Under Delaware law, a stockholder of a
Delaware corporation is generally entitled to demand appraisal
of the fair value of his or her shares in the event the
corporation is a party to a merger or consolidation, subject to
specified exceptions.
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English law does not provide for
appraisal rights similar to those rights under
Delaware law. However, English law will provide for
dissenters rights which permit a shareholder to object to
a Court in the context of the compulsory acquisition
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168
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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of minority shares. See Shareholders Votes on
Certain Transactions below.
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Preemptive Rights
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Under Delaware law, stockholders are
not entitled to preemptive rights to subscribe for additional
issuances of stock or any security convertible into stock unless
such right is expressly included in the certificate of
incorporation.
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Under English law, unless either a
special resolution to the contrary has been passed by the
shareholders or there is a provision in the Ensco Articles of
Association conferring a corresponding right, the issuance for
cash of:
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Prides certificate of incorporation
does not provide holders of Pride common stock such rights.
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(1) equity
securities, (i.e., ordinary shares, which are shares
other than shares which, with respect to dividends or capital,
carry a right to participate only up to a specified amount in a
distribution); or
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(2) rights to subscribe for, or convert
securities into, ordinary shares,
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must
be offered first to the existing ordinary shareholders in
proportion to the respective nominal values of their holdings.
English law permits a companys shareholders by special
resolution or a provision in a companys articles of
association to exclude preemptive rights for a period of up to
five years.
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Preemptive rights do not generally
apply to a companys issuance of shares in exchange for
consideration other than cash.
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A special resolution was adopted in
December 2009 to exclude preemptive rights for a period of five
years with respect to the allotment of shares up to an aggregate
nominal amount of $30,000,000.
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Amendment of Governing Instruments
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Prides certificate of
incorporation requires a vote of 80% of the outstanding voting
stock of Pride to amend or repeal the provision of the
certificate of incorporation dealing with stockholder action by
written consent. All other amendments to Prides
certificate of incorporation require a vote of a majority of the
outstanding voting stock of Pride pursuant to Delaware law.
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The provisions in the Ensco Articles
of Association of an English public limited company are
generally equivalent to the collective provisions in a
certificate of incorporation and bylaws of a Delaware
corporation.
Under English law, a special resolution
of the shareholders is required to amend any provision of the
Ensco Articles of Association. The Ensco board of directors does
not have the power to amend the articles without shareholder
approval.
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Prides certificate of
incorporation and bylaws provide that the bylaws may be amended
by the board of directors, subject to the right of the
stockholders to amend the bylaws by a vote of the
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169
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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stockholders holding a majority of the outstanding voting stock
of Pride.
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Preferred Stock/Unclassified Shares
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Prides certificate of incorporation
authorizes the board of directors to provide for the issuance of
one or more series of preferred stock and to fix the voting
rights, powers, designations, preferences, and relative
participating, optional, or other special rights, and
qualifications, limitations and restrictions thereof.
Pride currently does not have any shares of
preferred stock outstanding.
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Preferred shares can be issued by
English companies, giving the holders rights of priority over
ordinary shareholders.
Subject to there being an unexpired
authority to allot shares, the Ensco Articles of Association
permit the directors to issue shares with rights to be
determined by the directors at the time of issuance, which may
include preferred rights.
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Stock Class Rights
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Under Delaware law, any change to the
rights of holders of Prides common or preferred stock
would require an amendment to Prides certificate of
incorporation. Holders of shares of a class are entitled to vote
as a class upon a proposed amendment to the certificate of
incorporation if the amendment will:
(1) unless
otherwise provided in the certificate of incorporation, increase
or decrease the authorized shares of the class;
(2) increase
or decrease the par value of the shares of the class; or
(3) alter
or change the powers, preferences or special rights of the
shares of the class so as to affect them adversely.
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Amendments affecting the rights of the
holders of any class of shares may, depending on the rights
attached to the class and the nature of the amendments, also
require approval of the class affected at a separate class
meeting.
The Ensco Articles of Association
provide that shareholders of the relevant class of shares can
approve any amendment to their rights either by:
(1) consent
in writing of shareholders holding at least 75 percent of
the issued shares of that class by amount; or
(2) a
special resolution passed at a class meeting of the relevant
class.
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Shareholders Votes on Certain Transactions
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Approval of Mergers and Acquisitions, Generally
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Under Delaware law, unless a
corporations certificate of incorporation provides
otherwise, a merger or consolidation of the corporation or the
sale, lease or exchange of all or substantially all of a
corporations assets generally requires the affirmative
vote of the board of directors and (except in limited
circumstances) the affirmative vote of a majority of the
outstanding stock entitled to vote on the transaction.
Prides certificate of
incorporation does not require a supermajority vote of
stockholders to approve a merger or consolidation of Pride or
the sale, lease
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As noted above, ordinary
resolutions must be approved by at least a majority of the
votes cast by shareholders. Special resolutions
require the affirmative vote of at least 75 percent of the
votes cast at the meeting to be approved.
There is no concept of a statutory
merger under English law (except where an English company merges
with another company based in the European Economic Area).
Under English law and subject to
applicable U.S. securities laws and NYSE rules and
regulations, where Ensco proposes to acquire
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170
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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or exchange of all or substantially all of Prides
assets.
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another company, approval of Enscos shareholders is not
required.
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Under Delaware law, a corporation or other
entity owning at least 90% of the outstanding shares of a
subsidiary corporation may effect a merger with or into such
subsidiary by resolution of the board of directors of the parent
and without any action on the part of the board or of the other
stockholders of the subsidiary.
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Under English law, where another
company proposes to acquire Ensco, the requirement for the
approval of the shareholders of Ensco depends on the method of
acquisition.
Under English law, schemes of
arrangement are arrangements or compromises between a company
and any class of shareholders or creditors, and are used in
certain types of reconstructions, amalgamations, capital
reorganizations or takeovers (similar to a merger in the U.S.).
Such arrangements require the approval of: (i) a majority
in number of shareholders or creditors (as the case may be)
representing 75 percent in value of the creditors or class
of creditors or shareholders or class of shareholders present
and voting either in person or by proxy at a special meeting
convened by order of the court; and (ii) the English
court.
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Once approved, sanctioned and becoming
effective, all shareholders and creditors of the relevant class
are bound by the terms of the scheme, and a dissenting
shareholder would have no rights comparable to appraisal rights
provided under Delaware law.
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The Companies Act also provides that
where (i) a takeover offer is made for shares, and
(ii) following the offer, the offeror has acquired or
contracted to acquire not less than 90 percent in value of
the shares to which the takeover offer relates, and not less
than 90 percent of the voting rights carried by the shares
to which the offer relates, the offeror may require the other
shareholders who did not accept the offer to transfer their
shares on the terms of the offer.
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A dissenting shareholder may object to
the transfer on the basis that the bidder is not entitled to
acquire shares or to specify terms of acquisition different from
those in the offer by applying to the court within six weeks of
the date on which notice of the transfer was given. In the
absence of fraud or oppression, the court is unlikely to order
that the acquisition shall not take effect, but it may specify
terms of the transfer that it finds appropriate.
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A minority shareholder is also
entitled in similar circumstances to require the offeror to
acquire his or her shares on the terms of the offer.
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171
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Related Party Transactions
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Under the rules of the NYSE,
stockholder approval is required prior to the issuance of common
stock, or of securities convertible into or exercisable for
common stock, in any transaction or series of related
transactions, to:
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Under English law, certain
transactions between a director and a related company of which
he or she is a director are prohibited unless approved by the
shareholders, such as loans, credit transactions and substantial
property transactions.
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(1) a
director, officer or substantial security holder of the company
(each a Related Party);
(2) a
subsidiary, affiliate or other closely-related person of a
Related Party; or
(3) any
company or entity in which a Related Party has a substantial
direct or indirect interest;
if
the number of shares of common stock to be issued, or if the
number of shares of common stock into which the securities may
be convertible or exercisable, exceeds either one percent of the
number of shares of common stock or one percent of the voting
power outstanding before the issuance. However, if the Related
Party involved in the transaction is classified as such solely
because such person is a substantial security holder, and if the
issuance relates to a sale of stock for cash at a price at least
as great as each of the book and market value of the
issuers common stock, then shareholder approval will not
be required unless the number of shares of common stock to be
issued, or unless the number of shares of common stock into
which the securities may be convertible or exercisable, exceeds
either five percent of the number of shares of common stock or
five percent of the voting power outstanding before the
issuance.
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Under the rules of the NYSE,
shareholder approval is required prior to the issuance of common
stock, or of securities convertible into or exercisable for
common stock, in any transaction or series of related
transactions, to:
(1) a
director, officer or substantial security holder of the company
(each a Related Party);
(2) a
subsidiary, affiliate or other closely-related person of a
Related Party; or
(3) any
company or entity in which a Related Party has a substantial
direct or indirect interest;
if
the number of shares of common stock to be issued, or if the
number of shares of common stock into which the securities may
be convertible or exercisable, exceeds either one percent of the
number of shares of common stock or one percent of the voting
power outstanding before the issuance.
However, if the Related Party involved in the transaction is
classified as such solely because such person is a substantial
security holder, and if the issuance relates to a sale of stock
for cash at a price at least as great as each of the book and
market value of the issuers common stock, then shareholder
approval will not be required unless the number of shares of
common stock to be issued, or unless the number of shares of
common stock into which the securities may be convertible or
exercisable, exceeds either five percent of the number of shares
of common stock or five percent of the voting power outstanding
before the issuance.
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Greater than 20 Percent Change in Common Shares or
Voting Power
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Under NYSE rules stockholder approval
is required prior to the issuance of common stock, or of
securities convertible into or exercisable for common stock, in
any transaction or series of related transactions if:
(1) the
common stock has, or will have upon issuance, voting power equal
to or in excess of
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Under NYSE rules shareholder approval
is required prior to the issuance of common stock, or of
securities convertible into or exercisable for common stock, in
any transaction or series of related transactions if:
(1) the
common stock has, or will have upon issuance, voting power equal
to or in excess of
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172
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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20 percent of the voting power outstanding before the
issuance of such stock or of securities convertible into or
exercisable for common stock; or
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20 percent of the voting power outstanding before the
issuance of such stock or of securities convertible into or
exercisable for common stock; or
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(2) the number of shares of common stock to be
issued is, or will be upon issuance, equal to or in excess of
20 percent of the number of shares of common stock
outstanding before the issuance of the common stock or of
securities convertible into or exercisable for common stock.
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(2) the number of shares of common stock to be
issued is, or will be upon issuance, equal to or in excess of
20 percent of the number of shares of common stock
outstanding before the issuance of the common stock or of
securities convertible into or exercisable for common stock.
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Rights of Inspection
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Rights of Inspection Generally
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Delaware law allows any stockholder in
person or by attorney or other agent, upon written demand under
oath stating the purpose thereof, during the usual hours for
business to inspect for any proper purpose, and to make copies
and extracts from:
(1) The
corporations stock ledger, a list of its stockholders, and
its other books and records; and
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Generally, the register and index of
names of shareholders of Ensco may be inspected at any time
(1) for
free, by its shareholders, and
(2) for
a fee by any other person.
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(2) A subsidiarys books and records, to
the extent that:
(i) The
corporation has actual possession and control of such records of
such subsidiary; or
(ii) The
corporation could obtain such records through the exercise of
control over such subsidiary, provided that as of the date of
the making of the demand:
(1)
The stockholder inspection of such books and records of the
subsidiary would not constitute a breach of an agreement between
the corporation or the subsidiary and a person or persons not
affiliated with the corporation; and
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The inspecting shareholder has to show
he or she has a proper purpose in inspecting the register.
Documents may be copied for a fee.
The service contracts, if any, of
Enscos directors can be inspected without charge and
during business hours. In this and certain other contexts under
applicable English law, a director includes certain
executive officers and a service contract includes
any contract under which such a director or executive officer
undertakes personally to provide services to the company or a
subsidiary company, whether in that persons capacity as a
director, an executive officer or otherwise.
The shareholders of Ensco may also
inspect, without charge and during business hours, the minutes
of meetings of the shareholders for the previous 10 years
and obtain copies of the minutes for a fee.
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(2) The subsidiary would not have the right
under the law applicable to it to deny the corporation access to
such books and records upon demand by the corporation.
Delaware law allows any stockholder
the right to inspect a complete list of the stockholders
entitled to vote at a meeting of stockholders, both during the
time of the meeting and during the ten days preceding the
meeting, for a purpose germane to the meeting.
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In addition, the published annual
accounts of Ensco are required to be available for shareholders
at a general meeting and a shareholder is entitled to a copy of
these accounts. The accounts must also be made available on
Enscos website and remain available until the accounts for
the next financial year are placed on the website.
Under English law, the shareholders of a
company do not have the right to inspect the corporate books of
a subsidiary of that company.
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173
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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The Ensco Articles of Association
permit shareholders to examine a complete list of shareholders
prior to, and at, a shareholder meeting.
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Standard of Conduct for Directors
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Delaware law does not contain any
specific provisions setting forth the standard of conduct of a
director. The scope of the fiduciary duties of the board of
directors is thus determined by the courts of the State of
Delaware. In general, directors have a duty to act in good
faith, on an informed basis and in a manner they reasonably
believe to be in the best interests of the stockholders.
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English law imposes certain specific
obligations on the directors of Ensco. In addition to certain
common law and equitable principles, there are statutory
director duties, including seven codified duties as follows:
(1) To
act in a way he or she considers, in good faith, would be most
likely to promote the success of the company for the benefit of
its shareholders as a whole;
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(2) To act in accordance with the
companys constitution and exercise powers only for the
purposes for which they are conferred;
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(3) To exercise independent judgment;
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(4) To exercise reasonable care, skill and
diligence;
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(5) To avoid conflicts of interest;
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(6) Not to accept benefits from third parties;
and
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(7) To declare an interest in a proposed
transaction with the company.
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Classification of the Board of Directors
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Delaware law permits the certificate
of incorporation or a stockholder-adopted bylaw to provide that
directors be divided into one, two or three classes, with the
term of office of one class of directors to expire each year.
Prides bylaws and certificate of
incorporation do not provide for classes of directors.
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English law permits a company to
provide for terms of different length for its directors.
However, it also requires, in the case of officers who are also
considered directors under English law, that employment
agreements with a guaranteed term of more than two years be
subject to a prior approval of shareholders at a general
meeting.
The Ensco Articles of Association
provide that the board of directors will be divided into three
classes of directors, each class is elected to serve for a term
of three years, with the term of only one class expiring every
year.
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Removal of Directors
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Under Delaware law, any director may
be removed with or without cause by the affirmative vote of
holders of a majority of the outstanding shares entitled to vote
upon the election of directors.
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Under English law, shareholders may
remove a director without cause by ordinary resolution,
irrespective of any provisions in the companys articles of
association, provided that 28 clear days notice of the
resolution is given to the company.
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Unless otherwise provided in the Ensco
Articles of
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174
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Association, the director has a right to make written
representations, which the company must circulate to
shareholders, as to why he or she should not be removed. This
right is not excluded by the Ensco Articles of Association.
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Vacancies on the Board of Directors
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Vacancies, Generally
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Under Delaware law, unless otherwise
provided in the certificate of incorporation or the bylaws,
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The Ensco Articles of Association
provide that:
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(1) vacancies
on a board of directors; and
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(1) any vacancies on the board; or
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(2) newly
created directorships resulting from an increase in the number
of directors
may
be filled by a majority of the directors in office, although
less than a quorum, or by a sole remaining director. In the case
of a classified board, directors elected to fill vacancies or
newly created directorships will hold office until the next
election of the class for which the directors have been chosen.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less
than a majority of the whole board, the Court of Chancery may,
upon application of any stockholder or stockholders holding at
least 10 percent of the voting stock at the time
outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
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(2) newly created directorships
shall
be filled by the majority vote of the remaining directors of all
classes, whether or not a quorum, or by a sole remaining
director. If there are, however, no directors in office, a
shareholder may convene a general meeting for the purpose of
appointing directors.
Shareholders also have a right to
propose directors for appointment at a general meeting convened
by the Ensco board of directors for such purpose, provided the
shareholder(s) comply with the relevant procedural requirements.
See Shareholder Proposals and Shareholder Nominations of
Directors and Special Meetings of Shareholders
above.
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Under Delaware law, unless otherwise provided
in the certificate of incorporation or the bylaws, when one or
more directors shall resign from the board, effective at a
future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and
each director so chosen shall hold office as provided in this
section in the filling of other vacancies.
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Prides bylaws and certificate of
incorporation provide that any vacancies on the board of
directors or newly created directorships shall be filled by the
majority vote of the remaining directors, whether or not a
quorum is present, or by a sole remaining director. If there are
no directors in office, then an
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Stockholders
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Rights of Ensco
Shareholders
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election of directors may be held in the manner provided by
statute.
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Term of Service After Appointment to Fill a
Vacancy
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Prides bylaws and certificate of
incorporation provide that any director appointed to fill a
vacancy or a newly-created directorship shall serve until the
next annual meeting of stockholders and until such
directors successor shall have been duly elected and
qualified or until his earlier death, resignation or removal.
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The Ensco Articles of Association
provide that any director appointed to fill a vacancy shall
serve for the remainder of the then present term of office of
the class to which he or she was appointed. In the event such
term extends beyond the next annual general meeting of
shareholders for which a definitive proxy statement has not been
filed at the time of the appointment, the director or directors
so appointed shall be named and described in the next definitive
annual general meeting proxy statement and shall stand for
election for the remaining portion of the term of office at the
annual general meeting of shareholders subject to said proxy
statement.
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The Ensco Articles of Association also
provide that in the event of any change in the authorized number
of directors, the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by
the board of directors among the classes of directors so as to
maintain such classes as nearly equal as possible.
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Liability of Directors and Officers
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Delaware law permits a
corporations certificate of incorporation to include a
provision eliminating or limiting the personal liability of a
director to the corporation and its stockholders for damages
arising from a breach of fiduciary duty as a director. However,
no provision can limit the liability of a director for
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English law does not permit a company
to exempt any director or certain officers from any liability
arising from negligence, default, breach of duty or breach of
trust against the company. However, despite this prohibition, an
English company is permitted to purchase and maintain insurance
for a director or executive officer of the company against any
such liability.
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(1) any
breach of his or her duty of loyalty to the corporation or its
stockholders;
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Shareholders can ratify by ordinary
resolution a directors or certain officers conduct
amounting to negligence, default, breach of duty or breach of
trust in relation to the company.
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(2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law;
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(3) intentional or negligent payment of
unlawful dividends or stock purchases or redemptions; or
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(4) any transaction from which he or she
derives an improper personal benefit.
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Prides certificate of incorporation
provides that its
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Stockholders
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Shareholders
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directors will not be personally liable to Pride or its
stockholders for monetary damages for breach of fiduciary duty
as a director, except (i) for any breach of the directors
duty of loyalty, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL, or (iv) for any
transaction from which such director derived an improper
personal benefit.
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Indemnification of Directors and Officers
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Delaware law provides that a
corporation may indemnify any persons who are, or are threatened
to be made, parties to any threatened, pending or completed
legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of such corporation), by reason of the fact that such
person is or was a director, officer, employee or agent of such
corporation or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding,
provided such person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that
the persons conduct was unlawful. Where an officer or
director is successful on the merits or otherwise in the defense
of any action referred to above, the corporation must indemnify
him against the expenses that such officer or director actually
and reasonably incurred.
A Delaware corporation may indemnify the
same category of persons in an action by or in the right of the
corporation under the same conditions, but only for expenses
(including attorneys fees), provided that no
indemnification is permitted without judicial approval if such
person is adjudged to be liable to the corporation.
Prides bylaws provide for
indemnification and advancement of expenses of its directors,
officers, employees and agents, and persons serving at the
request of Pride in any such capacity with any other
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Subject to exceptions, English law
does not permit a company to exempt a director or certain
officers from, or indemnify him or her against, liability in
connection with any negligence, default, breach of duty or
breach of trust by him or her in relation to the company.
The exceptions allow a company to:
(1) purchase
and maintain director and officer insurance, or D&O
Insurance against any liability attaching in connection
with any negligence, default, breach of duty or breach of trust
owed to the company. D&O Insurance generally covers costs
incurred in defending allegations and compensatory damages that
are awarded. However, D&O Insurance will not cover damages
awarded in relation to criminal acts, intentional malfeasance or
other forms of dishonesty, regulatory offences or excluded
matters such as environmental liabilities. In relation to these
matters, D&O Insurance generally only covers defense costs,
subject to the obligation of the director or officer to repay
the costs if an allegation of criminality, dishonesty or
intentional malfeasance is subsequently admitted or found to be
true; and
(2) provide
a qualifying third party indemnity provision, or
QTPIP. This permits a company to indemnify its
directors and certain officers (and directors and certain
officers of an associated company) in respect of proceedings
brought by third parties (covering both legal costs and the
amount of any adverse judgment, except for: the legal costs of
an unsuccessful defense of criminal proceedings or civil
proceedings brought by the company itself; fines imposed in
criminal proceedings; and penalties imposed by regulatory
bodies). Ensco can therefore indemnify directors and certain
officers against such third party actions
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Stockholders
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Rights of Ensco
Shareholders
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corporation, entity or enterprise, to the fullest extent
permitted by Delaware law.
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as class actions or actions following mergers and acquisitions
or share issues; and
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As permitted by the DGCL, Pride currently has
in effect a directors and officers liability
insurance policy.
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(3) indemnify
a director or certain officers in respect of defense costs in
relation to civil and criminal proceedings against him or her
(even if the action is brought by the company itself). This is
subject to the requirement for the director or officer to
reimburse the company if the defense is unsuccessful. However,
if the company has a QTPIP in place whereby the director or
officer is indemnified in respect of legal costs in civil
proceedings brought by third parties, then the director or
officer will not be required to reimburse the company.
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The Ensco Articles of Association
include a provision requiring the company to indemnify to any
extent permitted by law any person who is or was a director or
officer of any associated company, directly or indirectly
(including by funding any expenditure incurred or to be incurred
by him or her) against any loss or liability, whether in
connection with any negligence, default, breach of duty or
breach of trust by him or her or otherwise, in relation to the
company or any associated company. The articles of association
go on to state that where a person is so indemnified, such
indemnity may extend to all costs, losses, expenses and
liabilities incurred by him or her.
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In addition to the provisions of the
Ensco Articles of Association, it is common to set out the terms
of the QTPIP in the form of a deed of indemnity between the
company and the relevant director or executive officer which
essentially indemnifies the director or executive officer
against claims brought by third parties to the fullest extent
permitted under English law. In December 2009, Ensco entered
into such deeds of indemnity with directors, executive officers
and certain other officers and employees (including directors,
officers and employees of subsidiaries and other affiliates).
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Ensco is required to disclose in its
annual directors report any QTPIP in force at any point
during the relevant financial year or in force when the
directors report is approved. A copy of the indemnity or,
if it is not in writing, a memorandum setting out its terms must
be open to inspection during the life of the indemnity and for a
period of one year from the date of its termination or
expiration. Any shareholder may inspect the
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Stockholders
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Rights of Ensco
Shareholders
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indemnity, or memorandum, without charge or may request a copy
on payment of a fee.
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Shareholders Suits
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Under Delaware law, a stockholder may
initiate a derivative action to enforce a right of a corporation
if the corporation fails to enforce the right itself. The
complaint must:
(1) state
that the plaintiff was a stockholder at the time of the
transaction of which the plaintiff complains or that the
plaintiffs shares thereafter devolved on the plaintiff by
operation of law; and
(2) (a)
allege with particularity the efforts made by the plaintiff to
obtain the action the plaintiff desires from the directors;
or
(b) state
the reasons for the plaintiffs failure to obtain the
action or for not making the effort.
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While English law only permits a
shareholder to initiate a lawsuit on behalf of the company in
limited circumstances, it does permit a shareholder whose name
is on the register of shareholders of Ensco to apply for a court
order:
(1) when
Enscos affairs are being or have been conducted in a
manner unfairly prejudicial to the interests of all or some
shareholders, including the shareholder making the claim; or
(2) when
any act or omission of Ensco is or would be so prejudicial.
As discussed in Description of Class A
Ordinary Shares of Ensco Anti-takeover
Provisions, Ensco is not currently subject to the
jurisdiction of the U.K. Takeover Panel (i.e., the
regulator of the Takeover Code).
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Additionally, the plaintiff must remain a
stockholder through the duration of the derivative suit. The
action may not be dismissed or compromised without the approval
of the Delaware Court of Chancery.
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An individual may also commence a class
action suit on behalf of himself or herself and other similarly
situated stockholders where the requirements for maintaining a
class action under Delaware law have been met.
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Anti-Takeover Matters
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A Delaware court will generally uphold
board of director decisions to adopt anti-takeover measures in
the face of a potential takeover where the directors are able to
show that:
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English law does not expressly
prohibit anti-takeover measures, such as shareholder rights
plans. The Ensco Articles of Association provide that the Ensco
board of directors may adopt a shareholder rights plan at any
time subject to compliance with their fiduciary duties.
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(1) they had reasonable grounds for believing
that there was a danger to corporate policy and effectiveness
from an acquisition proposal; and
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(2) the board action taken was reasonable in
relation to the threat posed.
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Pride has a shareholder rights plan.
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Section 203 of the DGCL prohibits
certain business combinations. A corporation shall
not engage in any business combination with any interested
stockholder for a period of three years following the time
that such stockholder became an interested stockholder,
unless:
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179
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Stockholders
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Rights of Ensco
Shareholders
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(1) Prior to such time the board of directors
of the corporation approved either the business combination or
the transaction which resulted in the stockholder becoming an
interested stockholder;
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(2) Upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85 percent of the
voting stock of the corporation outstanding at the time the
transaction commenced (excluding for purposes of determining the
voting stock outstanding (but not the outstanding voting stock
owned by the interested stockholder) those shares owned by (i)
persons who are directors and also officers and (ii) employee
stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer); or
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(3) At or subsequent to such time the business
combination was approved by the board of directors and
authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least
662/3
percent of the outstanding voting stock which is not owned by
the interested stockholder.
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Disclosure of Interests
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Short Form Disclosure
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Certain acquisitions of Pride stock
may require disclosure under the Exchange Act. Some
acquisitions, however, may qualify for a short-form disclosure
on Schedule 13G. Generally, an acquisition of more than a
5 percent interest in a U.S. publicly-held issuer
by
(1) certain
types of persons, including a broker-dealer, a bank, an
insurance company, an investment company and an investment
adviser, or
(2) a
passive investor who is not seeking to acquire or
influence control of the issuer, so long as the investor owns
less than 20 percent of the class of stock it is acquiring,
may be disclosed on a Schedule 13G.
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The Section 13D/G reporting applies to
Ensco as its shares are registered under Section 12 of the U.S.
Securities Exchange Act of 1934.
In addition, English law provides that a
company may, by notice in writing, require a person whom the
company knows or reasonably believes to be or to have been
within the three preceding years, interested in its issued
voting share capital to:
(1) confirm
whether this is or is not the case; and
(2) if
this is the case, to give further information that it requires
relating to his or her interest and any other interest in the
companys shares of which he or she is aware. The
disclosure must be made within a reasonable period as specified
in the relevant notice which may be as short as one or two
days.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Amendments to Short Form Disclosure
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A buyer who files a Schedule 13G must
amend it periodically
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(1) to report any change in the information
previously reported; or
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(2) if it acquires more than 10 percent of
the class of stock and, thereafter, if it undergoes any change
in ownership of 5 percent or more of the class of stock.
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Limitation on Enforceability of Civil Liabilities Under U.S.
Federal Securities Laws
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Ability to Bring Suits, Enforce Judgments and Enforce U.S.
Law
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Pride is a U.S. company incorporated
under the laws of Delaware and has substantial assets located in
the U.S. As a result, investors generally can initiate lawsuits
in the U.S. against Pride and its directors and officers and can
enforce lawsuits based on U.S. federal securities laws in
U.S. courts.
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As a company listed on the NYSE, Ensco
and its directors and officers are subject to U.S. Federal
securities laws, and investors could initiate civil lawsuits in
the U.S. against Ensco for breaches of the U.S. Federal
securities laws.
Because Ensco is a public limited
company incorporated under English law, investors could
experience more difficulty enforcing judgments obtained against
Ensco in U.S. courts than would currently be the case for
U.S. judgments obtained against Pride. In addition, it may be
more difficult (or impossible) to bring some types of claims
against Ensco in courts sitting in England than it would be to
bring similar claims against a U.S. company in a
U.S. court. In addition, the Ensco articles of association
provide that English courts have exclusive jurisdiction with
respect to any suits brought by shareholders against Ensco or
its directors.
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A judgment obtained against Ensco from
a U.S. court will not be recognized by the English courts
but an action may be commenced in the English courts for an
amount due under a judgment given by the U.S. courts if that
judgment is (a) for a debt or definite sum of money; (b) final
and conclusive; and (c) not of a penalty or revenue nature. A
judgment may be impeached by showing that: (i) the court in
question did not, in the circumstances of the case, and in
accordance with the English rules of private international law,
have jurisdiction to give that judgment; (ii) the judgment was
obtained through fraud; (iii) the enforcement of the judgment
would be contrary to the public policy of the U.K.; or (iv) the
proceedings in which the judgment was obtained were opposed to
the rules of natural justice.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Ensco and its directors and officers
may be subject to criminal penalties in the U.S. arising from
breaches of the U.S. federal securities laws, but may not be
subject to criminal penalties unless the criminal laws of the
U.K. were violated.
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A criminal judgment in a U.S. court
under U.S. Federal securities laws may not be enforceable
in the English courts on public policy grounds and a prosecution
brought before the English courts under U.S. federal securities
laws might not be permitted on public policy grounds.
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Short Swing Profits
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Directors and officers of Pride are
governed by rules under the Exchange Act that may require
directors and officers to forfeit to Pride any short
swing profits realized from purchases and sales, as
determined under the Exchange Act and the rules thereunder, of
Pride equity securities.
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As a company listed on the NYSE,
directors and officers of Ensco are subject to the U.S.
securities laws, including the prohibitions on short
swing trading.
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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Proxy Statements and Reports
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Notices and Reports to Shareholders; Matters to Include
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Proxy Statements, Generally
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Under the Exchange Act proxy rules,
Pride must comply with notice and disclosure requirements
relating to the solicitation of proxies for stockholder
meetings.
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Under the Exchange Act proxy rules,
Ensco must comply with notice and disclosure requirements
relating to the solicitation of proxies for shareholder
meetings.
English law does not have specific proxy
solicitation legislation, but approaches to shareholders may
need to comply with the U.K. Financial Services and Markets
Act 2000.
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Voting by Proxy
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Prides bylaws provide that each
stockholder is entitled to vote in person or by proxy for each
share of the capital stock having voting power held by such
stockholder, but under Section 212 of the DGCL no proxy may be
voted on or after three years from its date unless the proxy
provides for a longer period.
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The Ensco Articles of Association
provide that each shareholder is entitled to vote in person or
by proxy for each share of the capital stock having voting power
held by such shareholder, but no proxy shall be voted on after
three years from its date unless the proxy provides for a longer
period.
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Approval of Director Compensation
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Under recently adopted SEC rules,
Prides stockholders are allowed a non-binding advisory
vote to approve named executive officer compensation.
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Because shares of Ensco stock trade on
the NYSE in ADS form only, Ensco is not required to prepare and
submit for shareholder approval a directors remuneration
report. Ensco is subject to SEC reporting requirements for
director and executive officer compensation and shareholder non-
binding advisory votes to approve named executive officer
compensation.
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Approval of Auditors
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Prides stockholders do not have
the right to appoint its auditors; however, Pride typically
includes in its proxy statement a shareholder proposal to ratify
the appointment of its auditors.
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Under English law, Enscos
shareholders approve the companys auditors each year. In
addition, the companys annual financial statements, which
must, to the satisfaction of the directors, give a true
and fair view of the assets, liabilities, financial
position and profit or loss of Ensco and the consolidated group,
must be presented to the shareholders at a general meeting but
are not required to be approved by the shareholders.
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Notice
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Prides bylaws provide that
whenever notice is required to be given to any stockholder, such
notice
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The Ensco Articles of Association
provide that whenever notice is required to be given to any
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Rights of Pride
Stockholders
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Rights of Ensco
Shareholders
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may be given (i) by telegraph, telephone, facsimile, cable or
wireless transmission or (ii) by mail, addressed to such
stockholder, at his or her address as it appears on the records
of the corporation, with postage thereon prepaid, and such
notice shall be deemed to be given at the time when the same
shall be deposited in the U.S. mail.
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shareholder, such notice may be given in writing
(1) personally;
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(2) by mail, addressed to such shareholder, at
his or her address as it appears on the records of the company,
with postage thereon prepaid;
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(3) by sending it in electronic form (if the
shareholder has so agreed); or
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(4) in certain circumstances, by making the
notice available on a website.
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Reporting Requirements
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As a U.S. public company, Pride must
file with the SEC, among other reports and notices:
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Ensco is subject to
U.S. securities laws, but is not subject to the reporting
obligations of companies listed on the London Stock Exchange or
on any other securities exchange.
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(1) an Annual Report on Form 10-K within
60 days after the end of a fiscal year;
(2) a
Quarterly Report on Form 10-Q within 40 days after the end
of a fiscal quarter ending; and
(3) Current
Reports on
Form 8-K
upon the occurrence of certain important corporate events.
Unless otherwise specified, a report is to be filed or furnished
within four business days after occurrence of the event.
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As a U.S. public company, Ensco must
file with the SEC, among other reports and notices:
(1) an
Annual Report on
Form 10-K
within 60 days after the end of a fiscal year;
(2) a
Quarterly Report on
Form 10-Q
within 40 days after the end of a fiscal quarter; and
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(3) Current Reports on Form 8-K upon the
occurrence of certain important corporate events. Unless
otherwise specified, a report is to be filed or furnished within
four business days after occurrence of the event.
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184
THE ENSCO
GENERAL MEETING
Date,
Time, Place and Purpose of the Ensco General Meeting
The general meeting of the shareholders of Ensco will be held at
the registered office and headquarters of Ensco plc, 6
Chesterfield Gardens, London, W1J 5BQ, United Kingdom at 8:30
a.m. London time on May 24, 2011. The purpose of the Ensco
general meeting is:
1. to consider and vote on the proposal to approve the
issuance and delivery of Ensco ADSs pursuant to the merger
agreement; and
2. to transact any other business that may properly come
before the Ensco general meeting or any adjournment or
postponement of the Ensco general meeting.
Ensco
Board Recommendation
The Ensco board of directors has unanimously approved the
merger agreement and the transactions contemplated by the merger
agreement and unanimously recommends that you vote
FOR the proposal to approve the issuance and
delivery of Ensco ADSs pursuant to the merger agreement. For
the reasons for this recommendation, see The
Merger Recommendation of the Ensco Board of
Directors and Its Reasons for the Merger.
Who Can
Vote at the Ensco General Meeting
Ensco shareholders who owned Class A ordinary shares at the
close of business on April 11, 2011, which is referred to
as the Ensco record date, are qualified to receive notice of,
attend and vote at the Ensco general meeting and, subject to the
Ensco Articles of Association, any adjournment or postponement
thereof. On the Ensco record date, there were 143,429,203 Ensco
Class A ordinary shares (represented by Ensco ADSs)
outstanding and entitled to vote at the Ensco general meeting.
Citibank, N.A. (London Branch) (or its nominee), as the
custodian for Citibank, N.A., the ADS depositary, is the
registered holder of all outstanding Ensco Class A ordinary
shares as of the date of this joint proxy statement/prospectus.
If you own Ensco ADSs representing Class A ordinary shares
at the close of business in New York City on the Ensco record
date, whether directly or in street name, you are
entitled to instruct the ADS depositary on how to vote the
Class A ordinary shares represented by your Ensco ADSs,
which for purposes of this joint proxy statement/prospectus we
refer to as voting your shares.
Voting instructions must be received by the ADS depositary at
Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,
NY 11717 by 11:59 p.m. New York City time on May 15, 2011
for employees and directors holding shares in Ensco benefit
plans, and on May 18 , 2011 for all other holders (the
ADS voting cutoff time).
Each Ensco Class A ordinary share is entitled to one vote
on each matter to be voted on at the Ensco general meeting.
Vote
Required for Approval; Quorum
The approval of the issuance and delivery of Ensco ADSs pursuant
to the merger agreement is being proposed as an ordinary
resolution, which means that, assuming a quorum is present, the
resolution will be approved for purposes of the U.K. Companies
Act 2006 if a majority of the votes cast are cast in favor of
the resolution. Further, under NYSE rules, the total amount of
votes cast on the resolution must represent over 50% in interest
of all securities entitled to vote. The chairman of the Ensco
general meeting may adjourn or postpone the meeting without
notice other than announcement at the meeting.
At the Ensco general meeting, holders of a majority of the
outstanding Ensco Class A ordinary shares entitled to vote
must be present, either in person or represented by proxy, to
constitute a quorum. Abstentions and broker non-votes will be
counted in determining whether a quorum is present at the Ensco
general meeting. However, because abstentions and broker
non-votes are not considered votes cast under English law,
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they will not have any effect on the outcome of the vote with
respect to the proposal to approve the issuance and delivery of
Ensco ADSs pursuant to the merger agreement (assuming a quorum
is present). Under NYSE rules, abstentions, but not broker
non-votes, will be considered as votes cast for determining
whether a sufficient number of votes have been cast on the
resolution.
An abstention occurs when a shareholder abstains from voting
(either in person or by proxy) on one or more of the proposals.
Broker non-votes occur when a bank, broker or other nominee
returns a proxy but does not have authority to vote on a
particular proposal.
Your vote is very important. You are encouraged to vote as soon
as possible and in any event before the ADS voting cutoff time.
If the ADS depositary timely receives voting instructions that
fail to specify the manner in which the ADS depositary is to
vote the Class A ordinary shares represented by Ensco ADSs,
the ADS depositary will vote in favor of the items set forth in
such voting instructions. Class A ordinary shares
represented by Ensco ADSs for which no timely voting
instructions are received by the ADS depositary will not be
voted.
Manner of
Voting
If you are a shareholder of record of Ensco
Class A ordinary shares, you may vote your shares in
person at the Ensco general meeting (any resolution put to vote
at a general meeting shall be decided on a poll) or, in
accordance with provisions in the Companies Act and in
accordance with the Ensco Articles of Association, you are
entitled to appoint another person as your proxy to exercise all
or any of your rights to attend and to speak and vote at the
Ensco general meeting and to appoint more than one proxy in
relation to the Ensco general meeting (provided that each proxy
is appointed to exercise the rights attached to a different
share or shares held by you). Such proxy need not be a
shareholder of record.
If you are a holder of record of Ensco ADSs,
your name will appear on the register of Citibank as the ADS
depositary, and Citibank (or its nominee), as the registered
holder of the Class A ordinary shares underlying your Ensco
ADSs, will, insofar as practicable and permitted under
applicable law, the provisions of the deposit agreement and the
Ensco Articles of Association, vote the Class A ordinary
shares underlying your Ensco ADSs in accordance with your voting
instructions.
If you want the ADS depositary to vote your shares at the Ensco
general meeting, you may provide your voting instructions to the
ADS depositary c/o Broadridge via the Internet, by
telephone or by sending in a completed voting instruction card,
as described on the voting instruction card.
After you have carefully read this joint proxy
statement/prospectus, please respond by completing, signing and
dating your proxy card or voting instruction card, as applicable
and returning it in the enclosed postage-paid envelope or, if
available, by submitting your proxy or voting instructions by
telephone or through the Internet as soon as possible so that
the Class A ordinary shares represented by your Ensco ADSs
will be represented and voted at the Ensco general meeting.
Please refer to your proxy card, voting instruction card or the
information forwarded by your broker or other nominee to see
which voting options are available to you.
The Internet and telephone proxy submission procedures are
designed to verify your holdings and to allow you to confirm
that your instructions have been properly recorded.
The method by which you submit a proxy or voting instructions
will in no way limit your right to vote at the Ensco general
meeting if you later decide to attend the meeting in person. If
your Ensco ADSs are held in the name of a broker or other
nominee, you must either cause the Class A ordinary shares
represented by your Ensco ADSs to be withdrawn from the ADS
depositary or obtain a proxy, executed in your favor, from the
holder of record of your Ensco ADSs and obtain a proxy, executed
in your favor from the ADS depositary, to be able to appear,
speak and vote at the Ensco general meeting, although
street name holders of Ensco ADSs are permitted to
attend the Ensco general meeting at the invitation of the
Chairman as described above.
Voting instructions for Ensco ADSs must be received by the
ADS depositary c/o Broadridge by the ADS voting cutoff
time.
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If the ADS depositary timely receives voting instructions that
fail to specify the manner in which the ADS depositary is to
vote the Class A ordinary shares represented by ADSs, the
ADS depositary will vote as the Ensco board of directors
recommends and therefore FOR the approval of the
issuance and delivery of Ensco ADSs pursuant to the merger
agreement.
Revoking
a Proxy
You may revoke your proxy or voting instructions or change your
vote at any time before the ADS voting cutoff date in the case
of holders of record and street name holders of
Ensco ADSs and before your proxy is voted at the Ensco general
meeting in the case of shareholders of record. If your Ensco
ADSs are held in an account at a broker or other nominee and you
desire to change your vote, you should contact your broker or
other nominee for instructions on how to do so before the ADS
voting cutoff date.
If you are a holder of record of Ensco ADSs, you may revoke your
voting instructions or otherwise change your vote by doing one
of the following:
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sending a written notice of revocation to the ADS depositary
c/o Broadridge that must be received before the ADS voting
cutoff time, stating that you revoke your voting instructions;
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signing and submitting a later-dated voting instruction card
that must be received by the ADS depositary c/o Broadridge
before the ADS voting cutoff time in accordance with the
instructions included in the voting instruction card; or
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if you voted electronically, by returning to
www.proxyvote.com and changing your vote before the ADS
voting cutoff time. Follow the same voting process, and your
original vote will be superseded.
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If you are a shareholder of record of Ensco Class A
ordinary shares, you can do this in any of the three following
ways:
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by sending a written notice to the Company Secretary of Ensco at
the address set forth below, in time to be received before the
Ensco general meeting, stating that you would like to revoke
your proxy;
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by completing, signing and dating another proxy card and
returning it by mail in time to be received before the Ensco
general meeting, or by submitting a later dated proxy by the
Internet in which case your later-submitted proxy will be
recorded and your earlier proxy revoked; or
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by attending the meeting and voting in person. Simply attending
the Ensco general meeting without voting will not revoke your
proxy or change your vote.
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Tabulation
of the Votes
Ensco will appoint an Inspector of Election for the Ensco
general meeting to tabulate affirmative and negative votes and
abstentions.
Solicitation
Ensco will pay the cost of soliciting
proxies. Directors, officers and employees of
Ensco and Pride may solicit proxies and voting instructions on
behalf of Ensco in person or by telephone, facsimile or other
means. Ensco has engaged D.F. King & Co., Inc. to
assist it in the distribution and solicitation of proxies. Ensco
has agreed to pay D.F. King & Co., Inc. a fee of
$10,000 plus payment of certain fees and expenses for its
services to solicit proxies and voting instructions.
In accordance with the regulations of the SEC and the NYSE,
Ensco also will reimburse brokerage firms and other custodians,
nominees and fiduciaries for their expenses incurred in sending
proxies and proxy materials to beneficial owners of Ensco ADSs.
187
THE PRIDE
SPECIAL MEETING
Date,
Time, Place and Purpose of the Pride Special Meeting
The special meeting of the stockholders of Pride will be held on
May 24, 2011, at 9:00 a.m. Houston time at the Hotel
Granduca, located at 1080 Uptown Park Blvd., Houston, Texas
77056. The purpose of the Pride special meeting is:
1. to consider and vote on the proposal to adopt the merger
agreement;
2. to consider and vote on any proposal to adjourn the
Pride special meeting to a later date or dates if necessary to
solicit additional proxies if there are insufficient votes at
the time of the Pride special meeting to adopt the merger
agreement; and
3. to transact any other business that may properly come
before the Pride special meeting or any adjournment or
postponement of the Pride special meeting by or at the direction
of the board.
Pride
Board Recommendation
The Pride board of directors has determined that the merger
agreement and the transactions contemplated thereby, including
the merger, are advisable and in the best interests of Pride and
its stockholders and unanimously recommends that Pride
stockholders vote FOR the proposal to adopt the
merger agreement and FOR any proposal to adjourn the
Pride special meeting if necessary to solicit additional
proxies. See The Merger Recommendation of the
Pride Board of Directors and Its Reasons for the Merger.
Who Can
Vote at the Pride Special Meeting
Only holders of record of Pride common stock at the close of
business on April 11, 2011, the Pride record date, are
entitled to notice of, and to vote at, the Pride special meeting
or any adjournments or postponements of the Pride special
meeting.
As of the Pride record date, there were 177,961,390 shares
of Pride common stock outstanding and entitled to vote at the
Pride special meeting, held by approximately 1,000 stockholders
of record. Each share of Pride common stock is entitled to one
vote at the Pride special meeting.
For a period of 10 days prior to the Pride special meeting,
a complete list of stockholders of record entitled to vote at
the Pride special meeting will be available at Prides
executive offices for inspection by Pride stockholders during
ordinary business hours for proper purposes.
Vote
Required for Approval; Quorum
The affirmative vote of the holders of at least a majority of
the outstanding shares of Pride common stock entitled to vote at
the Pride special meeting as of the Pride record date, either in
person or represented by proxy, is necessary for the adoption of
the merger agreement. Approval of any proposal to adjourn the
Pride special meeting if necessary to solicit additional proxies
requires the affirmative vote of the holders of at least a
majority of the shares of Pride common stock present in person
or represented by proxy at the Pride special meeting and
entitled to vote on the adjournment. If a Pride stockholder
fails to vote, or if a Pride stockholder abstains, that will
have the same effect as votes cast AGAINST the
adoption of the merger agreement. Abstentions will have the same
effect as votes cast AGAINST approval of any
proposal to adjourn the Pride special meeting if necessary to
solicit additional proxies. Broker non-votes will have no effect
on approval of any proposal to adjourn the Pride special meeting
if necessary to solicit additional proxies.
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Pride common stock at the
Pride special meeting is necessary to constitute a quorum.
Broker non-votes and abstentions will be counted for purposes of
determining whether a quorum is present at the Pride special
meeting.
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Voting of
Shares by Holders of Record
Giving a proxy means that a Pride stockholder authorizes the
persons named in the proxy card to vote his or her shares at the
Pride special meeting in the manner he or she directs. A Pride
stockholder may submit a proxy or vote in person at the Pride
special meeting. Pride stockholders who hold shares of Pride
common stock in his or her name as a stockholder of record may
submit a proxy by signing, dating and returning their proxy card
in the preaddressed postage-paid envelope provided.
All shares of Pride common stock entitled to vote and
represented by properly completed proxies received prior to the
Pride special meeting, and not revoked, will be voted at the
Pride special meeting as instructed on the proxies. If Pride
stockholders do not indicate how their shares of Pride common
stock should be voted on a matter, the shares of Pride common
stock represented by their properly completed proxy will be
voted as the Pride board of directors recommends and, therefore,
FOR the adoption of the merger agreement and
FOR any proposal to adjourn the special meeting if
necessary to solicit additional proxies.
Voting of
Shares Held in Street Name
If a Pride stockholders shares are held in an account at a
broker or through another nominee, he or she must instruct the
broker or other nominee on how to vote such shares by following
the instructions that the broker or other nominee provides with
these proxy materials. Most brokers offer the ability for
stockholders to submit voting instructions by mail by completing
a voting instruction card, by telephone and via the Internet.
If voting instructions are not provided to the broker, shares
will not be voted on any proposal on which the broker does not
have discretionary authority to vote. This is referred to in
this proxy statement/prospectus and in general as a broker
non-vote. In these cases, the broker or other nominee can
register the Pride stockholders shares as being present at
the Pride special meeting for purposes of determining a quorum,
but will not be able to vote the shares on those matters for
which specific authorization is required. Under the current
rules of the New York Stock Exchange, brokers do not have
discretionary authority to vote on the proposal to adopt the
merger agreement. Therefore, a broker non-vote will have the
same effect as a vote AGAINST adoption of the merger
agreement.
If a Pride stockholder holds shares through a broker or other
nominee and wishes to vote such shares in person at the Pride
special meeting, he or she must obtain a proxy from his or her
broker or other nominee and present it to the inspector of
election with the ballot when voting at the Pride special
meeting.
Revoking
a Proxy
A Pride stockholder may revoke a proxy previously submitted by
such stockholder at any time prior to the voting thereof at the
Pride meeting by (i) filing a written revocation with the
Secretary of Pride prior to the voting of such proxy,
(ii) giving a duly executed proxy bearing a later date or
(iii) attending the Pride special meeting and voting in
person. Attendance by a stockholder at the Pride special meeting
will not itself revoke his or her proxy. If you hold your shares
in the name of a bank, broker or other nominee, you should
follow the instructions provided by your bank, broker or nominee
in revoking your previously granted proxy.
Tabulation
of Votes
Pride will appoint an Inspector of Election for the Pride
special meeting to tabulate affirmative and negative votes and
abstentions.
Stock
Ownership of and Voting by Pride Directors and Executive
Officers
At the close of business on March 31, 2011 the directors
and executive officers of Pride and their affiliates
beneficially owned and were entitled to
vote 744,520 shares of Pride common stock,
collectively representing less than 1% of the shares of Pride
common stock outstanding and entitled to vote on that date. The
directors and executive officers of Pride have each indicated
that they expect to vote FOR the proposal
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to adopt the merger agreement and FOR any
proposal to authorize the Pride board of directors, in its
discretion, to adjourn the special meeting if necessary to
solicit additional proxies.
Solicitation
The solicitation of proxies from Pride stockholders is made on
behalf of the Pride board of directors. Pride and Ensco will
each bear their own costs and expenses, including with respect
to printing and mailing this proxy statement/prospectus and
payment of fees to the SEC. Pride will pay the costs of
soliciting and obtaining proxies from Pride stockholders,
including the cost of reimbursing brokers, banks and other
financial institutions for forwarding proxy materials to their
customers. Proxies may be solicited, without extra compensation,
by Pride officers and employees by mail, telephone, fax,
personal interviews or other methods of communication.
Pride has engaged Innisfree M&A Incorporated to assist it
in the distribution and solicitation of proxies. Pride has
agreed to pay Innisfree M&A Incorporated a fee of $65,000
and an additional monthly fee of $35,000, plus payment of
certain fees and expenses for its services to solicit proxies.
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SHAREHOLDER
PROPOSALS
Ensco
2011 Annual General Meeting and Shareholder Proposals
The 2011 annual general meeting of Ensco shareholders will be
held on May 24, 2011. Ensco shareholders intending to
present a proposal at the 2011 annual general meeting must have
delivered such proposal to Enscos principal executive
offices, in writing and in accordance with SEC
Rule 14a-8,
no later than December 10, 2010, for inclusion in the proxy
statement related to that meeting (a different deadline may
apply if Ensco changes the date of its 2011 annual general
meeting to later than June 24, 2011). The proposal should
have been delivered to Enscos Company Secretary by
certified mail, return receipt requested.
In addition, apart from the SEC
Rule 14a-8
process described above, a shareholder whose proposal is not
included in the proxy statement related to the 2011 annual
general meeting, but who still intends to submit a proposal at
that meeting, is required by the Ensco Articles of Association
to deliver such proposal, in writing, to Enscos Company
Secretary at its principal executive offices and to provide
certain other information, not earlier than the close of
business on the 75th day and not later than the close of
business on the 50th day prior to the first anniversary of
the preceding years annual general meeting, subject to any
other requirements of law; provided, however, that (i) in
the event that the date of the annual general meeting is more
than 30 days before or more than 60 days after such
anniversary date, notice by the shareholder to be timely must be
so delivered not earlier than the close of business on the
75th day prior to the date of such annual general meeting
and not later than the close of business on the later of the
50th day prior to the date of such annual general meeting,
or (ii) if the first public announcement of the date of
such annual general meeting is less than 65 days prior to
the date of such annual general meeting, the 15th day
following the day on which public announcement of the date of
such meeting is first made. In the case of Enscos 2011
annual general meeting, the Ensco Articles of Association
provide that references to the anniversary date of the preceding
years annual general meeting shall mean the first
anniversary of May 28, 2010. Any such proposal must also
comply with the other provisions contained in the Ensco Articles
of Association relating to shareholder proposals, including
provision of the information specified in the Ensco Articles of
Association, such as information concerning the nominee of the
proposal, and the shareholder and the beneficial owner, as the
case may be. Any proposals that do not meet the requirements set
forth in the Ensco Articles of Association, other than proposals
submitted in compliance with the SEC
Rule 14a-8,
will be declared out of order and will not be considered at
Enscos 2011 annual general meeting.
All proposals and notices should be delivered to the Company
Secretary, Ensco plc, 6 Chesterfield Gardens, London, England
W1J 5BQ.
Pride
2011 Annual Stockholder Meeting and Stockholder
Proposals
In light of the special meeting, Pride has cancelled the 2011
annual meeting of stockholders scheduled for May 19, 2011,
and the 2011 annual meeting may not be held if the merger is
completed in 2011. If the merger agreement is terminated or the
proposal to adopt the merger agreement is not approved by Pride
stockholders at the Pride special meeting, Pride intends to call
an annual meeting of stockholders promptly thereafter. If the
2011 annual meeting is held by June 19, 2011, to be
included in the proxy materials for Prides 2011 annual
meeting, stockholder proposals that are submitted for
presentation at that annual meeting and are otherwise eligible
for inclusion in the proxy statement must have been received by
Pride no later than December 6, 2010. Proxies granted in
connection with the 2011 annual meeting may confer discretionary
authority to vote on any stockholder proposal if notice of the
proposal is not received by Pride in accordance with the advance
notice requirements of Prides bylaws discussed below. A
different deadline may apply if Pride changes the date of its
meeting for this year more than 30 days from the
anniversary date of the 2010 annual meeting of Pride
stockholders.
Prides bylaws provide the manner in which stockholders may
give notice of business and director nominations to be brought
before an annual meeting. In order for an item to be properly
brought before the meeting by a stockholder, the stockholder
must be a holder of record at the time of the giving of notice
and must be entitled to vote at the annual meeting. The item to
be brought before the meeting must be a proper
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subject for stockholder action, and the stockholder must have
given timely advance written notice of the item. For notice to
be timely, it must be delivered to, or mailed and received at,
Prides principal office at least 90 days but not more
than 120 days prior to the first anniversary of the prior
years annual meeting date. Accordingly, if the 2011 annual
meeting is held by June 19, 2011, notice must have been
delivered or received by Pride no earlier than January 20,
2011 or later than February 19, 2011. If, however, the 2011
annual meeting is held after June 19, 2011, then notice of
an item to be brought before the 2011 annual meeting may be
timely if it is delivered or received not earlier than the close
of business on the 120th day and not later than the close
of business on the later of the 90th day prior to the date
of the annual meeting or, if less than 100 days prior
notice or public disclosure of the scheduled meeting date is
given or made, the 10th day following the earlier of the
day on which the notice of such meeting was mailed to
stockholders or the day on which such public disclosure was
made. The notice must set forth the information required by the
provisions of Prides bylaws dealing with stockholder
proposals and nominations of directors.
All notices should be directed to Brady K. Long, Secretary,
Pride International, Inc., 5847 San Felipe,
Suite 3300, Houston, Texas 77057. Under current SEC rules,
Pride is not required to include in its proxy statement any
candidate for election as a director nominated by a stockholder
using this process. If Pride chooses not to include such a
nominee in its proxy, the stockholder will be required to
distribute its own proxy materials in connection with its
solicitation of proxies with respect to that nominee.
LEGAL
MATTERS
The validity of the Class A ordinary shares represented by
Ensco ADSs to be issued in the merger will be passed upon for
Ensco by Baker & McKenzie LLP, London, England.
EXPERTS
The consolidated financial statements of Ensco plc and its
subsidiaries as of December 31, 2010 and 2009, and for each
of the years in the three-year period ended December 31,
2010, and managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2010 have been incorporated by reference
herein and in the registration statement in reliance upon the
reports of KPMG LLP, independent registered public accounting
firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Pride International,
Inc. as of December 31, 2010 and 2009, and for each of the
years in the three-year period ended December 31, 2010, and
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2010
have been incorporated by reference herein and in the
registration statement in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing.
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WHERE YOU
CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
Ensco and Pride file reports and other information with the SEC.
Ensco shareholders and Pride stockholders may read and copy
these reports, statements or other information filed by Ensco
and Pride at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the Public Reference Room. The SEC
filings of Ensco and Pride are also available to the public from
commercial document retrieval services and at the website
maintained by the SEC at
http://www.sec.gov.
Ensco has filed with the SEC a registration statement on
Form S-4
to register the Class A ordinary shares represented by
Ensco ADSs to be delivered to Pride stockholders pursuant to the
merger agreement. The ADS depositary has filed with the SEC a
registration statement on
Form F-6
to register the offering from time to time of Ensco ADSs. This
joint proxy statement/prospectus forms a part of the Ensco
registration statement on
Form S-4
and constitutes a prospectus of Ensco, in addition to being a
proxy statement of Ensco for its general meeting and of Pride
for its special meeting. For the avoidance of doubt, this joint
proxy statement/prospectus is not intended to be and is not a
prospectus for the purposes of the Prospectus Rules made under
Part 6 of the U.K. Financial Services and Markets Act 2000
(as set out in the U.K. FSA Handbook). The registration
statement, including the attached annexes, exhibits and
schedules, contains additional relevant information about Ensco
and Pride. As allowed by SEC rules, this joint proxy
statement/prospectus does not contain all the information Ensco
shareholders and Pride stockholders can find in the registration
statement or the exhibits to the registration statement.
The SEC allows Ensco and Pride to incorporate by
reference information into this joint proxy
statement/prospectus. This means that Ensco and Pride can
disclose important information to Ensco shareholders and Pride
stockholders by referring them to another document filed
separately with the SEC. The information incorporated by
reference is considered to be a part of this joint proxy
statement/prospectus, except for any information that is
superseded by information that is included directly in this
joint proxy statement/prospectus or incorporated by reference
subsequent to the date of this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Ensco and Pride have previously
filed with the SEC. They contain important information about
Ensco and Pride and the financial condition of each company.
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Ensco SEC Filings (File
No. 001-08097)
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Period and/or Date Filed
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Annual Report on
Form 10-K
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Fiscal year ended December 31, 2010
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Current Reports on
Form 8-K
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Filed on February 7, March 4, March 8,
March 16, March 23 and March 24, 2011
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Description of Ensco Class A ordinary shares and American
depositary shares contained in Enscos Current Report on
Form 8-K12B
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Filed on December 23, 2009
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Pride SEC Filings (File
No. 001-13289)
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Period and/or Date Filed
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Annual Report on
Form 10-K
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Fiscal year ended December 31, 2010
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Current Reports on
Form 8-K
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Filed on February 7 and March 4, 2011
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Description of Pride common stock (including related preferred
share purchase rights) contained in Prides Current Report
on
Form 8-K
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Filed on September 28, 2001
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In addition, Ensco and Pride incorporate by reference additional
documents that they may file or furnish with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this joint proxy statement/prospectus until
the latest of the date the Ensco general meeting is held, the
date the Pride special meeting is held or the date all sales of
Ensco ADSs by an affiliate of the exchange agent have been
completed (other than information furnished pursuant to
Item 2.02 or Item 7.01 of any Current Report on
Form 8-K
or exhibits filed under Item 9.01 relating to those Items,
unless expressly stated otherwise therein). These documents
include periodic reports, such as annual reports on
Form 10-K,
quarterly reports on
Form 10-Q
and current reports on
Form 8-K.
193
Ensco and Pride also incorporate by reference the merger
agreement attached to this joint proxy statement/prospectus as
Annex A.
Ensco has supplied all information contained in or incorporated
by reference into this joint proxy statement/prospectus relating
to Ensco, Delaware Sub and Merger Sub, and Pride has supplied
all information contained in this joint proxy
statement/prospectus relating to Pride.
Documents incorporated by reference are available to Ensco
shareholders and Pride stockholders without charge upon written
or oral request, excluding any exhibits to those documents,
unless the exhibit is specifically incorporated by reference as
an exhibit in this joint proxy statement/prospectus. Ensco
shareholders and Pride stockholders can obtain any of these
documents by requesting them in writing or by telephone from the
appropriate company at:
If you are an Ensco shareholder:
Ensco plc
Attention: Investor Relations
500 N. Akard, Suite 4300
Dallas, Texas 75201
(214) 397-3015
www.enscoplc.com
If you are a Pride stockholder:
Pride International, Inc.
Attention: Investor Relations
5847 San Felipe, Suite 3300
Houston, Texas 77057
(713) 789-1400
www.prideinternational.com
For Ensco shareholders and Pride stockholders to receive timely
delivery of the requested documents in advance of the Ensco
general meeting and the Pride special meeting, Ensco and Pride
should receive such request by no later than May 17, 2011.
Ensco shareholders and Pride stockholders also may obtain these
documents at the SECs website,
http://www.sec.gov,
and may obtain certain of these documents at Enscos
website under the Investors tab at www.enscoplc.com
and at Prides website under the Investors
Relations tab at www.prideinternational.com. Information
not filed with the SEC, but contained on the Ensco and Pride
websites is expressly not incorporated by reference into this
joint proxy statement/prospectus.
Ensco and Pride are not incorporating the contents of the
websites of the SEC, Ensco, Pride or any other person into this
joint proxy statement/prospectus. Ensco and Pride are providing
only the information about how to obtain certain documents that
are incorporated by reference into this joint proxy
statement/prospectus at these websites for the convenience of
Ensco shareholders and Pride stockholders.
Ensco and Pride have not authorized anyone to give any
information or make any representation about the merger or their
companies that is different from, or in addition to, that
contained in this joint proxy statement/prospectus or in any of
the materials that are incorporated into this joint proxy
statement/prospectus. Therefore, if anyone does give you
information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or
solicitations of offers to exchange or purchase, the securities
offered by this joint proxy statement/prospectus or the
solicitation of proxies is unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then
the offer presented in this joint proxy statement/prospectus
does not extend to you. The information contained in this joint
proxy statement/prospectus is accurate only as of the date of
this document unless the information specifically indicates that
another date applies.
194
ANNEX A
AGREEMENT
AND PLAN OF MERGER
among
ENSCO PLC,
ENSCO VENTURES LLC,
ENSCO INTERNATIONAL INCORPORATED
and
PRIDE INTERNATIONAL, INC.
Dated as of February 6, 2011
(composite as amended on March 1, 2011)
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Article 1 THE MERGER
|
|
|
A-1
|
|
Section 1.1
|
|
The Merger
|
|
|
A-1
|
|
Section 1.2
|
|
The Closing
|
|
|
A-2
|
|
Section 1.3
|
|
Certificate of Incorporation and Bylaws of the Surviving Entity
|
|
|
A-2
|
|
Section 1.4
|
|
Directors and Officers of the Surviving Entity
|
|
|
A-2
|
|
Section 1.5
|
|
Board of Directors of Parent
|
|
|
A-2
|
|
|
|
|
|
|
Article 2 CONVERSION OF SECURITIES
|
|
|
A-2
|
|
Section 2.1
|
|
Effect on Securities
|
|
|
A-2
|
|
Section 2.2
|
|
Exchange of Certificates
|
|
|
A-6
|
|
Section 2.3
|
|
Taking of Necessary Action; Further Action
|
|
|
A-10
|
|
Section 2.4
|
|
Withholding
|
|
|
A-10
|
|
Section 2.5
|
|
Associated Rights
|
|
|
A-10
|
|
|
|
|
|
|
Article 3 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
|
|
|
A-10
|
|
Section 3.1
|
|
Existence; Good Standing; Corporate Authority
|
|
|
A-10
|
|
Section 3.2
|
|
Authorization, Validity and Effect of Agreements
|
|
|
A-11
|
|
Section 3.3
|
|
Capitalization
|
|
|
A-11
|
|
Section 3.4
|
|
Significant Subsidiaries
|
|
|
A-11
|
|
Section 3.5
|
|
Compliance with Laws; Permits
|
|
|
A-12
|
|
Section 3.6
|
|
No Conflict
|
|
|
A-13
|
|
Section 3.7
|
|
SEC Documents
|
|
|
A-13
|
|
Section 3.8
|
|
Litigation
|
|
|
A-14
|
|
Section 3.9
|
|
Absence of Certain Changes
|
|
|
A-15
|
|
Section 3.10
|
|
Taxes
|
|
|
A-15
|
|
Section 3.11
|
|
Employee Benefit Plans
|
|
|
A-16
|
|
Section 3.12
|
|
Labor Matters
|
|
|
A-18
|
|
Section 3.13
|
|
Environmental Matters
|
|
|
A-18
|
|
Section 3.14
|
|
Intellectual Property
|
|
|
A-19
|
|
Section 3.15
|
|
Decrees, Etc
|
|
|
A-19
|
|
Section 3.16
|
|
Insurance
|
|
|
A-19
|
|
Section 3.17
|
|
No Brokers
|
|
|
A-20
|
|
Section 3.18
|
|
Recommendation of Board of Directors; Opinion of Financial
Advisor
|
|
|
A-20
|
|
Section 3.19
|
|
Parent Share Ownership
|
|
|
A-20
|
|
Section 3.20
|
|
Vote Required
|
|
|
A-20
|
|
Section 3.21
|
|
Ownership of Drilling Units
|
|
|
A-20
|
|
Section 3.22
|
|
Undisclosed Liabilities
|
|
|
A-21
|
|
Section 3.23
|
|
Certain Contracts
|
|
|
A-21
|
|
Section 3.24
|
|
Capital Expenditure Program
|
|
|
A-22
|
|
Section 3.25
|
|
Derivative Transactions
|
|
|
A-22
|
|
Section 3.26
|
|
Disclosure Controls and Procedures
|
|
|
A-23
|
|
Section 3.27
|
|
Affiliate Transactions
|
|
|
A-23
|
|
Section 3.28
|
|
Company Rights Agreement
|
|
|
A-23
|
|
Section 3.29
|
|
State Anti-Takeover Statutes
|
|
|
A-23
|
|
Section 3.30
|
|
Disclaimer
|
|
|
A-24
|
|
A-i
|
|
|
|
|
|
|
Article 4 REPRESENTATIONS AND WARRANTIES OF
PARENT,
DELAWARE SUB AND MERGER SUB
|
|
|
A-24
|
|
Section 4.1
|
|
Existence; Good Standing; Corporate Authority
|
|
|
A-24
|
|
Section 4.2
|
|
Authorization, Validity and Effect of Agreements
|
|
|
A-25
|
|
Section 4.3
|
|
Capitalization
|
|
|
A-25
|
|
Section 4.4
|
|
Significant Subsidiaries
|
|
|
A-26
|
|
Section 4.5
|
|
Compliance with Laws; Permits
|
|
|
A-26
|
|
Section 4.6
|
|
No Conflict
|
|
|
A-27
|
|
Section 4.7
|
|
SEC Documents
|
|
|
A-27
|
|
Section 4.8
|
|
Litigation
|
|
|
A-28
|
|
Section 4.9
|
|
Absence of Certain Changes
|
|
|
A-28
|
|
Section 4.10
|
|
Taxes
|
|
|
A-29
|
|
Section 4.11
|
|
Employee Benefit Plans
|
|
|
A-30
|
|
Section 4.12
|
|
Labor Matters
|
|
|
A-31
|
|
Section 4.13
|
|
Environmental Matters
|
|
|
A-32
|
|
Section 4.14
|
|
Intellectual Property
|
|
|
A-32
|
|
Section 4.15
|
|
Decrees, Etc
|
|
|
A-33
|
|
Section 4.16
|
|
Insurance
|
|
|
A-33
|
|
Section 4.17
|
|
No Brokers
|
|
|
A-33
|
|
Section 4.18
|
|
Recommendation of Board of Directors; Opinion of Financial
Advisor
|
|
|
A-33
|
|
Section 4.19
|
|
Company Share Ownership
|
|
|
A-33
|
|
Section 4.20
|
|
Vote Required
|
|
|
A-34
|
|
Section 4.21
|
|
Ownership of Drilling Units
|
|
|
A-34
|
|
Section 4.22
|
|
Undisclosed Liabilities
|
|
|
A-34
|
|
Section 4.23
|
|
Certain Contracts
|
|
|
A-34
|
|
Section 4.24
|
|
Capital Expenditure Program
|
|
|
A-35
|
|
Section 4.25
|
|
Derivative Transactions
|
|
|
A-35
|
|
Section 4.26
|
|
Disclosure Controls and Procedures
|
|
|
A-36
|
|
Section 4.27
|
|
Affiliate Transactions
|
|
|
A-36
|
|
Section 4.28
|
|
Disclaimer
|
|
|
A-36
|
|
|
|
|
|
|
Article 5 COVENANTS
|
|
|
A-37
|
|
Section 5.1
|
|
Conduct of Company and Parent Business
|
|
|
A-37
|
|
Section 5.2
|
|
No Solicitation by the Company
|
|
|
A-40
|
|
Section 5.3
|
|
Meetings of Shareholders to Consider the Merger
|
|
|
A-42
|
|
Section 5.4
|
|
Filings; Reasonable Best Efforts, Etc
|
|
|
A-43
|
|
Section 5.5
|
|
Inspection
|
|
|
A-44
|
|
Section 5.6
|
|
Publicity
|
|
|
A-44
|
|
Section 5.7
|
|
Registration Statements
|
|
|
A-45
|
|
Section 5.8
|
|
Listing Application
|
|
|
A-46
|
|
Section 5.9
|
|
Rule 16b-3 Approval
|
|
|
A-46
|
|
Section 5.10
|
|
Expenses
|
|
|
A-46
|
|
Section 5.11
|
|
Indemnification and Insurance
|
|
|
A-47
|
|
Section 5.12
|
|
Employee Matters
|
|
|
A-48
|
|
Section 5.13
|
|
Financing
|
|
|
A-49
|
|
Section 5.14
|
|
Company Rights Agreement
|
|
|
A-51
|
|
Section 5.15
|
|
Deferred Prosecution Agreement
|
|
|
A-52
|
|
Section 5.16
|
|
No Solicitation by Parent
|
|
|
A-52
|
|
A-ii
|
|
|
|
|
|
|
Article 6 CONDITIONS
|
|
|
A-53
|
|
Section 6.1
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
|
|
A-53
|
|
Section 6.2
|
|
Conditions to Obligation of the Company to Effect the Merger
|
|
|
A-54
|
|
Section 6.3
|
|
Conditions to Obligation of Parent and Merger Sub to Effect the
Merger
|
|
|
A-55
|
|
|
|
|
|
|
Article 7 TERMINATION
|
|
|
A-55
|
|
Section 7.1
|
|
Termination by Mutual Consent
|
|
|
A-55
|
|
Section 7.2
|
|
Termination by Parent or the Company
|
|
|
A-55
|
|
Section 7.3
|
|
Termination by the Company
|
|
|
A-56
|
|
Section 7.4
|
|
Termination by Parent
|
|
|
A-56
|
|
Section 7.5
|
|
Effect of Termination
|
|
|
A-57
|
|
Section 7.6
|
|
Extension; Waiver
|
|
|
A-59
|
|
|
|
|
|
|
Article 8 GENERAL PROVISIONS
|
|
|
A-59
|
|
Section 8.1
|
|
Nonsurvival of Representations, Warranties and Agreements
|
|
|
A-59
|
|
Section 8.2
|
|
Notices
|
|
|
A-59
|
|
Section 8.3
|
|
Assignment; Binding Effect; Benefit
|
|
|
A-60
|
|
Section 8.4
|
|
Entire Agreement
|
|
|
A-60
|
|
Section 8.5
|
|
Amendments
|
|
|
A-60
|
|
Section 8.6
|
|
Governing Law
|
|
|
A-60
|
|
Section 8.7
|
|
Counterparts
|
|
|
A-61
|
|
Section 8.8
|
|
Headings
|
|
|
A-61
|
|
Section 8.9
|
|
Interpretation
|
|
|
A-61
|
|
Section 8.10
|
|
Waivers
|
|
|
A-63
|
|
Section 8.11
|
|
Incorporation of Exhibits
|
|
|
A-63
|
|
Section 8.12
|
|
Severability
|
|
|
A-63
|
|
Section 8.13
|
|
Enforcement of Agreement
|
|
|
A-63
|
|
Section 8.14
|
|
Waiver of Jury Trial
|
|
|
A-64
|
|
Section 8.15
|
|
No Recourse
|
|
|
A-64
|
|
|
|
|
|
|
Exhibit A Certificate of Incorporation of the
Surviving Entity
|
|
|
|
|
A-iii
GLOSSARY
OF DEFINED TERMS
Capitalized terms used but not previously defined shall have the
meanings set forth in the section identified below.
|
|
|
|
|
Defined Term
|
|
Section
|
|
Action
|
|
|
Section 5.11(a)
|
|
ADS Depositary
|
|
|
Section 4.3
|
|
Affected Employees
|
|
|
Section 5.12(a)
|
|
Affiliate
|
|
|
Section 3.27
|
|
Agreement
|
|
|
Preamble
|
|
Antitrust Laws
|
|
|
Section 5.4(c)
|
|
Applicable Laws
|
|
|
Section 3.5(a)
|
|
Assumed Option
|
|
|
Section 2.1(c)(iii)(A)
|
|
Assumed RSU Award
|
|
|
Section 2.1(c)(v)(B)
|
|
Book Entry Share
|
|
|
Section 2.1(c)(i)
|
|
Business Day
|
|
|
Section 8.9(k)
|
|
Cash-Only Shares
|
|
|
Section 2.1(c)(i)
|
|
Certificate of Merger
|
|
|
Section 1.1
|
|
Class A Ordinary Shares
|
|
|
Recitals
|
|
Class B Ordinary Shares
|
|
|
Section 4.3
|
|
Closing
|
|
|
Section 1.2
|
|
Closing Date
|
|
|
Section 1.2
|
|
Code
|
|
|
Section 2.1(c)(iii)(A)
|
|
Company
|
|
|
Preamble
|
|
Company Acquisition Proposal
|
|
|
Section 5.2(a)
|
|
Company Adverse Recommendation Change
|
|
|
Section 5.2(d)(i)
|
|
Company Benefit Plans
|
|
|
Section 3.11(a)
|
|
Company Certificate
|
|
|
Section 2.1(c)(i)
|
|
Company Common Stock
|
|
|
Recitals
|
|
Company Disclosure Schedule
|
|
|
Article 3
|
|
Company ESPP
|
|
|
Section 5.12(d)
|
|
Company Material Adverse Effect
|
|
|
Section 3.1
|
|
Company Material Contract
|
|
|
Section 3.23(a)
|
|
Company Permits
|
|
|
Section 3.5(b)
|
|
Company Permitted Liens
|
|
|
Section 3.21(a)
|
|
Company Preferred Stock
|
|
|
Section 3.3
|
|
Company Real Property
|
|
|
Section 3.5(d)
|
|
Company Reports
|
|
|
Section 3.7(a)
|
|
Company Representatives
|
|
|
Section 5.2(a)
|
|
Company Restricted Stock Awards
|
|
|
Section 2.1(c)(iv)
|
|
Company Rights
|
|
|
Section 2.5
|
|
Company Rights Agreement
|
|
|
Section 2.5
|
|
Company RSU Awards
|
|
|
Section 2.1(c)(v)
|
|
Company Stockholder Approval
|
|
|
Section 3.20
|
|
Company Stock Option
|
|
|
Section 2.1(c)(iii)(A)
|
|
Company Superior Proposal
|
|
|
Section 5.2(d)(ii)
|
|
Competition Action
|
|
|
Section 5.4(c)
|
|
Confidentiality Agreement
|
|
|
Section 5.2(a)
|
|
A-iv
|
|
|
|
|
Defined Term
|
|
Section
|
|
control
|
|
|
Section 3.27
|
|
Cutoff Date
|
|
|
Section 8.9(e)
|
|
Definitive Financing Agreements
|
|
|
Section 5.13(b)
|
|
Delaware Sub
|
|
|
Preamble
|
|
Deposit Agreement
|
|
|
Section 4.3
|
|
Derivative Transaction
|
|
|
Section 3.25(a)
|
|
DGCL
|
|
|
Recitals
|
|
Dissenting Shares
|
|
|
Section 2.1(c)(vii)
|
|
Dissenting Stockholder
|
|
|
Section 2.1(c)(vii)
|
|
DLLCA
|
|
|
Recitals
|
|
Effective Time
|
|
|
Section 1.1
|
|
Environmental Laws
|
|
|
Section 3.13(a)
|
|
ERISA
|
|
|
Section 3.11(a)
|
|
ERISA Affiliate
|
|
|
Section 3.11(c)
|
|
Equity Compensation Exchange Ratio
|
|
|
Section 2.1(c)(i)
|
|
Exchange Act
|
|
|
Section 3.4
|
|
Exchange Agent
|
|
|
Section 2.2(a)
|
|
Exchange Fund
|
|
|
Section 2.2(a)
|
|
Exchange Ratio
|
|
|
Section 2.1(c)(i)
|
|
Excluded Shares
|
|
|
Section 2.1(c)(ii)
|
|
FCPA
|
|
|
Section 3.5(e)
|
|
Fee
|
|
|
Section 7.5(b)
|
|
Final Parent Stock Price
|
|
|
Section 2.1(c)(i)
|
|
Financing
|
|
|
Section 5.13(a)
|
|
Financing Commitments
|
|
|
Section 5.13(a)
|
|
Financing Sources
|
|
|
Section 5.13(a)
|
|
Form F-6
|
|
|
Section 5.7(a)
|
|
Form S-4
|
|
|
Section 5.7(a)
|
|
GAAP
|
|
|
Section 3.7(b)
|
|
Governmental Entity
|
|
|
Section 3.6(b)
|
|
Governmental Official
|
|
|
Section 3.5(e)
|
|
Hazardous Materials
|
|
|
Section 3.13(b)
|
|
HSR Act
|
|
|
Section 3.6(b)
|
|
Indemnified Party(ies)
|
|
|
Section 5.11(a)
|
|
IRS
|
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Section 3.11(a)
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Liens
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Section 3.4
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Material Adverse Effect
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Section 8.9(c)
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Merger
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Recitals
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Merger Consideration
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Section 2.1(c)(i)
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Merger Sub
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Preamble
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New Financing Commitments
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Section 5.13(a)
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Non-U.S.
Antitrust Laws
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Section 5.4(a)(i)
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Non-U.S.
Company Benefit Plan
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Section 3.11(a)
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Non-U.S.
Parent Benefit Plan
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Section 4.11(a)
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NYSE
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Recitals
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OFAC
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Section 3.5(f)
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A-v
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Defined Term
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Section
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Parent
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Preamble
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Parent ADS
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Recitals
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Parent Adverse Recommendation Change
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Section 5.16(d)(i)
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Parent Alternative Proposal
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Section 5.16(a)
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Parent Benefit Plans
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Section 4.11(a)
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Parent Disclosure Schedule
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Article 4
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Parent Material Adverse Effect
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Section 4.1
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Parent Material Contract
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Section 4.23(a)
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Parent Options
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Section 4.3
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Parent Permits
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Section 4.5(b)
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Parent Permitted Liens
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Section 4.21(a)
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Parent Real Property
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Section 4.5(d)
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Parent Representatives
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Section 5.16(a)
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Parent Reports
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Section 4.7(a)
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Parent Shareholder Approval
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Section 4.20
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Parent Superior Proposal
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Section 5.16(d)(ii)
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Parent UK Prospectus
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Section 5.7(d)(i)
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Per Share Cash-Only Additional Cash Amount
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Section 2.1(c)(i)
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Per Share Cash Amount
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Section 2.1(c)(i)
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Per Share Stock Amount
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Section 2.1(c)(i)
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Person
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Section 3.5(e)
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PFIC
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Section 4.10(b)
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Proxy Statement/Prospectus
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Section 5.7(a)
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Regulatory Filings
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Section 3.6(b)
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Required Jurisdiction
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Section 6.1(b)(iii)
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Returns
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Section 3.10(a)
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Rule 16b-3
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Section 5.9
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Sarbanes-Oxley Act
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Section 3.7(a)
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SEC
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Section 3.7(a)
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Securities Act
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Section 3.6(b)
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Significant Subsidiary
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Section 3.4
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Subsidiary
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Section 8.9(d)
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Surviving Entity
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Section 1.1
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tax(es)
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Section 3.10(f)
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Third Party Provision
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Section 8.3
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to the knowledge of
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Section 8.9(b)
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UK FSMA
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Section 2.2(b)(i)
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UK Prospectus Rules
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Section 5.7(d)(i)
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UKLA
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Section 5.7(d)(i)
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U.S. Company Benefit Plan
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Section 3.11(a)
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U.S. Parent Benefit Plan
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Section 4.11(a)
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A-vi
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this
Agreement) dated as of
February 6, 2011, is by and among Ensco plc, a public
limited company organized under the laws of England and Wales
(Parent), Pride International, Inc., a
Delaware corporation (the Company),
ENSCO Ventures LLC, a Delaware limited liability company and an
indirect, wholly owned subsidiary of Parent (Merger
Sub), and ENSCO International Incorporated, a
Delaware corporation and an indirect, wholly-owned subsidiary of
Parent (Delaware Sub).
RECITALS
A. The Company is a Delaware corporation with its
outstanding shares of common stock, par value $0.01 per share
(the Company Common Stock), listed and
traded on the New York Stock Exchange (the
NYSE). Parent is a public limited
company organized under the laws of England and Wales with
outstanding American Depositary Shares (each, a
Parent ADS), representing Class A
ordinary shares, nominal value $0.10 per share
(Class A Ordinary Shares), listed
and traded on the NYSE. Merger Sub is a Delaware limited
liability company and indirect, wholly owned subsidiary of
Parent newly formed for the purposes of effecting the merger
(the Merger) of Merger Sub with and
into the Company, with the Company as the surviving entity, in
accordance with the provisions of this Agreement and the
applicable provisions of the General Corporation Law of the
State of Delaware (the DGCL) and the
Delaware Limited Liability Company Act (the
DLLCA).
B. The Board of Directors of the Company has
(i) determined that it is in the best interests of the
Company and the stockholders of the Company to enter into this
Agreement with Parent, Delaware Sub and Merger Sub,
(ii) approved and declared advisable this Agreement in
accordance with the DGCL and (iii) resolved to recommend
the adoption of this Agreement by the stockholders of the
Company, in each case upon the terms and subject to the
conditions stated herein.
C. The Board of Directors of Parent has approved this
Agreement providing for the Merger in accordance with the DGCL
and the DLLCA and has resolved to recommend the approval by the
shareholders of Parent of the delivery of Parent ADSs in
accordance with the rules of the NYSE, in each case upon the
terms and subject to the conditions stated herein.
D. The sole member of Merger Sub has approved this
Agreement providing for the Merger in accordance with the DGCL
and the DLLCA, upon the terms and subject to the conditions
stated herein.
E. The Board of Directors of Delaware Sub has approved this
Agreement providing for the payment of certain fees, under
certain conditions, to induce the Company to enter into this
Agreement for the benefit of Parent and Delaware Sub, upon the
terms and subject to the conditions stated herein.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The
Merger. Subject to the provisions of this
Agreement, a certificate of merger (the Certificate
of Merger) shall be duly prepared and executed in
accordance with the relevant provisions of the DGCL and the
DLLCA and thereafter delivered to the Secretary of State of the
State of Delaware for filing, as provided in the DGCL and the
DLLCA, on the Closing Date. The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware or at such time thereafter as
is agreed upon in writing by Parent and the Company and provided
in the Certificate of Merger (the Effective
Time). At the Effective Time, Merger Sub shall be
merged with and into the Company and the separate existence of
Merger Sub shall cease and the Company shall continue as the
surviving entity in the Merger. The Merger will have the effects
set forth in the DGCL and the DLLCA. As used in this Agreement,
A-1
Surviving Entity shall mean the
Company, at and after the Effective Time, as the surviving
entity in the Merger.
Section 1.2 The
Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the Merger (the
Closing) shall take place (a) at
the offices of Baker & McKenzie LLP, 100 New Bridge
Street, London EC4V 6JA, United Kingdom, at 2:00 p.m.,
local time, on the first Business Day immediately following the
day on which all of the conditions set forth in Article 6
have been satisfied or waived (by the party entitled to waive
the condition) (except for those conditions that by their nature
cannot be satisfied until the Closing, but subject to the
satisfaction or waiver of those conditions) or (b) at such
other time, date or place as the parties may agree. The date on
which the Closing occurs is referred to as the
Closing Date.
Section 1.3 Certificate
of Incorporation and Bylaws of the Surviving
Entity. As of the Effective Time, the Certificate
of Incorporation of the Company shall be amended as set forth in
Exhibit A and, as so amended, shall be the
certificate of incorporation of the Surviving Entity, until duly
amended in accordance with the provisions thereof and the DGCL.
The Bylaws of the Company shall be the bylaws of the Surviving
Entity, until duly amended in accordance with the provisions
thereof and the DGCL.
Section 1.4 Directors
and Officers of the Surviving Entity. The
officers of Merger Sub immediately prior to the Effective Time
shall be the directors and officers of the Surviving Entity from
and after the Effective Time, until their successors shall be
elected and qualified or appointed, as the case may be, or their
earlier death, retirement, resignation or removal.
Section 1.5 Board
of Directors of Parent. Parent shall take such
actions as are necessary for the Parent Board of Directors to
expand the size of the Board of Directors of Parent and to
appoint two persons designated by the Company to fill such
vacancies, effective as of the Effective Time, to serve until
such persons successor is appointed or until such
persons death, retirement, resignation or removal by the
shareholders of Parent. Each designee shall be a current
non-employee director of the Company reasonably acceptable to
Parent, shall qualify as an independent director of Parent under
the listing rules of the NYSE, shall be appointed to such class
of directors as the Board of Directors of Parent may designate
and shall stand for election for the remaining portion of the
term of office, if any, for such class at the next annual
general meeting of shareholders of Parent for which a notice of
the meeting has not been sent at the time of the appointment.
The management of Parent shall recommend to the Nominating,
Governance and Compensation Committee of the Parent Board of
Directors that such designees be nominated for election at such
annual general meeting.
ARTICLE 2
CONVERSION
OF SECURITIES
Section 2.1 Effect
on Securities.
(a) Merger Sub Membership Interests. At
the Effective Time, by virtue of the Merger and without any
action on the part of any holder thereof, the membership
interests of Merger Sub issued and outstanding immediately prior
to the Effective Time shall, in the aggregate, be converted into
and become one thousand validly issued, fully paid and
nonassessable shares of common stock of the Surviving Entity.
(b) Parent Class A Ordinary
Shares. At the Effective Time, each Class A
Ordinary Share of Parent then issued and outstanding shall
remain issued, outstanding and unchanged.
(c) Company Securities.
(i) Company Common Stock. At the
Effective Time, by virtue of the Merger and without any action
on the part of any holder thereof (but subject to adjustment in
accordance with the provisions of Section 2.1(c)(viii)),
each share of Company Common Stock (other than Dissenting Shares
and Excluded Shares) that is issued and outstanding immediately
prior to the Effective Time shall be converted into and shall
thereafter represent the right to receive the combination of
(x) $15.60 in
A-2
cash (the Per Share Cash Amount) and
(y) 0.4778 (the Exchange Ratio)
Parent ADSs duly and validly issued against the deposit of an
equal number of Class A Ordinary Shares in accordance with
the Deposit Agreement (the Per Share Stock
Amount) (such combination of consideration
identified in clauses (x) and (y), and subject to the
following proviso, the Merger
Consideration); provided, however,
that, if determined by Parent in its reasonable discretion prior
to the mailing of the Proxy Statement/Prospectus as necessary or
advisable to comply with the UK Prospectus Rules, each Cash-Only
Share shall receive, in lieu of the Per Share Stock Amount, an
additional amount in cash equal to the net cash proceeds
attributable to the sale by the Exchange Agent pursuant to
Section 2.2(i) of the Parent ADSs constituting the Per
Share Stock Amount for such Cash-Only Share (the Per
Share Cash-Only Additional Cash Amount). At the
Effective Time, by virtue of the Merger and without any action
on the part of any holder thereof, all shares of Company Common
Stock shall cease to be outstanding and shall be canceled and
retired and shall cease to exist, and each certificate and
uncertificated book entry that immediately prior to the
Effective Time represented any shares of Company Common Stock
(other than Dissenting Shares and Excluded Shares) (as
applicable, a Company Certificate or
Book Entry Share) shall thereafter
represent only the right to receive the Merger Consideration
with respect to the shares of Company Common Stock formerly
represented thereby, and any dividends or other distributions to
which the holders thereof are entitled pursuant to
Section 2.2(c).
For purposes of this Agreement, each of the following terms has
the meaning set forth below:
Cash-Only Shares shall mean such
shares of Company Common Stock held of record or owned
beneficially by any person who is unable or fails to timely make
the certifications set forth in clause (1) of the
penultimate sentence of Section 2.2(b)(i); provided
that (x) such certification shall not be required to be
so made, and there shall be no Cash-Only Shares, if Parent
determines, in its reasonable discretion prior to the mailing of
the Proxy Statement/Prospectus, that such certifications are not
necessary or advisable to comply with the UK Prospectus Rules
and (y) if such certification is deemed necessary or
advisable by Parent in its reasonable discretion, such
certification must be delivered to the Exchange Agent,
(i) in the case of Book Entry Shares, within 10 Business
Days after the Exchange Agent provides notice and means after
the Closing Date pursuant to Section 2.2(b)(i) for
beneficial owners of Book Entry Shares to deliver an
agents message with respect to such Book Entry
Shares through the facilities of The Depository Trust Company
and (ii) in the case of certificated shares of Company
Common Stock, within six months after the Closing Date, or in
either case such later dates as determined by Parent in its
reasonable discretion; provided, however, that in the
case of clause (i), Parent shall extend the deadline by up to
two additional 10 Business Day periods if the Exchange Agent has
received certifications with respect to less than 90% of the
Book Entry Shares by the end of each 10 Business Day period.
Shares of Company Common Stock for which the certification is
not timely delivered will be treated as Cash-Only Shares
immediately following the applicable cut-off time for delivery
of such certification.
Equity Compensation Exchange Ratio
means the sum of (i) the Exchange Ratio plus (ii) the
quotient of (x) the Per Share Cash Amount divided by
(y) the Final Parent Stock Price, rounded to the nearest
ten thousandth.
Final Parent Stock Price means the
average of the closing prices of the Parent ADSs for the five
consecutive trading days ending three trading days prior to the
Closing Date.
(ii) Excluded Shares. At the Effective
Time, by virtue of the Merger, all shares of Company Common
Stock that are held by the Company or by Parent or Merger Sub or
by any wholly-owned Subsidiary of Parent or the Company
immediately prior to the Effective Time, in each case except for
any such shares held in a fiduciary capacity on behalf of third
parties, (collectively, the Excluded
Shares) shall be cancelled and retired and shall
cease to exist, and no Merger Consideration shall be paid or
payable in exchange therefor.
A-3
(iii) Company Stock Options.
(A) The Company shall take any and all action necessary to
provide that, at the Effective Time, each option to purchase
shares of Company Common Stock granted under a Company Benefit
Plan (other than purchase rights under the Company ESPP)
(Company Stock Option) that is
outstanding and unexercised immediately prior to the Effective
Time (including Company Stock Options that become exercisable in
connection with the transactions contemplated by this Agreement)
shall cease to represent a right to acquire shares of Company
Common Stock, and Parent shall assume each such Company Stock
Option (hereinafter an Assumed
Option), which shall, effective as of the
Effective Time, represent the right to purchase Parent ADSs,
subject to the terms of the applicable Company Benefit Plan and
Company Stock Option award agreement; provided, however,
that (1) the number of Parent ADSs purchasable upon
exercise of such Assumed Option shall be equal to the number of
shares of the Company Common Stock that were purchasable under
such Company Stock Option immediately prior to the Effective
Time multiplied by the Equity Compensation Exchange Ratio and
rounded down to the nearest whole Parent ADS, and (2) the
per share exercise price under such Assumed Option shall be
adjusted by dividing the per share exercise price under such
Company Stock Option immediately prior to the Effective Time by
the Equity Compensation Exchange Ratio and rounding up to the
nearest whole cent, each in compliance with the ratio
test and the spread test of the Treasury
Regulations under Section 424 of the U.S. Internal
Revenue Code of 1986, as amended (the
Code), in the event of Company Stock
Options that are intended to be treated as incentive stock
options within the meaning of Section 422 of the Code
and under Section 409A of the Code in the case of
non-qualified stock options.
(B) Any provision of this Agreement to the contrary
notwithstanding, any adjustment pursuant to Parents
assumption of the Company Stock Options shall be determined in a
manner so each Assumed Option (including Company Stock Options
assumed pursuant to Section 2.1(c)(iii)(A)) will be exempt
from Code Section 409A and the parties to this Agreement
shall agree to any adjustments to the foregoing to comply
therewith. Unless otherwise provided in the terms of the
relevant Company Stock Option award agreement, all Assumed
Options (including Company Stock Options assumed pursuant to
Section 2.1(c)(iii)(A)) shall continue to vest according to
the terms of the applicable Company Stock Option award
agreement. Following the Effective Time, no holder of a Company
Stock Option that becomes an Assumed Option (including Company
Stock Options assumed pursuant to Section 2.1(c)(iii)(A))
shall have any right to receive any shares of Company Common
Stock in respect of such option or any Merger Consideration.
(iv) Company Restricted Stock Awards. The
parties acknowledge that, as of the date hereof, no shares of
Company Common Stock are subject to awards of restricted stock
(Company Restricted Stock Awards) that
have been granted and have not yet vested under a Company
Benefit Plan.
(A) To the extent a Company Restricted Stock Award becomes
vested in connection with the transactions contemplated by this
Agreement, pursuant to the terms of the applicable Company
Benefit Plan, restricted stock award agreement or other
agreement between the Company and awardholder, each share of
Company Common Stock subject to such award will be treated at
the Effective Time the same as, and have the same rights and be
subject to the same conditions as, each share of Company Common
Stock described in Section 2.1(c)(i) above.
(B) To the extent Section 2.1(c)(iv)(A) above does not
apply to a Company Restricted Stock Award, each share of Company
Common Stock subject to a Company Restricted Stock Award will be
treated at the Effective Time the same as, and have the same
rights and be subject to the same conditions as, each share of
Company Common Stock described in Section 2.1(c)(i) above,
except as set forth in the applicable Company Restricted Stock
Award
A-4
agreement, the holder of such Company Restricted Stock Award
will receive the Per Share Cash Amount at the same time as other
holders of Company Common Stock and, with respect to the number
of Parent ADSs received by such holder, the Company Restricted
Stock Award shall continue to vest according to the conditions
set forth in, and be subject to such other terms of, the
applicable Company Benefit Plan and Company Restricted Stock
Award agreement; provided, however, that appropriate
modifications will be made to such agreements to comply with
Section 409A of the Code and to provide that, upon any
applicable taxable event, the awardholder may satisfy any tax
withholding obligations by transferring or selling to an
employee benefit trust designated by Parent a sufficient number
of Parent ADSs equal in value to such obligation. Prior to the
Effective Time, the Company, the Company Board of Directors and
Parent shall take all actions necessary under the Company
Benefit Plans and the award agreements thereunder and otherwise
to effectuate this Section 2.1(c)(iv)(B).
(v) Company Restricted Stock Unit
Awards. The Parties acknowledge that, as of the
date hereof, awards of 2,141,101 restricted stock units
representing Company Common Stock, whether subject to time-based
or performance-based vesting conditions, (Company
RSU Awards) have been granted and have not yet
vested under a Company Benefit Plan.
(A) To the extent a Company RSU Award becomes vested in
connection with the transactions contemplated by this Agreement,
pursuant to the terms of the applicable Company Benefit Plan,
restricted stock unit award agreement or other agreement between
the Company and awardholder, a number of shares of Company
Common Stock determined in accordance with the terms of the
applicable Company Benefit Plan and restricted stock unit award
agreement will be issued to the awardholder immediately prior to
the Effective Time and each such share will be treated at the
Effective Time the same as, and have the same rights and be
subject to the same conditions as, each share of Company Common
Stock described in Section 2.1(c)(i) above.
(B) The Company shall take all necessary action to provide
that each Company RSU Award that remains outstanding immediately
prior to the Effective Time after giving effect to
Section 2.1(c)(v)(A) above shall cease to represent a right
to acquire shares of Company Common Stock, and Parent shall
assume each such Company RSU Award (hereinafter an
Assumed RSU Award) which shall,
effective as of the Effective Time, represent the right to
acquire Parent ADSs, subject to the terms of the applicable
Company Benefit Plan and restricted stock unit award agreement;
provided, however, that the number of Parent ADSs
issuable upon vesting of such Assumed RSU Award shall be equal
to the number of shares of Company Common Stock that were
subject to the Company RSU Award immediately prior to the
Effective Time multiplied by the Equity Compensation Exchange
Ratio, with any fractional Parent ADS that results from such
calculation to be settled in cash when the related Assumed RSU
Award vests; and provided that appropriate modifications
will be made to the applicable restricted stock unit award
agreements to provide that, upon any applicable taxable event,
the awardholder may satisfy any tax withholding obligations by
transferring or selling to an employee benefit trust designated
by Parent a sufficient number of Parent ADSs equal in value to
such obligation. Prior to the Effective Time, the Company, the
Company Board of Directors and Parent shall take all actions
necessary under the Company Benefit Plans and the award
agreements thereunder and otherwise to effectuate this Section
2.1(c)(v)(B). Following the Effective Time, no holder of a
Company RSU Award that becomes an Assumed RSU Award shall have
any right to receive any shares of Company Common Stock in
respect of such Company RSU Award or any right to receive the
Merger Consideration.
(vi) Further Action. The Company and
Parent shall take all requisite action to implement and
effectuate the foregoing provisions of Section 2.1(c)(iii),
Section 2.1(c)(iv) and Section 2.1(c)(v).
(vii) Dissenting Shares. Shares of
Company Common Stock issued and outstanding immediately prior to
the Effective Time that are held by any record holder (a
Dissenting Stockholder)
A-5
who is entitled to demand and properly demands appraisal of such
shares pursuant to the provisions of Section 262 of the
DGCL are referred to in this Agreement as the
Dissenting Shares. Dissenting Shares
shall not be converted into or represent the right to receive
any Merger Consideration (along with any cash in lieu of
fractional Parent ADSs as provided in Section 2.2(e) and
any unpaid dividends and distributions with respect to such
Parent ADSs as provided in Section 2.2(c)) and the holders
thereof shall be entitled to only such rights as are granted by
Section 262 of the DGCL unless and until the Dissenting
Stockholder holding particular Dissenting Shares has failed to
perfect his, her or its right to appraisal under the DGCL in
respect of such shares or has effectively waived, withdrawn or
lost his, her or its demand for appraisal in respect of such
shares. If such Dissenting Stockholder has so failed to perfect
or has waived, withdrawn or lost his, her or its rights to
appraisal in respect of such shares, then such Dissenting Shares
shall cease to be Dissenting Shares and shall thereafter entitle
such Dissenting Stockholder to receive the Merger Consideration
as provided in Section 2.1(c)(i) in respect of such shares. The
Company shall comply with those provisions of Section 262
of the DGCL which are required to be performed by the Company
prior to the Effective Time to the reasonable satisfaction of
Parent. The Company shall give Parent (A) prompt notice of
any written demands for appraisal under the DGCL actually
received by the Company and (B) an opportunity to direct
all negotiations and proceedings with respect to demands for
appraisal under the DGCL. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment
with respect to demands for appraisal under the DGCL or offer to
settle or settle any such demands.
(viii) Certain Adjustments. If between
the date of this Agreement and the Effective Time, whether or
not permitted pursuant to the terms of this Agreement, the
outstanding Parent ADSs or the outstanding Class A Ordinary
Shares in respect thereof shall be changed by reason of any
reclassification, recapitalization, stock split,
split-up,
combination or exchanging of shares, merger, consolidation,
reorganization or other similar transaction, or any dividend or
distribution of Class A Ordinary Shares or other dividend
or distribution payable in other securities shall be declared
with a record date within such period, or any similar event
shall have occurred, the Merger Consideration, the Per Share
Cash Amount, the Exchange Ratio, the Per Share Cash-Only
Additional Cash Amount, the Equity Compensation Exchange Ratio,
the Final Parent Stock Price and any similarly dependent items,
as the case may be, shall be appropriately adjusted to provide
the holders of Company Common Stock, Company Stock Options,
Company Restricted Stock Awards and Company RSU Awards with the
same economic effect as was contemplated by this Agreement prior
to giving effect to such event.
(ix) Parent ADSs. Subject to
Section 2.2(h), Parent shall take all actions necessary to
ensure that no holder of shares of Company Common Stock
(including holders of Company Restricted Stock Awards), Assumed
RSU Awards or Assumed Options shall be obligated to pay
(i) any United Kingdom stamp duty, stamp duty reserve tax
or other similar United Kingdom governmental charge (or any
interest or penalties thereon) or (ii) any fee or other
charge or expense to the ADS Depositary, in each case in
connection with the delivery of Parent ADSs pursuant to the
Merger, the exercise of Assumed Options that become exercisable
for Parent ADSs in accordance with Section 2.1(c)(iii) or
the delivery of Parent ADSs pursuant to Section 2.1(c)(iv)
or Section 2.1(c)(v).
Section 2.2 Exchange
of Certificates.
(a) Exchange Fund. Prior to the Effective
Time, Parent shall appoint a commercial bank or trust company or
such other party as is reasonably satisfactory to the Company to
act as exchange agent hereunder for the purpose of exchanging
Company Certificates and Book Entry Shares for the Merger
Consideration (the Exchange Agent). At
or substantially concurrently with the Effective Time, Parent
shall or shall cause the Surviving Entity to (i)
(A) deposit with the Exchange Agent American Depositary
Receipts evidencing or (B) provide the Exchange Agent an
uncertificated Parent ADS book-entry representing the number of
Parent ADSs that are issuable pursuant to Section 2.1(c)
and (ii) deposit with the Exchange Agent cash representing
the aggregate cash consideration payable by Parent and the
Surviving Entity pursuant to Section 2.1(c), in each case
to be held by the Exchange Agent for the benefit
A-6
of the holders of shares of Company Common Stock. Such Parent
ADSs (and in the case of Parent ADSs held for Cash-Only Shares,
the net cash proceeds from their sale by the Exchange Agent
pursuant to Section 2.2(i)), together with any dividends or
distributions with respect thereto as provided in
Section 2.2(c), and such funds are referred to herein as
the Exchange Fund. The Exchange Agent,
pursuant to irrevocable instructions consistent with the terms
of this Agreement, shall deliver the Parent ADSs and the cash
portion of the aggregate Merger Consideration to be paid
pursuant to Section 2.1(c) out of the Exchange Fund, and
the Exchange Fund shall not be used for any other purpose
whatsoever. The Exchange Agent shall not be entitled to vote or
exercise any rights of ownership with respect to the Parent ADSs
held by it from time to time hereunder, except that it shall
receive and hold all dividends or other distributions paid or
distributed after the deposit of such Exchange Fund with respect
thereto for the account of Persons entitled thereto.
(b) Exchange Procedures.
(i) As soon as reasonably practicable after the Effective
Time and in any event not later than the second Business Day
following the Closing Date, Parent shall cause the Exchange
Agent to mail, and Parent shall and shall cause the Exchange
Agent to (x) make otherwise available, to each holder of
record of one or more shares of Company Common Stock as of
immediately prior to the Effective Time, a letter of transmittal
to be used to effect the exchange of such Company Common Stock
for the Merger Consideration payable in respect thereof, along
with instructions for using such letter of transmittal to effect
such exchange and (y) provide notice and means for
beneficial owners of Book Entry Shares to deliver an
agents message with respect to such Book Entry
Shares through the facilities of The Depository
Trust Company. The letter of transmittal (or the
instructions thereto) shall specify that delivery shall be
effected, and risk of loss and title to the shares of Company
Common Stock shall pass, only upon delivery thereof together
with (A) delivery of the corresponding Company Certificate
to the Exchange Agent or (B) receipt by the Exchange Agent
of an agents message with respect to Book
Entry Shares. Such letter of transmittal shall be in customary
form and have such other provisions as Parent may reasonably
specify, which, unless otherwise determined by Parent pursuant
to Section 2.1(c)(i), shall include provisions
(x) requiring each holder of record of a Company
Certificate (or the beneficial owner thereof through appropriate
and customary documentation and instructions) to certify that
such holder or beneficial owner (1) is either (a) not
a resident of the United Kingdom or (b) if a resident of
the United Kingdom, is a qualified investor within
the meaning of Section 86(7) of the UK Financial Services
and Markets Act 2000 (UK FSMA) or
(2) is a resident of the United Kingdom and not a
qualified investor within the meaning of
Section 86(7) of UK FSMA and (y) specifying that
shares of Company Common Stock for which the foregoing
certification is not timely delivered to the Exchange Agent will
be treated as Cash-Only Shares. Parent and the Exchange Agent
shall be entitled to conclusively rely on such certifications
without further inquiry but may conduct such inquiries as deemed
appropriate in their sole discretion.
(ii) Upon surrender to the Exchange Agent of a Company
Certificate for cancellation, together with a duly completed and
executed letter of transmittal and any other documents
reasonably required by Parent or the Exchange Agent, or receipt
by the Exchange Agent of an agents message
with respect to Book Entry Shares, (A) the holder of
Company Common Stock shall be entitled to receive in exchange
therefor a certificated American Depositary Receipt evidencing,
or an uncertificated Parent ADS book-entry representing, the
number of whole Parent ADSs, if any, and cash portion of the
Merger Consideration that such holder has the right to receive
pursuant to Section 2.1(c) (along with any cash in lieu of
fractional Parent ADSs as provided in Section 2.2(e) and
any unpaid dividends and distributions with respect to such
Parent ADSs as provided in Section 2.2(c)); and
(B) the Company Certificate or Book Entry Shares
represented by the agents message so
surrendered shall forthwith be cancelled. No interest shall be
paid or accrued on any Merger Consideration, cash in lieu of
fractional Parent ADSs or unpaid dividends and distributions, if
any, payable to holders of Company Common Stock.
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(iii) In the event of a transfer of ownership of Company
Common Stock that is not registered in the transfer records of
the Company, the Merger Consideration payable in respect of such
shares of Company Common Stock (along with any cash in lieu of
fractional Parent ADSs as provided in Section 2.2(e) and
any unpaid dividends and distributions with respect to such
Parent ADSs as provided in Section 2.2(c)) may be paid to a
transferee if the Company Certificate representing such shares
of Company Common Stock is presented to the Exchange Agent
accompanied by all documents required to evidence and effect
such transfer, including such signature guarantees as Parent or
the Exchange Agent may request, and to evidence that any
applicable stock transfer taxes have been paid.
(c) Distributions with Respect to Unexchanged
Shares. All Parent ADSs to be issued pursuant to
the Merger and all Class A Ordinary Shares represented
thereby shall be deemed issued and outstanding as of the
Effective Time; provided that no dividends or other
distributions with respect to Parent ADSs or Class A
Ordinary Shares represented thereby with a record date after the
Effective Time shall be paid to the former holder of any Company
Common Stock until such holder shall surrender such shares in
accordance with this Section 2.2. Subject to the effect of
Applicable Law: (i) at the time of the surrender of any
such shares of Company Common Stock for exchange in accordance
with the provisions of this Section 2.2, there shall be
paid to the surrendering holder, without interest, the amount of
dividends or other distributions (having a record date after the
Effective Time but on or prior to surrender and a payment date
on or prior to surrender) not theretofore paid with respect to
the number of whole Parent ADSs that such holder is entitled to
receive; and (ii) at the appropriate payment date and
without duplicating any payment made under clause (i)
above, there shall be paid to the surrendering holder, without
interest, the amount of dividends or other distributions (having
a record date after the Effective Time but on or prior to
surrender and a payment date subsequent to surrender) payable
with respect to the number of whole Parent ADSs that such holder
receives.
(d) No Further Ownership Rights in Company Common
Stock. The Merger Consideration delivered and
paid upon the surrender for exchange of shares of Company Common
Stock in accordance with the terms hereof (including any cash
paid pursuant to Section 2.2(c) or Section 2.2(e))
shall be deemed to have been delivered and paid in full
satisfaction of all rights pertaining to such shares of Company
Common Stock. At the Effective Time, the stock transfer books of
the Company shall be closed and from and after the Effective
Time, there shall be no further registration of transfers of the
shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, a
Company Certificate or Book Entry Share is presented to the
Surviving Entity for any reason, it shall be cancelled and
exchanged as provided in this Section 2.2.
(e) Treatment of Fractional Parent
ADSs. No American Depositary Receipt or scrip
representing fractional Parent ADSs or book-entry credit of the
same shall be issued in the Merger and, except as provided in
this Section 2.2(e), no dividend or other distribution,
stock split or interest shall relate to any such fractional
share, and such fractional share shall not entitle the owner
thereof to vote or to any other rights of a shareholder of
Parent. In lieu of any fractional Parent ADSs to which a former
holder of Company Common Stock would otherwise be entitled
(after taking into account all Company Certificates and Book
Entry Shares delivered by or on behalf of such holder), such
holder of shares of Company Common Stock surrendered in the
manner described in this Section 2.2 shall be paid an
amount in cash (without interest) determined by multiplying
(i) the Final Parent Stock Price by (ii) the fraction
of a Parent ADS to which such holder would otherwise be
entitled, in which case Parent shall make available to the
Exchange Agent, in addition to any other cash being provided to
the Exchange Agent pursuant to Section 2.2(a), the amount
of cash necessary to make such payments. The Parties acknowledge
that payment of cash consideration in lieu of issuing fractional
Parent ADSs represented thereby was not separately bargained for
consideration but represents merely a mechanical rounding off
for purposes of simplifying the problems that would otherwise be
caused by the delivery of fractional Parent ADSs and
Class A Ordinary Shares represented thereby.
(f) Termination of Exchange Fund. Any
portion of the Exchange Fund and cash held by the Exchange Agent
in accordance with the terms of this Section 2.2 that
remains unclaimed by the former
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stockholders of the Company as of the date that is twelve months
following the Effective Time shall be delivered to Parent, upon
demand. Thereafter, any former stockholders of the Company,
other than Dissenting Stockholders, who have not theretofore
complied with the provisions of this Section 2.2 shall look
only to Parent and the Surviving Entity for payment of their
claim for Merger Consideration, any cash in lieu of fractional
Parent ADSs and any dividends or distributions with respect to
Parent ADSs or Class A Ordinary Shares represented thereby
(all without interest).
(g) No Liability. None of Parent, the
Company, the Surviving Entity, the Exchange Agent or any other
Person shall be liable to any former holder of shares of Company
Common Stock for any amount properly delivered to any public
official pursuant to any applicable abandoned property, escheat
or similar law. Any amounts remaining unclaimed by former
holders of Company Common Stock for a period of three years
following the Effective Time (or such earlier date immediately
prior to the time at which such amounts would otherwise escheat
to or become property of any governmental entity) shall, to the
extent permitted by Applicable Law, become the property of
Parent, free and clear of any claims or interest of any such
holders or their successors, assigns or personal representatives
previously entitled thereto.
(h) Lost, Stolen, or Destroyed Company
Certificates. If any Company Certificate shall
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Company
Certificate to be lost, stolen or destroyed, and, if required by
Parent or the Exchange Agent, the posting by such Person of a
bond, in such reasonable amount as Parent or the Exchange Agent
may direct, as indemnity against any claims that may be made
against it with respect to such Company Certificate, the
Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Company Certificate the Merger Consideration (along
with any cash in lieu of fractional Parent ADSs pursuant to
Section 2.2(e) and any unpaid dividends and distributions
pursuant to Section 2.2(c)) deliverable with respect
thereto pursuant to this Agreement.
(i) Sales for Cash-Only Shares. The
Exchange Agent shall be instructed by Parent to (i) cause
the Parent ADSs it receives and holds in respect of Cash-Only
Shares to be sold on the NYSE and to hold and distribute the net
cash proceeds from such sale (after deduction of applicable
commissions and taxes) for the holders of Cash-Only Shares upon
their due surrender to the Exchange Agent, and (ii) to
effect such sale of the applicable Parent ADSs at the following
times: (a) in the case of holders of Company Common Stock
who timely certify that they are residents of the United Kingdom
and are not qualified investors (within the meaning
of Section 86(7) of the UK FSMA), promptly following the
receipt of such certification (at such time as determined by the
Exchange Agent but no less frequently than once a week), and
(b) in the case of holders of Company Common Stock who fail
to timely deliver the applicable certification contemplated in
clause (1) of the penultimate sentence of
Section 2.2(b)(i), promptly after the applicable cut-off
time for delivery of such certification (as contemplated in the
definition of Cash-Only Shares). Parent shall take
such actions as are necessary or advisable to cause the sale of
such Parent ADSs by the Exchange Agent to be registered under
the Securities Act to the extent required by applicable law and
shall pay any applicable fees and expenses of Parent and the
Exchange Agent (other than commissions and taxes payable by the
holders) in connection with such sales. No dividends or other
distributions with respect to Parent ADSs or Class A
Ordinary Shares represented thereby with a record date after the
Effective Time shall be paid to the former holder of any
Cash-Only Shares until such holder shall surrender such shares
in accordance with this Section 2.2. Subject to the effect
of Applicable Law: (i) at the time of the surrender of any
such Cash-Only Shares for payment in accordance with the
provisions of this Section 2.2, there shall be paid to the
surrendering holder of Cash-Only Shares, without interest, the
amount of dividends or other distributions (having a record date
after the Effective Time but on or prior to the date of sale of
the applicable Parent ADSs pursuant to this Section 2.2(i)
and a payment date on or prior to surrender) not theretofore
paid with respect to the number of whole Parent ADSs sold by the
Exchange Agent pursuant to this Section 2.2(i) in respect
of such Cash-Only Shares; and (ii) at the appropriate
payment date and without duplicating any payment made under
clause (i) above, there shall be paid to the surrendering
holder, without interest, the amount of dividends or other
distributions (having a record date after the Effective Time but
on or prior to the date of sale of the applicable Parent ADSs
pursuant to this Section 2.2(i) and a payment date
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subsequent to surrender) payable with respect to the number of
whole Parent ADSs sold by the Exchange Agent pursuant to this
Section 2.2(i) in respect of such Cash-Only Shares.
Section 2.3 Taking
of Necessary Action; Further Action. Upon the
terms and subject to the conditions of this Agreement, each of
the Parties shall use reasonable best efforts to take all such
actions as may be necessary or appropriate in order to
effectuate the Merger under the DGCL and the DLLCA as promptly
as commercially practicable. In addition, the Parties agree to
execute and deliver any additional instruments necessary to
consummate the transactions contemplated by this Agreement. If,
at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Entity with full right,
title and possession to all assets, real estate and other
property, rights, privileges, powers and franchises of either of
Merger Sub or the Company, the directors and officers of the
Surviving Entity are fully authorized, in the name of the
Surviving Entity or otherwise to take, and shall take, all such
lawful and necessary action.
Section 2.4 Withholding. Each
of Parent, the Surviving Entity and the Exchange Agent shall be
entitled, without duplication, to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to
any former holder of Company Common Stock such amounts as
required under the Code or any provision of state, local or
foreign tax law, with respect to the making of such payment. Any
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the former holder of Company
Common Stock in respect of whom such deduction and withholding
was made; provided that such amounts are duly and timely
paid over to the appropriate tax authority.
Section 2.5 Associated
Rights. References in Article 2 and
Section 5.1 of this Agreement to Company Common Stock shall
include, unless the context requires otherwise, the associated
rights (the Company Rights)
distributed to the holders of Company Common Stock pursuant to
the Rights Agreement, dated as of September 13, 2001,
between the Company and American Stock Transfer and
Trust Company, as rights agent, as amended to date (the
Company Rights Agreement).
ARTICLE 3
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as set forth in (i) other than with respect to
Section 3.1, Section 3.2 and Section 3.3, the
Company Reports filed on or after December 31, 2009 and
prior to the date of this Agreement (excluding any risk factor
disclosure contained in any such Company Report under the
heading Risk Factors or Forward-Looking
Statements or similar heading and excluding information
set forth in any exhibit thereto), to the extent a matter is
disclosed in such Company Reports in such a way as to make its
relevance to the applicable representation or warranty
reasonably apparent, and (ii) the disclosure schedule
delivered to Parent by the Company at or prior to the execution
hereof (the Company Disclosure
Schedule) (each section of which qualifies the
correspondingly numbered representation, warranty or covenant to
the extent specified therein and such other representations,
warranties or covenants to the extent a matter in such section
is disclosed in such a way as to make its relevance to such
other representation, warranty or covenant reasonably apparent),
the Company represents and warrants to Parent, Delaware Sub and
Merger Sub that:
Section 3.1 Existence;
Good Standing; Corporate Authority. The Company
is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. To the extent
such concept or similar concept exists in the relevant
jurisdiction, the Company is duly qualified to do business and
is in good standing under the laws of any jurisdiction in which
the character of the properties owned or leased by it therein or
in which the transaction of its business makes such
qualification necessary, except where the failure to be so
qualified or in good standing does not and is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on the Company (a Company Material
Adverse Effect). The Company has all requisite
corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted. The
copies of the Companys Certificate of Incorporation and
Bylaws previously made available to Parent are true and correct
and contain all amendments as of the date hereof.
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Section 3.2 Authorization,
Validity and Effect of Agreements. The Company
has the requisite corporate power and authority to execute and
deliver this Agreement and all other agreements and documents
contemplated hereby to which it is a party. The execution,
delivery and performance by the Company of this Agreement and
the consummation by the Company of the transactions contemplated
hereby have been duly authorized by the Board of Directors of
the Company, and no other corporate proceedings on the part of
the Company are necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby, other than
the approval referred to in Section 3.20. This Agreement
has been duly and validly executed and delivered by the Company
and, assuming due authorization, execution and delivery of this
Agreement by Parent, Delaware Sub and Merger Sub, constitutes
the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors
rights and general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
Section 3.3 Capitalization. As
of the date of this Agreement, the authorized capital stock of
the Company consists of 400,000,000 shares of Company
Common Stock and 50,000,000 shares of preferred stock, par
value $0.01 per share (Company Preferred
Stock). As of February 2, 2011, there were
176,833,366 shares of Company Common Stock issued and
outstanding, including no Company Restricted Stock Awards, no
shares of Company Preferred Stock outstanding, and
3,647,194 shares of Company Common Stock reserved for
issuance upon exercise of outstanding Company Stock Options,
2,380,442 shares of Company Common Stock reserved for
issuance upon vesting of outstanding Company RSU Awards and up
to 752,485 shares of Company Common Stock subject to
outstanding purchase rights under the Company ESPP. As of
February 2, 2011, there were 1,221,905 shares of
Company Common Stock held in treasury of the Company and no
shares of Company Common Stock held by Subsidiaries of the
Company. From February 2, 2011 to the date of this
Agreement, no additional shares of Company Common Stock have
been issued (other than pursuant to Company Stock Options,
Company RSU Awards
and/or
purchase rights under the Company ESPP that were outstanding as
of February 2, 2011), no additional Company Stock Options,
Company Restricted Stock Awards or Company RSU Awards have been
issued or granted, and there has been no increase in the number
of shares of Company Common Stock issuable upon exercise of
Company Stock Options or vesting of Company RSU Awards from
those issuable under such Company Stock Options and Company
Restricted RSU Awards as of February 2, 2011. All issued
shares of Company Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights.
As of the date of this Agreement, except as set forth in this
Section 3.3 and except for the Company Rights and purchase
rights under the Company ESPP for no more than
752,485 shares of Company Common Stock, (x) there are
no outstanding or authorized shares of capital stock and there
are no options, warrants, calls, subscriptions, convertible
securities, preemptive rights or other rights, agreements,
claims or commitments which obligate the Company or any of its
Subsidiaries to issue, transfer or sell any shares of capital
stock or other voting securities or other equity interest in the
Company or any of its Subsidiaries or securities convertible
into or exchangeable for such shares, securities or equity
interests, (y) there are no outstanding or authorized
contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock or other voting securities of or other
equity interest in the Company or any of its Subsidiaries or any
such securities or agreements listed in clause (x) of this
sentence, and (z) there are no voting trusts or similar
agreements to which the Company or any of its Subsidiaries is a
party with respect to the voting of any capital shares or other
voting securities of or other equity interest in the Company or
any of its Subsidiaries. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have
the right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the stockholders
of the Company on any matter.
Section 3.4 Significant
Subsidiaries. For purposes of this Agreement,
Significant Subsidiary shall mean
significant subsidiary as defined in
Rule 1-02
of
Regulation S-X
under the Securities Exchange Act of 1934, as amended (the
Exchange Act). Each of the
Companys Significant Subsidiaries is a corporation or
other legal entity duly organized, validly existing and, to the
extent such concept or similar concept exists in the relevant
jurisdiction, in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate
or other entity power and authority to own, operate and lease
its properties and to carry on
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its business as it is now being conducted, and is duly qualified
to do business and is in good standing (where applicable) in
each jurisdiction in which the ownership, operation or lease of
its property or the conduct of its business requires such
qualification, in each case except for jurisdictions in which
such failure to be so qualified or to be in good standing does
not and is not reasonably likely to have a Company Material
Adverse Effect. All of the outstanding shares of capital stock
of, or other ownership interests in, each of the Companys
Significant Subsidiaries are duly authorized, validly issued,
fully paid and nonassessable and, as of the date of this
Agreement, are owned, directly or indirectly, by the Company
free and clear of all mortgages, deeds of trust, liens, security
interests, pledges, leases, conditional sale contracts, charges,
privileges, easements, rights of way, reservations, options,
rights of first refusal and other encumbrances
(Liens).
Section 3.5 Compliance
with Laws; Permits. Except for such matters as,
individually or in the aggregate, do not and are not reasonably
likely to have a Company Material Adverse Effect and except for
matters arising under Environmental Laws which are treated
exclusively in Section 3.13:
(a) Neither the Company nor any Subsidiary of the Company
is in violation of any applicable law, rule, regulation, code,
governmental determination, order, treaty, convention,
governmental certification requirement or other public
limitation, U.S. or
non-U.S.,
including without limitation the UK Companies Act of 2006
(collectively, Applicable Laws),
relating to the ownership or operation of any of their
respective assets or businesses, and no claim is pending or, to
the knowledge of the Company, threatened with respect to any
such matters. No condition exists that is not disclosed in the
Company Disclosure Schedule or the Company Reports and which
does or is reasonably likely to constitute a violation of or
deficiency under any Applicable Law relating to the ownership or
operation of the assets or conduct of businesses of the Company
or any Subsidiary of the Company.
(b) The Company and each Subsidiary of the Company hold all
permits, licenses, certifications, variations, exemptions,
orders, franchises and approvals of all governmental or
regulatory authorities necessary for the ownership, leasing and
operation of their respective assets or the conduct of their
respective businesses (the Company
Permits). All Company Permits are in full force
and effect and there exists no default thereunder or breach
thereof, and the Company has no notice or actual knowledge that
such Company Permits will not be renewed in the ordinary course
after the Effective Time. No Governmental Entity has given, or
to the knowledge of the Company threatened to give, any notice
to terminate, cancel or reform any Company Permit.
(c) Each drilling unit owned or leased by the Company or a
Subsidiary of the Company which is subject to classification is
in class without any significant outstanding deficiencies
according to the rules and regulations of the applicable
classifying body and is duly and lawfully documented under the
laws of its flag jurisdiction.
(d) The Company and each Subsidiary of the Company possess
all permits, licenses, operating authorities, orders,
exemptions, franchises, variances, consents, approvals or other
authorizations required for the present ownership and operation
of all its real property or leaseholds (Company Real
Property). There exists no material default or
breach with respect to, and no party or Governmental Entity has
taken or, to the knowledge of the Company, threatened to take,
any action to terminate, cancel or reform any such permit,
license, operating authority, order, exemption, franchise,
variance, consent, approval or other authorization pertaining to
the Company Real Property.
(e) The Company has instituted and maintains policies and
procedures designed to ensure, and which are reasonably expected
to continue to ensure, compliance with the United States Foreign
Corrupt Practices Act (the FCPA) and
other similar applicable foreign laws. Without limiting the
generality of clause (a) above, and mindful of the
principles of the FCPA and other similar applicable foreign
laws, neither the Company nor any of its Subsidiaries nor, in
any such case, any of their respective Company Representatives
(i) is in violation of the FCPA or other similar applicable
foreign laws as a result of having made, offered or authorized
any payment or given or offered anything of value directly or
indirectly to any officer, employee or representative of a
government or any department, agency or instrumentality thereof
(including any state owned or controlled enterprise), political
party, political campaign or public international organization
(a Government Official) (including
through a friend or
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family member with personal relationships with Government
Officials) for the purpose of influencing an act or decision of
the Government Official in his official capacity or inducing the
Government Official to use his influence with that government,
political party, political campaign or public international
organization or (ii) has taken any action that would be
reasonably likely to subject the Company or any of its
Subsidiaries to any material liability or penalty under any and
all Applicable Laws of any Governmental Entity.
Person means any natural person, firm,
individual, partnership, joint venture, business trust, trust,
association, corporation, company, limited liability company,
unincorporated entity or Governmental Entity.
(f) Without limiting the generality of clause (a)
above, neither the Company nor any of its Subsidiaries nor any
of their respective directors, officers, employees or
affiliates, to the Companys knowledge, is a Person with
whom transactions are currently prohibited under any
U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Department of Treasury
(OFAC) or equivalent European Union
measure.
Section 3.6 No
Conflict.
(a) Neither the execution, delivery and performance by the
Company of this Agreement nor the consummation by the Company of
the transactions contemplated hereby in accordance with the
terms hereof will (i) subject to the approval referred to
in Section 3.20, conflict with or result in a breach of any
provisions of the Certificate of Incorporation or Bylaws of the
Company, or the certificate of incorporation, bylaws or similar
governing documents of any of the Companys Significant
Subsidiaries, (ii) violate, or conflict with, or result in
a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in
a right of termination or cancellation of, or give rise to a
right of purchase under, or accelerate the performance required
by, or result in the creation of any Lien upon any of the
properties of the Company or its Subsidiaries under, or result
in being declared void, voidable, or without further binding
effect, or otherwise result in a detriment to the Company or any
of its Subsidiaries under any of the terms, conditions or
provisions of, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, lease, contract, agreement,
joint venture or other instrument or obligation to which the
Company or any of its Subsidiaries is a party, or by which the
Company or any of its Subsidiaries or any of their properties is
bound or affected or (iii) subject to the filings and other
matters referred to in Section 3.6(b), contravene or
conflict with or constitute a violation of any provision of any
law, rule, regulation, judgment, order or decree binding upon or
applicable to the Company or any of its Subsidiaries, except,
for such matters described in clause (ii) or (iii) as
do not and are not reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect.
(b) Neither the execution, delivery and performance by the
Company of this Agreement nor the consummation by the Company of
the transactions contemplated hereby in accordance with the
terms hereof will require any consent, approval or authorization
of, or filing or registration with, any federal, state, local or
foreign government, court, or arbitral, legislative, executive
or regulatory authority or agency (a Governmental
Entity), other than (i) filings required
under the
U.S. Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR Act), the Exchange Act, the
Securities Act of 1933, as amended (the Securities
Act), or applicable
non-U.S. or
state securities and Blue Sky laws and
(ii) filings and notifications required under applicable
Non-U.S. Antitrust
Laws ((i) and (ii) collectively, the Regulatory
Filings), except for any consent, approval or
authorization the failure of which to obtain and for any filing
or registration the failure of which to make, individually or in
the aggregate, does not and is not reasonably likely to have a
Company Material Adverse Effect.
Section 3.7 SEC
Documents.
(a) The Company has timely filed with the
U.S. Securities and Exchange Commission (the
SEC) all documents (including exhibits
and any amendments thereto) required to be so filed by it since
January 1, 2010 pursuant to Sections 13(a), 14(a) and
15(d) of the Exchange Act, and has made available to Parent each
registration statement, report, proxy statement or information
statement (other than preliminary materials) it has so filed,
each in the form (including exhibits and any amendments thereto)
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filed with the SEC (collectively, the Company
Reports). As of its respective date, each Company
Report (i) complied in all material respects in accordance
with the applicable requirements of each of the Exchange Act,
the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley
Act) and other Applicable Law, as the case may be,
and, in each case, the applicable rules and regulations of the
SEC thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading except for such statements,
if any, as have been corrected by subsequent filings with the
SEC prior to the date hereof.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including
the related notes and schedules) fairly presents in all material
respects (subject, in the case of unaudited statements, to
recurring audit adjustments normal in nature and amount) the
consolidated financial position of the Company and its
Subsidiaries as of its date, and each of the consolidated
statements of operations, cash flows and changes in
stockholders equity included in or incorporated by
reference into the Company Reports (including any related notes
and schedules) fairly presents in all material respects
(subject, in the case of unaudited statements, to recurring
audit adjustments normal in nature and amount) the results of
operations, cash flows or changes in stockholders equity,
as the case may be, of the Company and its Subsidiaries for the
periods set forth therein; each of such statements (including
the related notes, where applicable) complies, and the financial
statements to be filed by the Company with the SEC after the
date of this Agreement will comply, with applicable accounting
requirements and with the published rules and regulations of the
SEC with respect thereto; and each of such statements (including
the related notes, where applicable) has been, and the financial
statements to be filed by the Company with the SEC after the
date of this Agreement will be, prepared in accordance with
U.S. generally accepted accounting principles
(GAAP) consistently applied during the
periods involved, except as indicated in the notes thereto or,
in the case of unaudited statements, as permitted by
Rule 10-01
of
Regulation S-X
of the SEC. KPMG LLP is an independent registered public
accounting firm with respect to the Company and has not resigned
or been dismissed as independent registered public accountants
of the Company.
(c) Since January 1, 2007, (A) the exercise price
of each Company Stock Option granted has been no less than the
Fair Market Value (as defined or determined under the terms of
the respective Company Benefit Plan under which such Company
Stock Option was granted) of a share of Company Common Stock as
determined on the date of grant of such Company Stock Option,
and (B) all grants of Company Stock Options were validly
issued and properly approved by the Board of Directors of the
Company (or a duly authorized committee or subcommittee thereof)
in material compliance with Applicable Law and recorded in the
Companys financial statements referred to in
Section 3.7(b) in accordance with GAAP, and no such grants
involved any back dating or similar practices with
respect to the effective date of grant or exercise price, except
as, individually or in the aggregate, has not had and would not
be reasonably likely to have or result in a Company Material
Adverse Effect.
Section 3.8 Litigation. Except
as described in the Company Reports filed on or prior to the
date of this Agreement, (A) there are no actions, suits or
proceedings pending against the Company or any of its
Subsidiaries or, to the Companys knowledge, threatened
against the Company or any of its Subsidiaries, at law or in
equity or in any arbitration or similar proceedings, before or
by any U.S. federal or state or any
non-U.S. court,
commission, board, bureau, agency or instrumentality or any
U.S. or
non-U.S. arbitral
or other dispute resolution body, that are reasonably likely to
have, individually or in the aggregate, a Company Material
Adverse Effect, and (B) there is no claim, action,
litigation or proceeding that the Company or any of its
Subsidiaries has pending against other parties, where such
claim, action, litigation or proceeding is intended to enforce
or preserve material rights of the Company or any of its
Subsidiaries, except for any such matters as are not reasonably
likely to have a Company Material Adverse Effect.
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Section 3.9 Absence
of Certain Changes.
(a) Since December 31, 2009, there has not been or
continued to exist any event, change, occurrence, effect, fact,
circumstance or condition that, individually or in the
aggregate, has had or is reasonably likely to have a Company
Material Adverse Effect.
(b) From December 31, 2009 to the date of this
Agreement, (x) the Company and its Subsidiaries have
conducted their respective business only in the ordinary course
consistent with past practice in all material respects and
(y) there has not been (i) any material change by the
Company or any of its Subsidiaries, when taken as a whole, in
any of its accounting methods, principles or practices or any of
its tax methods, practices or elections, (ii) any
declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or
any redemption, purchase or other acquisition of any of its
securities, other than in connection with the exercise or
vesting of awards under the Company Benefit Plans,
(iii) any split, combination or reclassification of any of
the Companys capital stock or any issuance thereof or any
issuance of any other securities in respect of, in lieu of or in
substitution for the Companys capital stock, except for
issuances of shares of Company Common Stock upon the exercise of
Company Stock Options, the vesting of Company RSU Awards or the
exercise of purchase rights under the Company ESPP,
(iv) any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or
other employee benefit plan, except in the ordinary course of
business consistent with past practices, (v) any sale,
lease, exchange, transfer or other disposition of any material
asset of the Company or any of its Subsidiaries other than in
the ordinary course of business consistent with past practices,
or (vi) any agreement or commitment (contingent or
otherwise) by the Company or any of its Subsidiaries to do any
of the foregoing.
Section 3.10 Taxes.
(a) Each of the Company, its Subsidiaries and each
affiliated, consolidated, combined, unitary or similar group of
which any such corporation is or was a member has (i) duly filed
(or there has been filed on its behalf) on a timely basis
(including all applicable extensions) with appropriate
Governmental Entities all true and complete tax returns,
statements, reports, declarations, estimates and forms
(Returns) required to be filed by or
with respect to it on or prior to the date hereof, except to the
extent that any failure to file does not and is not reasonably
likely to have, individually or in the aggregate, a Company
Material Adverse Effect, and (ii) duly paid, or deposited
in full on a timely basis (including all applicable extensions)
or made adequate provision in accordance with GAAP (or there has
been paid or deposited or adequate provision has been made on
its behalf) for the payment of, all taxes required to be paid by
it, except to the extent that any failure to pay or deposit or
make adequate provision for the payment of such taxes does not
and is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect. Representations
made in this Section 3.10 are made to the knowledge of the
Company to the extent that the representations relate to a
corporation which was, but is not currently, a part of the
Companys or any Subsidiarys affiliated,
consolidated, combined unitary or similar group.
(b) (i) No audits or other administrative proceedings
or court proceedings are presently pending with regard to any
taxes or Returns of the Company or any of its Subsidiaries as to
which any taxing authority has asserted in writing any claim
which, if adversely determined, is reasonably likely to have a
Company Material Adverse Effect; (ii) no Governmental
Entity is now asserting in writing any deficiency or claim for
taxes or any adjustment to taxes with respect to which the
Company or any of its Subsidiaries may be liable with respect to
income and other material taxes which have not been fully paid
or finally settled, which, if adversely determined, is
reasonably likely to have a Company Material Adverse Effect;
(iii) as of the date of this Agreement, neither the Company
nor any of its Subsidiaries has granted any requests,
agreements, consents or waivers to extend the statutory period
of limitations applicable to the assessment of any taxes with
respect to any Returns of the Company or any of its
Subsidiaries, which taxes, if paid by the Company, would be
reasonably likely to have a Company Material Adverse Effect;
(iv) to the knowledge of the Company, neither the Company
nor any of its
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Subsidiaries is a party to any closing agreement described in
Section 7121 of the Code or any predecessor provision
thereof or any similar agreement under state, local, or
non-U.S. tax
law; (v) to the knowledge of the Company, neither the
Company nor any of its Subsidiaries is a party to, is bound by
or has any obligation under any tax sharing, allocation or
indemnity agreement or any similar agreement or arrangement
(other than such an agreement or arrangement exclusively between
or among the Company and its Subsidiaries and other than
customary tax indemnifications contained in credit or similar
agreements), which is reasonably likely to have a Company
Material Adverse Effect; (vi) neither the Company nor any
of its Subsidiaries is a party to an agreement that provides for
the payment of any amount in connection with the Merger that
would be reasonably likely to constitute an excess
parachute payment within the meaning of Section 280G
of the Code; (vii) to the knowledge of the Company, neither
the Company nor any of its Subsidiaries has made an election
under Section 341(f) of the Code; and (viii) to the
knowledge of the Company, neither the Company nor any of its
Subsidiaries has any liability for taxes under Treasury
Regulation Section 1.1502-6
or any similar provision of state, local, or
non-U.S. tax
law, except for taxes of the affiliated group of which the
Company or any of its Subsidiaries is the common parent, within
the meaning of Section 1504(a)(1) of the Code or any
similar provision of state, local, or
non-U.S. tax
law and except for taxes that, if paid by the Company, would not
be reasonably likely to have a Company Material Adverse Effect.
(c) There are no liens for taxes in amounts reasonably
likely to have a Company Material Adverse Effect (other than
statutory liens for taxes not yet due and payable or the amount
or validity of which is being contested in good faith by
appropriate proceedings) upon any of the assets of the Company
or any of its Subsidiaries.
(d) Except for transactions which are not reasonably likely
to have a Company Material Adverse Effect, neither the Company
nor any of its Subsidiaries has been, within the past two years
or otherwise as part of a plan (or series of related
transactions) within the meaning of Section 355(e) of
the Code of which the Merger is also a part, a
distributing corporation or a controlled
corporation (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of
stock intending to qualify for tax-free treatment under
Section 355 of the Code.
(e) To the knowledge of the Company, neither the Company
nor any of its Subsidiaries has participated in a
reportable transaction within the meaning of
Treasury Regulation
Section 1.6011-4(b)(1).
(f) For purposes of this Agreement,
tax or taxes
means any (i) federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum,
add-on minimum, sales, use, transfer, registration, value added,
excise, natural resources, severance, stamp, occupation,
premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security or
similar, unemployment, disability, payroll, license, employee or
other withholding, or other tax, of any kind whatsoever, whether
computed on a separate or consolidated, unitary or combined
basis or in any other manner, including any interest, penalties
or additions to tax or additional amounts in respect of the
foregoing; (ii) liability for the payment of any amounts of
the type described in clause (i) arising as a result of
being, or ceasing to be, a member of any affiliated group (or
being included, or required to be included, in any tax Return
relating thereto); and (iii) liability for the payment of
any amounts of the type described in clause (i) as a result
of any express of implied obligation to indemnify or otherwise
assume or succeed to the liability of any other Person,
including any transferee liability in respect of any of the
foregoing.
Section 3.11 Employee
Benefit Plans.
(a) Section 3.11 of the Company Disclosure Schedule
contains a list of all the Company Benefit Plans. The term
Company Benefit Plans means all
material employee benefit plans and other material compensation
and benefit arrangements, including (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 the
requirements of ERISA and whether the plans are subject to
United States law (a U.S. Company Benefit
Plan) or not subject to United States law (a
Non-U.S. Company
Benefit
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Plan) with respect to which the Company, a
Subsidiary of the Company or any of their respective ERISA
Affiliates has or may have any liability, and (ii) all
other employee benefit, bonus, incentive, deferred compensation,
stock option (or other equity-based), severance, employment,
change in control, welfare (including post-retirement medical
and life insurance) and fringe benefit plans, practices or
agreements, whether or not such arrangement is a
U.S. Company Benefit Plan and whether written or oral,
sponsored, maintained or contributed to or required to be
contributed to by the Company or any of its Subsidiaries, to
which the Company or any of its Subsidiaries is a party or is
required to provide benefits under Applicable Laws or in which
any Person who is currently, has been or, prior to the Effective
Time, is expected to become an employee or other service
provider of the Company or any of its Subsidiaries is a
participant. The Company has made available to Parent a true and
complete copy of each Company Benefit Plan document, if
applicable, the most recent trust agreements, the most recently
filed U.S. Internal Revenue Service
(IRS) Form 5500, most recent
summary plan descriptions, most recently received determination
letter issued by the IRS with respect to any U.S. Company
Benefit Plan that is intended to qualify under
Section 401(a) of the Code, and most recently prepared
funding statements, annual reports and actuarial reports for
each such plan, and in the case of each
Non-U.S. Company
Benefit Plan, each material document, if any, prepared in
connection with each
Non-U.S. Company
Benefit Plan (in addition to the other documents, if any,
described in the first part of this sentence, to the extent
applicable).
(b) Except for such matters as, individually or in the
aggregate, do not or are not reasonably likely to have a Company
Material Adverse Effect: (i) all applicable reporting and
disclosure requirements have been met with respect to the
Company Benefit Plans; (ii) there has been no
reportable event, as that term is defined in
Section 4043 of ERISA, with respect to the Company Benefit
Plans subject to Title IV of ERISA for which the
30-day
reporting requirement has not been waived; (iii) to the
extent applicable, the Company Benefit Plans comply with the
requirements of ERISA and the Code or with the regulations of
any applicable jurisdiction; (iv) the Company Benefit Plans
have been maintained and operated in accordance with their
terms; (v) to the Companys knowledge, there are no
breaches of fiduciary duty in connection with the Company
Benefit Plans; (vi) there has not been any prohibited
transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Code) with respect to any
U.S. Company Benefit Plans; (vii) there are no pending
or, to the Companys knowledge, threatened claims against
or otherwise involving any Company Benefit Plan, and no suit,
action or other litigation (excluding claims for benefits
incurred in the ordinary course of Company Benefit Plan
activities) has been brought against or with respect to any such
Company Benefit Plan; (viii) all material contributions
required to be made as of the date hereof to the Company Benefit
Plans have been made or provided for; and (ix) the fair
market value of the assets of each funded
Non-U.S. Company
Benefit Plan, the liability of each insurer for any
Non-U.S. Company
Benefit Plan funded through insurance or the book reserve
established for any
Non-U.S. Company
Benefit Plan, together with any accrued contributions, is
sufficient to procure or provide for the benefits determined on
an ongoing basis (actual or contingent) accrued to the date of
this Agreement with respect to all current and former
participants under such
Non-U.S. Company
Benefit Plan according to the actuarial assumptions and
valuations most recently used to determine employer
contributions to such
Non-U.S. Company
Benefit Plan, and no transaction contemplated by this Agreement
shall cause such assets or insurance obligations to be less than
such benefit obligations; provided that a
Non-U.S. Company
Benefit Plan that is maintained solely pursuant to
non-U.S. Applicable
Law and sponsored by a governmental authority shall not be
subject to this clause.
(c) Each Company Benefit Plan intended be qualified under
Section 401(a) of the Code has received a favorable
determination letter from the IRS or may rely on an opinion or
advisory letter issued to a master or prototype or volume
submitter provider with respect to the tax-qualified status of
such Company Benefit Plan. Neither the Company nor any of its
Subsidiaries nor any trade or business (whether or not
incorporated) which is under common control, or which is treated
as a single employer, with the Company or any of its
Subsidiaries under Section 414(b), (c), (m) or
(o) of the Code (an ERISA
Affiliate) contributes to, or has an obligation to
contribute to, and has not within six years prior to the
Effective Time contributed to, had an obligation to contribute
to or otherwise has liability with respect to (i) any
employee pension benefit plan, as defined in
Section 3(2) of ERISA, that is subject to
A-17
Title IV of ERISA or (ii) a multiemployer
plan within the meaning of Section 3(37) of ERISA or
a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which liability under
Section 4063 or Section 4064 of ERISA could be
incurred (i.e., a multiple employer plan). The
execution of, and performance of the transactions contemplated
by, this Agreement will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event
under any benefit plan, policy, arrangement or agreement or any
trust or loan (in connection therewith) that will or may result
in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund
benefits with respect to any employee or other service provider
of the Company or any Subsidiary thereof.
(d) No Company Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of the Company or any
Subsidiary of the Company for periods extending beyond their
retirement or other termination of service other than
(i) coverage mandated by Applicable Laws, (ii) death
benefits under any pension plan or
(iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
Section 3.12 Labor
Matters.
(a) Except for such matters as, individually or in the
aggregate, do not and are not reasonably likely to have a
Company Material Adverse Effect, (i) as of the date of this
Agreement, neither the Company nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement or
similar contract, agreement or understanding with a labor union,
works council, employee representative or other labor
organization or group of employees (A) covering any
U.S. employees or (B) covering, in any single
instance, 5% or more of the employees of the Company and its
Subsidiaries taken as a whole, and (ii) to the
Companys knowledge, there are no organizational efforts
with respect to the formation of a collective bargaining unit
presently being made or threatened (x) involving any
U.S. employees or (y) involving, in any single
instance, 5% or more of the employees of the Company and its
Subsidiaries taken as a whole.
(b) There is no union, works council, employee
representative or other labor organization or group of
employees, which, pursuant to Applicable Laws, must be notified,
consulted or with which negotiations need to be conducted
connection with the transactions contemplated by this Agreement.
(c) Except for such matters as, individually or in the
aggregate, do not and are not reasonably likely to have a
Company Material Adverse Effect and except as described in the
Company Reports filed prior to the date of this Agreement,
(i) neither the Company nor any Subsidiary of the Company
has received any written complaint of any unfair labor practice
or other unlawful employment practice or any written notice of
any material violation of any Applicable Law with respect to the
employment or engagement of individuals by, or the employment
practices of, the Company or any Subsidiary of the Company or
the work conditions or the terms and conditions of employment
and wages and hours of their respective businesses and
(ii) there are no unfair labor practice charges or other
employee related complaints against the Company or any
Subsidiary of the Company pending or, to the knowledge of the
Company, threatened, before any Governmental Entity by or
concerning any former or current employees, temporary or agency
employees, or independent contractors of the Company or any
Subsidiary of the Company.
Section 3.13 Environmental
Matters.
(a) The Company and each Subsidiary of the Company has been
and is in compliance with all applicable orders of any court,
Governmental Entity or arbitration board or tribunal and any
Applicable Law related to human health and the environment,
including the common law (Environmental
Laws), except for such matters as do not and are
not reasonably likely to have, individually or in the aggregate,
a Company Material Adverse Effect. There are no past or present
facts, conditions or circumstances that interfere (or are
reasonably likely to interfere in the future) with the conduct
of any of their respective businesses in the manner now
conducted or which interfere with continued compliance with any
Environmental Law, except for any non-compliance or interference
that is not reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect.
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(b) Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect, no judicial or administrative
proceedings or governmental investigations are pending or, to
the knowledge of the Company, threatened against the Company or
any of its Subsidiaries that allege the violation of or seek to
impose liability pursuant to any Environmental Law, and there
are no past or present facts, conditions or circumstances at, on
or arising out of, or otherwise associated with, any current
(or, to the knowledge of the Company or any of its Subsidiaries,
former) businesses, assets or properties of the Company or any
Subsidiary of the Company, including but not limited to
on-site or
off-site storage, disposal, release or spill of any material,
substance or waste classified, characterized or otherwise
regulated as hazardous, toxic, pollutant, contaminant or words
of similar meaning under Environmental Laws, including petroleum
or petroleum products or byproducts (Hazardous
Materials) which violate Environmental Law or are
reasonably likely to give rise under any Environmental Law to
(i) costs, expenses, liabilities or obligations related to
any cleanup, remediation, investigation, disposal or corrective
action, (ii) claims arising for personal injury, property
damage or damage to natural resources, or (iii) fines,
penalties or injunctive relief.
(c) Neither the Company nor any of its Subsidiaries has
(i) received any notice of noncompliance with, violation
of, or liability or potential liability under any Environmental
Law or (ii) entered into any consent decree or order or is
subject to any order of any court or Governmental Entity or
tribunal under any Environmental Law or relating to the cleanup
of any Hazardous Materials, except for any such matters as do
not and are not reasonably likely to have a Company Material
Adverse Effect.
(d) The Company has delivered to, or otherwise made
available for inspection by, Parent true, complete and correct
copies and results of any material reports, studies, analyses,
tests or monitoring possessed or initiated by the Company
pertaining to Hazardous Materials in, on, beneath or adjacent to
any property currently or formerly owned, operated or leased by
the Company or any of its Subsidiaries, or regarding the
Companys or any of its Subsidiaries compliance with
or liability or potential liability under applicable
Environmental Laws.
Section 3.14 Intellectual
Property. The Company and its Subsidiaries own or
possess adequate licenses or other valid rights to use all
intellectual property used or held for use in connection with
their respective businesses as currently being conducted, except
where the failure to own such intellectual property or possess
such licenses and other rights does not and is not reasonably
likely to have, individually or in the aggregate, a Company
Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received notice of any claims challenging the
validity of such intellectual property, licenses or rights that
are reasonably likely to have, individually or in the aggregate,
a Company Material Adverse Effect. To the knowledge of the
Company, the conduct of the Companys and its
Subsidiaries respective businesses as currently conducted
does not infringe on any intellectual property rights of others,
except as would not be reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect. To the
knowledge of the Company, there is no infringement of any
intellectual property owned by the Company or any of its
Subsidiaries that is reasonably likely to have, individually or
in the aggregate, a Company Material Adverse Effect.
Section 3.15 Decrees,
Etc. Except for such matters as do not and are
not reasonably likely to have, individually or in the aggregate,
a Company Material Adverse Effect, (i) no order, writ,
fine, injunction, decree, judgment, award or determination of
any Governmental Entity or any arbitral or other dispute
resolution body has been issued or entered against the Company
or any Subsidiary of the Company or any of the Companys
officers or directors (in their capacities as such) that
continues to be in effect that affects the ownership or
operation of any of their respective assets or the conduct of
their respective businesses, and (ii) since January 1,
2000, no criminal order, writ, fine, injunction, decree,
judgment or determination of any Governmental Entity has been
issued against the Company or any Subsidiary of the Company.
Section 3.16 Insurance. Except
for such matters as do not and are not reasonably likely to
have, individually or in the aggregate, a Company Material
Adverse Effect:
(a) The Company and its Subsidiaries maintain insurance
coverage with financially responsible insurance companies in
such amounts and against such losses as are customary in the
international offshore drilling business as of the date hereof.
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(b) No event relating specifically to the Company or its
Subsidiaries (as opposed to events affecting the drilling
service industry in general) has occurred that is reasonably
likely, after the date of this Agreement, to result in an upward
adjustment in premiums under any insurance policies they
maintain. Excluding insurance policies that have expired and
been replaced in the ordinary course of business, no excess
liability, hull or protection and indemnity insurance policy has
been canceled by the insurer within one year prior to the date
hereof, and to the Companys knowledge, no threat in
writing has been made to cancel (excluding cancellation upon
expiration or failure to renew) any such insurance policy of the
Company or any Subsidiary of the Company during the period of
one year prior to the date hereof. Prior to the date hereof, no
event has occurred, including the failure by the Company or any
Subsidiary of the Company to give any notice or information or
by giving any inaccurate or erroneous notice or information,
which materially limits or impairs the rights of the Company or
any Subsidiary of the Company under any such excess liability,
hull or protection and indemnity insurance policies.
Section 3.17 No
Brokers. The Company has not entered into any
contract, arrangement or understanding with any Person which may
result in the obligation of the Company or Parent to pay any
finders fees, brokerage or other like payments in
connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby, except
that the Company has retained Goldman, Sachs & Co. as
its financial advisor, the arrangements with which have been
disclosed in writing to Parent prior to the execution and
delivery of this Agreement.
Section 3.18 Recommendation
of Board of Directors; Opinion of Financial Advisor.
(a) The Board of Directors of the Company, at a meeting
duly called and held, adopted resolutions (i) determining
that this Agreement and the transactions contemplated hereby are
advisable and in the best interests of the Company,
(ii) approving this Agreement and the transactions
contemplated hereby, (iii) determining that it would be in
the best interests of the stockholders of the Company that this
Agreement be submitted to the stockholders of the Company for
adoption and directing that it be so submitted in accordance
with this Agreement and (iv) recommending adoption of this
Agreement by the stockholders of the Company, which resolutions,
as of the date of this Agreement, have not been subsequently
rescinded, modified or withdrawn.
(b) The Board of Directors of the Company has received the
opinion of Goldman, Sachs & Co., dated as of the date
of this Agreement, that, as of the date of such opinion, and
subject to the limitations and assumptions set forth therein,
the Merger Consideration to be received by holders of Company
Common Stock is fair, from a financial point of view, to such
holders.
Section 3.19 Parent Share
Ownership. Neither the Company nor any of its
Subsidiaries owns any shares in the capital of Parent or any
other securities convertible into or otherwise exercisable to
acquire shares in the capital of Parent.
Section 3.20 Vote
Required. The only vote of the holders of any
class or series of capital stock of the Company necessary to
approve any transaction contemplated by this Agreement is the
adoption of this Agreement by the affirmative vote of the
holders of a majority of the outstanding shares of Company
Common Stock, whether in person or by proxy, at the meeting held
to consider such matter (the Company Stockholder
Approval).
Section 3.21 Ownership
of Drilling Units.
(a) As of the date hereof, the Company or a Subsidiary of
the Company has good and marketable title to the drilling units
listed in the Companys most recent fleet status report
posted on the Companys website, in each case free and
clear of all Liens except for (i) defects or irregularities
of title or encumbrances of a nature that do not materially
impair the ownership or operation of these assets and which have
not had and are not reasonably likely to, individually or in the
aggregate, have a Company Material Adverse Effect,
(ii) Liens that secure obligations not yet due and payable
or, if such obligations are due and have not been paid, Liens
securing such obligations that are being diligently contested in
good faith and by appropriate proceedings (any such contests
involving an amount in excess of $25 million being
described in Section 3.21 of the Company Disclosure
Schedule), (iii) Liens for taxes, assessments
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or other governmental charges or levies not yet due or which are
being contested in good faith, (iv) Liens in connection
with workmens compensation, unemployment insurance or
other social security, old age pension or public liability
obligations not yet due and payable or which are being contested
in good faith, (v) operators, vendors,
suppliers of necessaries to the Companys drilling units,
carriers, warehousemens, repairmens,
mechanics, workmens, materialmens,
construction or shipyard liens (during repair or upgrade
periods) or other like Liens arising by operation of law in the
ordinary course of business or statutory landlords liens,
each of which is in respect of obligations that have not been
outstanding more than 90 days (so long as no action has
been taken to file or enforce such Liens within said
90-day
period) or which are being contested in good faith and
(vi) other Liens disclosed in the Company Disclosure
Schedule (the Liens described in clauses (i), (ii), (iii), (iv),
(v) and (vi), collectively, Company Permitted
Liens). No such asset is leased under an operating
lease from a lessor that, to the Companys knowledge, has
incurred non-recourse indebtedness to finance the acquisition or
construction of such asset.
(b) Except as would not have, individually or in the
aggregate, a Company Material Adverse Effect, the Company has
caused the drilling units listed in the Companys most
recent fleet status report posted on the Companys website
to be maintained consistent with general practice in the
offshore drilling industry, and all such drilling units are in
good operating condition and repair consistent with general
practice in the offshore drilling industry.
Section 3.22 Undisclosed
Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature,
whether or not fixed, accrued, contingent or otherwise, except
liabilities and obligations that (i) are disclosed in the
Company Reports filed prior to the date of this Agreement,
(ii) are referred to in Section 3.22 of the Company
Disclosure Schedule, (iii) were incurred since
September 30, 2010 in the ordinary course of business
consistent with past practice or (iv) do not and are not
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
Section 3.23 Certain
Contracts.
(a) Section 3.23 of the Company Disclosure Schedule
contains a list of all of the following contracts, commitments
or agreements (other than those set forth on an exhibit index in
the Company Reports filed prior to the date of this Agreement)
to which the Company or any Subsidiary of the Company is a party
or by which any of them or their assets is bound as of the date
of this Agreement: (i) any non-competition agreement that
purports to limit the manner in which, or the localities in
which, all or any portion of their respective businesses is
conducted, other than any such limitation that is not material
to the Company and its Subsidiaries, taken as a whole, and will
not be material to Parent and its Subsidiaries, taken as a
whole, following the Effective Time, (ii) any drilling unit
construction, repair, modification, life extension, overhaul or
conversion contract for an amount in excess of $50 million,
with respect to which the drilling unit has not been delivered
and paid for, (iii) any drilling contracts of one year or
greater remaining duration, including fixed price customer
options, (iv) any contract or agreement, other than
agreements among the Company
and/or its
wholly-owned Subsidiaries, for the borrowing of money with a
borrowing capacity or outstanding indebtedness of
$50 million or more, (v) any employment agreement
between the Company or any of its Subsidiaries, on the one hand,
and any of the Companys officers and key employees, on the
other hand, (vi) any agreement which, upon the consummation
of the Merger or any other transaction contemplated by this
Agreement, will (either alone or upon the occurrence of any
additional acts or events, including the passage of time) result
in any payment or benefit (whether of severance pay or
otherwise) becoming due, or the acceleration or vesting of any
right to any payment or benefits, from Parent or the Company or
any of their respective Subsidiaries to any officer, director,
consultant or employee of any of the foregoing, (vii) any
agreement which is a material joint venture agreement, joint
operating agreement, partnership agreement or other similar
contract or agreement involving a sharing of profits and
expenses with one or more third Persons, (viii) any
agreement the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement (including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock
purchase plan) or (ix) any material contract
(as such term is defined in Item 601(b)(10) of
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Regulation S-K
of the SEC). Each contract, arrangement, commitment or
understanding of the type described in this
Section 3.23(a), whether or not included as an exhibit to
any Company Report or included in Section 3.23 of the
Company Disclosure Schedule, is referred to herein as a
Company Material Contract, and for
purposes of Section 5.1 and the bringdown of
Section 3.23(b) pursuant to Section 6.3, Company
Material Contract shall include any such contract,
arrangement, commitment or understanding that is entered into
after the date of this Agreement.
(b) Each Company Material Contract is, to the knowledge of
the Company, in full force and effect, and the Company and each
of its Subsidiaries have in all material respects performed all
obligations required to be performed by them to date under each
Company Material Contract to which it is a party, except where
such failure to be binding or in full force and effect or such
failure to perform does not and is not reasonably likely to
create, individually or in the aggregate, a Company Material
Adverse Effect. Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect, neither the Company nor any of
its Subsidiaries (x) knows of, or has received written
notice of, any breach of or violation or default under (nor, to
the knowledge of the Company, does there exist any condition
which with the passage of time or the giving of notice or both
would result in such a violation or default under) any Company
Material Contract or (y) has received written notice of the
desire of the other party or parties to any such Company
Material Contract to cancel, terminate, modify or repudiate such
contract or exercise remedies thereunder. Except as would not be
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect, the consummation of the
transactions contemplated by this Agreement will not breach or
violate any Company Material Contract or permit any other party
to a Company Material Contract to exercise rights adverse to the
Company. Each Company Material Contract is enforceable by the
Company or a Subsidiary of the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to
creditors rights and general principles of equity
(regardless of whether enforceability is considered in a
proceeding at law or in equity), except where such
unenforceability is not reasonably likely to create,
individually or in the aggregate, a Company Material Adverse
Effect.
Section 3.24 Capital
Expenditure Program. As of the date of this
Agreement, Section 3.24 of the Company Disclosure Schedule
accurately sets forth in all material respects, for each of the
Companys construction, repair, modification, life
extension, overhaul or conversion capital expenditure programs,
the capital expenditures for all such programs that were
forecasted to be incurred in 2011 on a quarterly basis, as
previously provided to Parent. The construction in progress
attributable to the newbuilds and included in the consolidated
balance sheet of the Company at September 30, 2010 included
in the Company Reports (excluding capitalized interest on such
newbuilds), together with the projected capital expenditures for
such newbuilds previously provided to Parent, equal the
projected total construction costs to complete such newbuilds,
as at the time of such forecast.
Section 3.25 Derivative
Transactions.
(a) Section 3.25 of the Company Disclosure Schedule
contains a complete and correct list of all Derivative
Transactions (including each outstanding commodity or financial
hedging position) entered into by the Company or any of its
Subsidiaries or for the account of any of its customers as of
the date of this Agreement. Derivative
Transaction means any material swap transaction,
option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar
transaction relating to one or more currencies, commodities,
bonds, equity securities, loans, interest rates, catastrophe
events, weather-related events, credit-related events or
conditions or any indexes, or any other similar transaction
(including any option with respect to any of these transactions)
or combination of any of these transactions, including
collateralized mortgage obligations or other similar instruments
or any debt or equity instruments evidencing or embedding any
such types of transactions, and any related credit support,
collateral or other similar arrangements related to such
transactions.
(b) Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect: (i) all such Derivative
Transactions were, and any
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Derivative Transactions entered into after the date of this
Agreement will be, entered into in accordance with Applicable
Laws, and in accordance with the investment, securities,
commodities, risk management and other policies, practices and
procedures employed by the Company and its Subsidiaries, and
were, and will be, entered into with counterparties that the
Company believed at the time, and still believes, to be
financially responsible and able to understand (either alone or
in consultation with their advisers) and to bear the risks of
such Derivative Transactions; and (ii) the Company and each
of its Subsidiaries have, and will have, duly performed all of
their respective obligations under the Derivative Transactions
to the extent that such obligations to perform have accrued,
and, to the knowledge of the Company, there are and will be no
breaches, violations, collateral deficiencies, requests for
collateral or demands for payment, or defaults or allegations or
assertions of such by any party thereunder.
Section 3.26 Disclosure
Controls and Procedures. The Company has
established and maintains disclosure controls and
procedures (as defined in
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) that are reasonably designed to ensure that
all material information (both financial and non-financial)
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and that all such information is
accumulated and communicated to the Companys management as
appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive
Officer and Chief Financial Officer of the Company required
under the Exchange Act with respect to such reports. Since
January 1, 2009, neither the Company nor its independent
auditors have identified any significant
deficiencies or material weaknesses in the
Companys or any of its Subsidiaries internal
controls as contemplated under Section 404 of the
Sarbanes-Oxley Act.
Section 3.27 Affiliate
Transactions. There are no material agreements,
contracts, transfers of assets or liabilities or other
commitments or transactions (other than Company Benefit Plans
described in Section 3.11 of the Company Disclosure
Schedule and Company Material Contracts listed in
Section 3.23 of the Company Disclosure Schedule or in the
exhibit list of a Company Report), whether or not entered into
in the ordinary course of business, to or by which the Company
or any of its Subsidiaries, on the one hand, and any of their
respective Affiliates (other than the Company or any of its
direct or indirect wholly owned Subsidiaries) on the other hand,
are or have been a party or otherwise bound or affected, and
that (a) are currently pending, in effect or have been in
effect at any time since December 31, 2009 or
(b) involve continuing liabilities and obligations that,
individually or in the aggregate, have been, are or will be
material to the Company and its Subsidiaries taken as a whole.
Affiliate means, as to any specified
Person, any other Person that, directly or indirectly through
one or more intermediaries or otherwise, controls, is controlled
by or is under common control with the specified Person. As used
in this definition, control means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person
(whether through ownership of capital stock of that Person, by
contract or otherwise).
Section 3.28 Company
Rights Agreement. The Company has taken all
action necessary pursuant to the Company Rights Agreement to
provide that, as a result of the execution, delivery or
performance of this Agreement, the conversion of shares of
Company Common Stock into the right to receive the Merger
Consideration in accordance with this Agreement, and the
consummation of the Merger or the other transactions
contemplated by this Agreement, (a) neither Parent nor
Merger Sub, nor any Affiliate or associate of Parent or Merger
Sub, will become or be deemed an Acquiring Person (as defined in
the Company Rights Agreement), (b) no Distribution Date or
Stock Acquisition Date (each as defined in the Company Rights
Agreement) will occur, (c) the Company Rights will not
separate from the underlying shares of Company Common Stock or
give the holders thereof the right to acquire securities of any
party hereto and (d) neither a Flip-In Event nor a
Flip-Over Event (each as defined in the Company Rights
Agreement) will occur; and the Company has further taken all
such other action reasonably requested by Parent prior to the
date hereof to render the Company Rights Agreement inapplicable
to the Merger and the transactions contemplated hereby.
Section 3.29 State
Anti-Takeover Statutes. The Company has taken all
necessary actions so that the restrictions on business
combinations set forth in Section 203 of the DGCL are not
applicable to the Merger and the other transactions contemplated
hereby. No other takeover statute or similar statute or
regulation applies to the Merger or the other transactions
contemplated hereby. Except as provided in this
Section 3.29,
A-23
from January 1, 2006 to the date of this Agreement, the
Company has not taken any action so that the restrictions on
business combinations set forth in Section 203 of the DGCL
are not applicable to any agreement, transaction or Person and
no action taken prior to January 1, 2006 so that the
restrictions on business combinations set forth in
Section 203 of the DGCL are not applicable to any
agreement, transaction or Person remain in effect as of the date
of this Agreement.
Section 3.30 Disclaimer.
(a) Except for the representations and warranties contained
in this Article 3 of this Agreement, Parent acknowledges
that neither the Company nor any other Person on behalf of the
Company makes any other express or implied representation or
warranty with respect to the Company with respect to any other
information provided to Parent. Without limiting the generality
of the foregoing, neither the Company nor any other Person will
have or be subject to any liability or indemnification
obligation to Parent or any other Person resulting from the
distribution to Parent, or use by Parent of, any such
information, including any information, documents, projections,
forecasts or other material made available to Parent in certain
data rooms or management presentations in
expectation of the transactions contemplated by this Agreement.
(b) In connection with investigation by Parent of the
Company and its Subsidiaries, Parent has received or may receive
from the Company
and/or the
Companys Subsidiaries certain projections, forward-looking
statements and other forecasts and certain business plan
information. Parent acknowledges that there are uncertainties
inherent in attempting to make such estimates, projections and
other forecasts and plans, that Parent is familiar with such
uncertainties, that Parent is taking full responsibility for
making its own evaluation of the adequacy and accuracy of all
estimates, projections and other forecasts and plans so
furnished to it (including the reasonableness of the assumptions
underlying such estimates, projections, forecasts or plans), and
that, absent fraud or willful misrepresentation, Parent shall
have no claim against anyone with respect thereto. Accordingly,
Parent acknowledges that the Company makes no representation or
warranty with respect to such estimates, projections, forecasts
or plans (including the reasonableness of the assumptions
underlying such estimates, projections, forecasts or plans).
ARTICLE 4
REPRESENTATIONS
AND WARRANTIES OF PARENT, DELAWARE SUB
AND MERGER
SUB
Except as set forth in (i) other than with respect to
Section 4.1, Section 4.2 and Section 4.3, the
Parent Reports filed on or after December 31, 2009 and
prior to the date of this Agreement (excluding any risk factor
disclosure contained in any such Parent Report under the heading
Risk Factors or Forward-Looking
Statements or similar heading and excluding information
set forth in any exhibit thereto), to the extent a matter is
disclosed in such Parent Reports in such a way as to make its
relevance to the applicable representation or warranty
reasonably apparent, and (ii) the disclosure schedule
delivered to the Company by Parent at or prior to the execution
hereof (the Parent Disclosure
Schedule) (each section of which qualifies the
correspondingly numbered representation, warranty or covenant to
the extent specified therein and such other representations,
warranties or covenants to the extent a matter in such section
is disclosed in such a way as to make its relevance to such
other representation, warranty or covenant reasonably apparent),
Parent, Delaware Sub and Merger Sub, jointly and severally,
represent and warrant to the Company that:
Section 4.1 Existence;
Good Standing; Corporate Authority. Parent is a
public limited company duly organized and validly existing under
the laws of England and Wales. Delaware Sub is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware. Merger Sub is a limited liability
company duly organized, validly existing and in good standing
under the laws of the State of Delaware. To the extent such
concept or similar concept exists in the relevant jurisdiction,
each of Parent and Delaware Sub is duly qualified to do business
and is in good standing under the laws of any jurisdiction in
which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so
qualified or in good standing does not and is not reasonably
likely to have, individually or in the aggregate, a Material
Adverse Effect on Parent (a
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Parent Material Adverse Effect). Each
of Parent, Delaware Sub and Merger Sub has all requisite company
power and authority to own, operate and lease its properties and
to carry on its business as now conducted. The copies of the
Articles of Association of Parent, Certificate of Incorporation
and Bylaws of Delaware Sub and the Certificate of Formation and
Limited Liability Company of Merger Sub previously made
available to the Company are true and correct and contain all
amendments as of the date hereof.
Section 4.2 Authorization,
Validity and Effect of Agreements. Each of
Parent, Delaware Sub and Merger Sub has the requisite company
power and authority to execute and deliver this Agreement and
all other agreements and documents contemplated hereby to which
it is a party. The execution, delivery and performance by
Parent, Delaware Sub and Merger Sub of this Agreement and the
consummation by each of Parent, Delaware Sub and Merger Sub of
the transactions contemplated hereby, including, with respect to
Parent, the delivery by Parent of Parent ADSs pursuant to the
Merger and, with respect to Delaware Sub, the payment by
Delaware Sub of the fees pursuant to Section 7.5, have been
duly authorized by the Board of Directors of Parent, the Board
of Directors of Delaware Sub and the sole member of Merger Sub,
as applicable, and no other organizational proceedings on the
part of any of them are necessary to authorize the execution,
delivery and performance of this Agreement by Parent, Delaware
Sub and Merger Sub and the consummation of the transactions
contemplated hereby, other than the approval referred to in
Section 4.20. This Agreement has been duly and validly
executed and delivered by Parent, Delaware Sub and Merger Sub
and, assuming due authorization, execution and delivery of this
Agreement by the Company, constitutes the valid and legally
binding obligation of Parent, Delaware Sub and Merger Sub,
enforceable against Parent, Delaware Sub and Merger Sub, as
applicable, in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors rights and general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 4.3 Capitalization. As
of the date of this Agreement, the share capital of Parent
consists of 150,000,000 Class A Ordinary Shares in issue
and 50,000 Class B ordinary shares, nominal value
£1.00 per share (the Class B Ordinary
Shares) in issue. Each Class A Ordinary Share
in issue has been deposited with the nominee of Citibank, N.A.,
as depositary (including any successor depositary, the
ADS Depositary), and is represented by
one Parent ADS, evidenced by an American Depositary Receipt in
respect thereof, pursuant to the Deposit Agreement, dated as of
September 29, 2009 (including any amendments, supplements
or replacements thereof, the Deposit
Agreement), among the ADS Depositary, Parent and
the holders and beneficial owners from time to time of such
Parent ADSs. As of the date of this Agreement, the Board of
Directors of Parent is authorized to allot shares in Parent, or
to grant rights to subscribe for or convert any securities into
shares of Parent, of aggregate nominal amount of up to
$30,000,000. As of February 4, there were 142,974,663
Parent ADSs outstanding (including 1,796,934 Parent ADSs granted
as restricted share awards under Parent Benefit Plans),
7,025,337 Parent ADSs held by Parent Subsidiaries or
consolidated Affiliates and 50,000 Class B Ordinary Shares
held by a Parent Subsidiary. As of February 4, 2011,
1,312,374 Parent ADSs were subject to outstanding options
(Parent Options) granted under the
Parent Benefit Plans. As of the date of this Agreement, all
Class A Ordinary Shares in issue are, and all Class A
Ordinary Shares to be issued in connection with the Merger will
be when issued, duly authorized, validly and unconditionally
issued, fully paid and free of preemptive rights, and all Parent
ADSs representing such Class A Ordinary Shares have been,
and will be, validly issued in accordance with the Deposit
Agreement and the persons in whose names American Depositary
Receipts evidencing such Parent ADSs are registered are, or will
be, entitled to the rights of registered holders of such
American Depositary Receipts specified therein and in the
Deposit Agreement. As of the date of this Agreement, except as
set forth in this Section 4.3 or in connection with the
transactions contemplated by this Agreement, (x) there are
no outstanding or authorized capital shares, and there are no
options, warrants, calls, subscriptions, convertible securities,
preemptive rights or other rights, agreements, claims or
commitments which obligate Parent or any of its Subsidiaries to
issue, transfer or sell any capital shares or other voting
securities or other equity interest in Parent or any of its
Subsidiaries or securities convertible into or exchangeable for
such shares, securities or equity interests, (y) there are
no outstanding or authorized contractual obligations of Parent
or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any capital shares or other voting securities of or
other equity interest in Parent or any of its Subsidiaries or
any such securities or agreements listed in clause (x) of
this sentence, and (z) there are no voting trusts or
similar agreements to which Parent or any of its Subsidiaries is
a party with respect to the
A-25
voting of any capital shares or other voting securities of or
other equity interest in Parent or any of its Subsidiaries.
Parent has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or
which are convertible into or exercisable for securities having
the right to vote) with the shareholders of Parent on any matter.
Section 4.4 Significant
Subsidiaries.
(a) Each of Parents Significant Subsidiaries is a
corporation or other legal entity duly organized, validly
existing and, to the extent such concept or similar concept
exists in the relevant jurisdiction, in good standing under the
laws of its jurisdiction of incorporation or organization, has
the corporate or other entity power and authority to own,
operate and lease its properties and to carry on its business as
it is now being conducted, and is duly qualified to do business
and is in good standing (where applicable) in each jurisdiction
in which the ownership, operation or lease of its property or
the conduct of its business requires such qualification, in each
case except for jurisdictions in which such failure to be so
qualified or to be in good standing does not and is not
reasonably likely to have a Parent Material Adverse Effect. All
of the outstanding shares of capital stock of, or other
ownership interests in, each of Parents Significant
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and, as of the date of this Agreement, are owned,
directly or indirectly, by Parent free and clear of all Liens.
(b) All of the outstanding equity interests of Delaware Sub
and Merger Sub are owned indirectly by Parent. Merger Sub has
been formed solely for the purpose of engaging in the
transactions contemplated hereby and, as of the Effective Time,
will have not engaged in any activities other than its
capitalization and other activities in connection with the
transactions contemplated by this Agreement, including the
Financing.
Section 4.5 Compliance
with Laws; Permits. Except for such matters as,
individually or in the aggregate, do not and are not reasonably
likely to have a Parent Material Adverse Effect and except for
matters arising under Environmental Laws which are treated
exclusively in Section 4.13:
(a) Neither Parent nor any Subsidiary of Parent is in
violation of any Applicable Laws relating to the ownership or
operation of any of their respective assets or businesses, and
no claim is pending or, to the knowledge of Parent, threatened
with respect to any such matters. No condition exists that is
not disclosed in the Parent Disclosure Schedule or the Parent
Reports and which does or is reasonably likely to constitute a
violation of or deficiency under any Applicable Law relating to
the ownership or operation of the assets or conduct of
businesses of Parent or any Subsidiary of Parent.
(b) Parent and each Subsidiary of Parent hold all permits,
licenses, certifications, variations, exemptions, orders,
franchises and approvals of all governmental or regulatory
authorities necessary for the ownership, leasing and operation
of their respective assets or the conduct of their respective
businesses (the Parent Permits). All
Parent Permits are in full force and effect and there exists no
default thereunder or breach thereof, and Parent has no notice
or actual knowledge that such Parent Permits will not be renewed
in the ordinary course after the Effective Time. No Governmental
Entity has given, or to the knowledge of Parent threatened to
give, any notice to terminate, cancel or reform any Parent
Permit.
(c) Each drilling unit owned or leased by Parent or a
Subsidiary of Parent which is subject to classification is in
class without any significant outstanding deficiencies according
to the rules and regulations of the applicable classifying body
and is duly and lawfully documented under the laws of its flag
jurisdiction.
(d) Parent and each Subsidiary of Parent possess all
permits, licenses, operating authorities, orders, exemptions,
franchises, variances, consents, approvals or other
authorizations required for the present ownership and operation
of all its real property or leaseholds (Parent Real
Property). There exists no material default or
breach with respect to, and no party or Governmental Entity has
taken or, to the knowledge of Parent, threatened to take, any
action to terminate, cancel or reform any such permit, license,
operating authority, order, exemption, franchise, variance,
consent, approval or other authorization pertaining to the
Parent Real Property.
A-26
(e) Parent has instituted and maintains policies and
procedures designed to ensure, and which are reasonably expected
to continue to ensure, compliance with the FCPA and other
similar applicable foreign laws. Without limiting the generality
of clause (a) above, and mindful of the principles of the
FCPA and other similar applicable foreign laws, neither Parent
nor any of its Subsidiaries nor, in any such case, any of their
respective Parent Representatives (i) is in violation of
the FCPA or other similar applicable foreign laws as a result of
having made, offered or authorized any payment or given or
offered anything of value directly or indirectly to any
Government Official (including through a friend or family member
with personal relationships with Government Officials) for the
purpose of influencing an act or decision of the Government
Official in his official capacity or inducing the Government
Official to use his influence with that government, political
party, political campaign or public international organization
or (ii) has taken any action that would be reasonably
likely to subject Parent or any of its Subsidiaries to any
material liability or penalty under any and all Applicable Laws
of any Governmental Entity.
(f) Without limiting the generality of clause (a)
above, neither Parent nor any of its Subsidiaries nor any of
their respective directors, officers, employees or affiliates,
to Parents knowledge, is a Person with whom transactions
are currently prohibited under any U.S. sanctions
administered by OFAC or equivalent European Union measure.
Section 4.6 No
Conflict.
(a) Neither the execution, delivery and performance by
Parent, Delaware Sub and Merger Sub of this Agreement nor the
consummation by any of them of the transactions contemplated
hereby in accordance with the terms hereof will (i) subject
to the approval referred to in Section 4.20, conflict with
or result in a breach of any provisions of the Articles of
Association of Parent or the Certificate of Incorporation and
Bylaws of Delaware Sub or the Certificate of Formation or
Limited Liability Company Agreement of Merger Sub or the
certificate of incorporation, bylaws or similar governing
documents of any of Parents Significant Subsidiaries,
(ii) violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of
termination or cancellation of, or give rise to a right of
purchase under, or accelerate the performance required by, or
result in the creation of any Lien upon any of the properties of
Parent or its Subsidiaries under, or result in being declared
void, voidable, or without further binding effect, or otherwise
result in a detriment to Parent or any of its Subsidiaries under
any of the terms, conditions or provisions of, any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit,
lease, contract, agreement, joint venture or other instrument or
obligation to which Parent or any of its Subsidiaries is a
party, or by which Parent or any of its Subsidiaries or any of
their properties is bound or affected or (iii) subject to
the filings and other matters referred to in
Section 4.6(b), contravene or conflict with or constitute a
violation of any provision of any law, rule, regulation,
judgment, order or decree binding upon or applicable to Parent
or any of its Subsidiaries, except for such matters described in
clause (ii) or (iii) as do not and are not reasonably
likely to have, individually or in the aggregate, a Parent
Material Adverse Effect.
(b) Neither the execution, delivery and performance by
Parent, Delaware Sub or Merger Sub of this Agreement nor the
consummation by any of them of the transactions contemplated
hereby in accordance with the terms hereof will require any
consent, approval or authorization of, or filing or registration
with, any Governmental Entity, other than the Regulatory Filings
and the filing of a listing application with the NYSE pursuant
to Section 5.8, except for any consent, approval or
authorization the failure of which to obtain and for any filing
or registration the failure of which to make, individually or in
the aggregate, does not and is not reasonably likely to have a
Parent Material Adverse Effect.
Section 4.7 SEC
Documents.
(a) Parent has timely filed with the SEC all documents
(including exhibits and any amendments thereto) required to be
so filed by it since January 1, 2010 pursuant to
Sections 13(a), 14(a) and 15(d) of the Exchange Act, and
has made available to the Company each registration statement,
report, proxy statement or information statement (other than
preliminary materials) it has so filed, each in the form
(including exhibits and any amendments thereto) filed with the
SEC (collectively, the Parent
Reports). As of its respective date, each Parent
Report (i) complied in all material respects in accordance
with the applicable requirements of each
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of the Exchange Act, the Sarbanes-Oxley Act and other Applicable
Law, as the case may be, and, in each case, the applicable rules
and regulations of the SEC thereunder and (ii) did not
contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the
circumstances under which they were made, not misleading except
for such statements, if any, as have been corrected by
subsequent filings with the SEC prior to the date hereof.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the
related notes and schedules) fairly presents in all material
respects (subject, in the case of unaudited statements, to
recurring audit adjustments normal in nature and amount) the
consolidated financial position of Parent and its Subsidiaries
as of its date, and each of the consolidated statements of
operations, cash flows and changes in shareholders equity
included in or incorporated by reference into the Parent Reports
(including any related notes and schedules) fairly presents in
all material respects (subject, in the case of unaudited
statements, to recurring audit adjustments normal in nature and
amount) the results of operations, cash flows or changes in
shareholders equity, as the case may be, of Parent and its
Subsidiaries for the periods set forth therein; each of such
statements (including the related notes, where applicable)
complies, and the financial statements to be filed by Parent
with the SEC after the date of this Agreement will comply, with
applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable)
has been, and the financial statements to be filed by Parent
with the SEC after the date of this Agreement will be, prepared
in accordance with GAAP consistently applied during the periods
involved, except as indicated in the notes thereto or, in the
case of unaudited statements, as permitted by
Rule 10-01
of
Regulation S-X
of the SEC. KPMG LLP is an independent registered public
accounting firm with respect to Parent and has not resigned or
been dismissed as independent registered public accountants of
Parent.
(c) Since January 1, 2007, (A) the exercise price
of each Parent Option has been no less than the Fair Market
Value (as defined or determined under the terms of the
respective Parent Benefit Plan under which such Parent Option
was granted) of a Parent ADS as determined on the date of grant
of such Parent Option, and (B) all grants of Parent Options
were validly issued and properly approved by the Board of
Directors of Parent (or a duly authorized committee or
subcommittee thereof) in material compliance with Applicable Law
and recorded in Parents financial statements referred to
in Section 4.7(b) in accordance with GAAP, and no such
grants involved any back dating or similar practices
with respect to the effective date of grant or exercise price,
except as, individually or in the aggregate, has not had and
would not be reasonably likely to have or result in a Parent
Material Adverse Effect.
Section 4.8 Litigation. Except
as described in the Parent Reports filed on or prior to the date
of this Agreement, (A) there are no actions, suits or
proceedings pending against Parent or any of its Subsidiaries
or, to Parents knowledge, threatened against Parent or any
of its Subsidiaries, at law or in equity or in any arbitration
or similar proceedings, before or by any U.S. federal or
state or any
non-U.S. court,
commission, board, bureau, agency or instrumentality or any
U.S. or
non-U.S. arbitral
or other dispute resolution body, that are reasonably likely to
have, individually or in the aggregate, a Parent Material
Adverse Effect, and (B) there is no claim, action,
litigation or proceeding that Parent or any of its Subsidiaries
has pending against other parties, where such claim, action,
litigation or proceeding is intended to enforce or preserve
material rights of Parent or any of its Subsidiaries, except for
any such matters as are not reasonably likely to have a Parent
Material Adverse Effect.
Section 4.9 Absence
of Certain Changes.
(a) Since December 31, 2009, there has not been or
continued to exist any event, change, occurrence, effect, fact,
circumstance or condition that, individually or in the
aggregate, has had or is reasonably likely to have a Parent
Material Adverse Effect.
(b) From December 31, 2009 to the date of this
Agreement, (x) Parent and its Subsidiaries have conducted
their respective business only in the ordinary course consistent
with past practice in all material respects and (y) there
has not been (i) any material change by Parent or any of
its Subsidiaries, when taken as a whole, in any of its
accounting methods, principles or practices or any of its tax
methods, practices or elections, (ii) any declaration,
setting aside or payment of any dividend or distribution in
respect of any share
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capital of Parent or any redemption, purchase or other
acquisition of any of its securities, other than in connection
with the exercise or vesting of awards under the Parent Benefit
Plans, (iii) any split, combination or reclassification of
any of Parents capital shares or any issuance thereof or
any issuance of any other securities in respect of, in lieu of
or in substitution for Parents capital shares, except for
issuances of Class A Ordinary Shares upon the exercise or
conversion, as the case may be, of Parent Options, (iv) any
increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing,
stock option, stock purchase or other employee benefit plan,
except in the ordinary course of business consistent with past
practices, (v) any sale, lease, exchange, transfer or other
disposition of any material asset of Parent or any of its
Subsidiaries other than in the ordinary course of business
consistent with past practices, or (vi) any agreement or
commitment (contingent or otherwise) by Parent or any of its
Subsidiaries to do any of the foregoing.
Section 4.10 Taxes.
(a) Each of Parent, its Subsidiaries and each affiliated,
consolidated, combined, unitary or similar group of which any
such corporation is or was a member has (i) duly filed (or
there has been filed on its behalf) on a timely basis (including
all applicable extensions) with appropriate Governmental
Entities all true and complete Returns required to be filed by
or with respect to it on or prior to the date hereof, except to
the extent that any failure to file does not and is not
reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, and (ii) duly paid, or
deposited in full on a timely basis (including all applicable
extensions) or made adequate provision in accordance with GAAP
(or there has been paid or deposited or adequate provision has
been made on its behalf) for the payment of, all taxes required
to be paid by it, except to the extent that any failure to pay
or deposit or make adequate provision for the payment of such
taxes does not and is not reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse
Effect. Representations made in this Section 4.10 are made
to the knowledge of Parent to the extent that the
representations relate to a corporation which was, but is not
currently, a part of Parents or any Subsidiarys
affiliated, consolidated, combined unitary or similar group.
(b) (i) No audits or other administrative proceedings
or court proceedings are presently pending with regard to any
taxes or Returns of Parent or any of its Subsidiaries as to
which any taxing authority has asserted in writing any claim
which, if adversely determined, is reasonably likely to have a
Parent Material Adverse Effect; (ii) no Governmental Entity
is now asserting in writing any deficiency or claim for taxes or
any adjustment to taxes with respect to which Parent or any of
its Subsidiaries may be liable with respect to income and other
material taxes which have not been fully paid or finally
settled, which, if adversely determined, is reasonably likely to
have a Parent Material Adverse Effect; (iii) as of the date
of this Agreement, neither Parent nor any of its Subsidiaries
has granted any requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the
assessment of any taxes with respect to any Returns of Parent or
any of its Subsidiaries, which taxes, if paid by Parent, would
be reasonably likely to have a Parent Material Adverse Effect;
(iv) to the knowledge of Parent, neither Parent nor any of
its Subsidiaries is a party to any closing agreement described
in Section 7121 of the Code or any predecessor provision
thereof or any similar agreement under state, local, or
non-U.S. tax
law; (v) to the knowledge of Parent, neither Parent nor any
of its Subsidiaries is a party to, is bound by or has any
obligation under any tax sharing, allocation or indemnity
agreement or any similar agreement or arrangement (other than
such an agreement or arrangement exclusively between or among
Parent and its Subsidiaries and other than customary tax
indemnifications contained in credit or similar agreements),
which is reasonably likely to have a Parent Material Adverse
Effect; (vi) neither Parent nor any of its Subsidiaries is
a party to an agreement that provides for the payment of any
amount in connection with the Merger that would be reasonably
likely to constitute an excess parachute payment
within the meaning of Section 280G of the Code;
(vii) to the knowledge of Parent, neither Parent nor any of
its Subsidiaries has made an election under Section 341(f)
of the Code; (viii) to the knowledge of Parent, neither
Parent nor any of its Subsidiaries has any liability for taxes
under Treasury
Regulation Section 1.1502-6
or any similar provision of state, local, or
non-U.S. tax
law, except for taxes of the affiliated group of which Parent or
any of its Subsidiaries is the common parent, within the meaning
of Section 1504(a)(1) of the Code or any similar provision
of state, local, or
non-U.S. tax
law and except for taxes that, if paid by Parent, would not be
reasonably likely to have a Parent Material Adverse
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Effect; and (ix) Parent was not a passive foreign
investment company, as defined in Section 1297(a) of the
Code (PFIC) for the 2010 taxable year,
does not believe that it will be a PFIC for the taxable year in
which the Merger occurs, and has no reason, on the basis of
facts presently known, to believe that Parent will become a PFIC
for any subsequent year.
(c) There are no liens for taxes in amounts reasonably
likely to have a Parent Material Adverse Effect (other than
statutory liens for taxes not yet due and payable or the amount
or validity of which is being contested in good faith by
appropriate proceedings) upon any of the assets of Parent or any
of its Subsidiaries.
(d) Except for transactions which are not reasonably likely
to have a Parent Material Adverse Effect, neither Parent nor any
of its Subsidiaries has been, within the past two years or
otherwise as part of a plan (or series of related
transactions) within the meaning of Section 355(e) of
the Code of which the Merger is also a part, a
distributing corporation or a controlled
corporation (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of
stock intending to qualify for tax-free treatment under
Section 355 of the Code.
(e) To the knowledge of Parent, neither Parent nor any of
its Subsidiaries has participated in a reportable
transaction within the meaning of Treasury
Regulation Section 1.6011-4(b)(1).
(f) For U.S. federal income tax purposes, Parent owns
all of the equity interests of Merger Sub indirectly through a
newly formed corporate Subsidiary.
Section 4.11 Employee
Benefit Plans.
(a) Section 4.11 of the Parent Disclosure Schedule
contains a list of all the Parent Benefit Plans. The term
Parent Benefit Plans means all
material employee benefit plans and other material compensation
and benefit arrangements, including (i) all employee
benefit plans as defined in Section 3(3) of ERISA,
whether or not subject to the requirements of ERISA and whether
the plans are subject to United States law (a
U.S. Parent Benefit Plan) or not
subject to United States law (a
Non-U.S. Parent
Benefit Plan) with respect to which the Parent, a
Subsidiary of the Parent or any of their respective ERISA
Affiliates has or may have any liability, and (ii) all
other employee benefit, bonus, incentive, deferred compensation,
stock option (or other equity-based), severance, employment,
change in control, welfare (including post-retirement medical
and life insurance) and fringe benefit plans, practices or
agreements, whether or not such arrangement is a
U.S. Parent Benefit Plan and whether written or oral,
sponsored, maintained or contributed to or required to be
contributed to by Parent or any of its Subsidiaries, to which
Parent or any of its Subsidiaries is a party or is required to
provide benefits under Applicable Laws or in which any Person
who is currently, has been or, prior to the Effective Time, is
expected to become an employee or other service provider of
Parent or any of its Subsidiaries is a participant. Parent has
made available to the Company a true and complete copy of each
Parent Benefit Plan document, if applicable, the most recent
trust agreements, the most recently filed IRS Form 5500,
most recent summary plan descriptions, most recently received
determination letter issued by the IRS with respect to any
U.S. Parent Benefit Plan that is intended to qualify under
Section 401(a) of the Code, and most recently prepared
funding statements, annual reports and actuarial reports for
each such plan, and in the case of each
Non-U.S. Parent
Benefit Plan, each material document, if any, prepared in
connection with each
Non-U.S. Parent
Benefit Plan (in addition to the other documents, if any,
described in the first part of this sentence, to the extent
applicable).
(b) Except for such matters as, individually or in the
aggregate, do not or are not reasonably likely to have a Parent
Material Adverse Effect: (i) all applicable reporting and
disclosure requirements have been met with respect to the Parent
Benefit Plans; (ii) there has been no reportable
event, as that term is defined in Section 4043 of
ERISA, with respect to the Parent Benefit Plans subject to
Title IV of ERISA for which the
30-day
reporting requirement has not been waived; (iii) to the
extent applicable, the Parent Benefit Plans comply with the
requirements of ERISA and the Code or with the regulations of
any applicable jurisdiction; (iv) the Parent Benefit Plans
have been maintained and operated in accordance with their
terms; (v) to Parents knowledge, there are no
breaches of fiduciary duty in connection with the Parent Benefit
Plans; (vi) there has not been any prohibited transaction
(within the meaning of Section 406 of ERISA or
Section 4975 of the Code) with respect to any
U.S. Parent Benefit Plans; (vii) there are no pending or,
to Parents knowledge,
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threatened claims against or otherwise involving any Parent
Benefit Plan, and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of Parent
Benefit Plan activities) has been brought against or with
respect to any such Parent Benefit Plan; (viii) all
material contributions required to be made as of the date hereof
to the Parent Benefit Plans have been made or provided for; and
(ix) the fair market value of the assets of each funded
Non-U.S. Parent
Benefit Plan, the liability of each insurer for any
Non-U.S. Parent
Benefit Plan funded through insurance or the book reserve
established for any
Non-U.S. Parent
Benefit Plan, together with any accrued contributions, is
sufficient to procure or provide for the benefits determined on
an ongoing basis (actual or contingent) accrued to the date of
this Agreement with respect to all current and former
participants under such
Non-U.S. Parent
Benefit Plan according to the actuarial assumptions and
valuations most recently used to determine employer
contributions to such
Non-U.S. Parent
Benefit Plan, and no transaction contemplated by this Agreement
shall cause such assets or insurance obligations to be less than
such benefit obligations; provided that a
Non-U.S. Parent
Benefit Plan that is maintained solely pursuant to
non-U.S. Applicable
Law and sponsored by a governmental authority shall not be
subject to this clause.
(c) Each Parent Benefit Plan intended be qualified under
Section 401(a) of the Code has received a favorable
determination letter from the IRS or may rely on an opinion or
advisory letter issued to a master or prototype or volume
submitter provider with respect to the tax-qualified status of
such Parent Benefit Plan. Neither Parent nor any of its
Subsidiaries nor any of its ERISA Affiliates contributes to, or
has an obligation to contribute to, and has not within six years
prior to the Effective Time contributed to, had an obligation to
contribute to or otherwise has liability with respect to
(i) any employee pension benefit plan, as
defined in Section 3(2) of ERISA, that is subject to
Title IV of ERISA or (ii) a multiemployer
plan within the meaning of Section 3(37) of ERISA or
a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which liability under
Section 4063 or Section 4064 of ERISA could be
incurred (i.e., a multiple employer plan).
The execution of, and performance of the transactions
contemplated by, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, policy, arrangement
or agreement or any trust or loan (in connection therewith) that
will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund
benefits with respect to any employee or other service provider
of Parent or any Subsidiary thereof.
(d) No Parent Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not
insured) for employees or former employees of Parent or any
Subsidiary of Parent for periods extending beyond their
retirement or other termination of service other than
(i) coverage mandated by Applicable Laws, (ii) death
benefits under any pension plan or
(iii) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
Section 4.12 Labor
Matters.
(a) Except for such matters as, individually or in the
aggregate, do not and are not reasonably likely to have a Parent
Material Adverse Effect, (i) as of the date of this
Agreement, neither Parent nor any of its Subsidiaries is a party
to, or bound by, any collective bargaining agreement or similar
contract, agreement or understanding with a labor union, works
council, employee representative or other labor organization or
group of employees (A) covering any U.S. employees or
(B) covering, in any single instance, 5% or more of the
employees of Parent and its Subsidiaries taken as a whole, and
(ii) to Parents knowledge, there are no
organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened
(x) involving any U.S. employees or
(y) involving, in any single instance, 5% or more of the
employees of Parent and its Subsidiaries taken as a whole.
(b) There is no union, works council, employee
representative or other labor organization or group of
employees, which, pursuant to Applicable Laws, must be notified,
consulted or with which negotiations need to be conducted
connection with the transactions contemplated by this Agreement.
(c) Except for such matters as, individually or in the
aggregate, do not and are not reasonably likely to have a Parent
Material Adverse Effect and except as described in the Parent
Reports filed prior to the date of this Agreement,
(i) neither Parent nor any Subsidiary of Parent has
received any written complaint of any
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unfair labor practice or other unlawful employment practice or
any written notice of any material violation of any Applicable
Law with respect to the employment or engagement of individuals
by, or the employment practices of, Parent or any Subsidiary of
Parent or the work conditions or the terms and conditions of
employment and wages and hours of their respective businesses
and (ii) there are no unfair labor practice charges or
other employee related complaints against Parent or any
Subsidiary of Parent pending or, to the knowledge of Parent,
threatened, before any Governmental Entity by or concerning any
former or current employees, temporary or agency employees, or
independent contractors of Parent or any Subsidiary of Parent.
Section 4.13 Environmental
Matters.
(a) Parent and each Subsidiary of Parent has been and is in
compliance with all Environmental Laws except for such matters
as do not and are not reasonably likely to have, individually or
in the aggregate, a Parent Material Adverse Effect. There are no
past or present facts, conditions or circumstances that
interfere (or are reasonably likely to interfere in the future)
with the conduct of any of their respective businesses in the
manner now conducted or which interfere with continued
compliance with any Environmental Law, except for any
non-compliance or interference that is not reasonably likely to
have, individually or in the aggregate, a Parent Material
Adverse Effect.
(b) Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, no judicial or administrative
proceedings or governmental investigations are pending or, to
the knowledge of Parent, threatened against Parent or any of its
Subsidiaries that allege the violation of or seek to impose
liability pursuant to any Environmental Law, and there are no
past or present facts, conditions or circumstances at, on or
arising out of, or otherwise associated with, any current (or,
to the knowledge of Parent or any of its Subsidiaries, former)
businesses, assets or properties of Parent or any Subsidiary of
Parent, including but not limited to
on-site or
off-site storage, disposal, release or spill of any Hazardous
Materials which violate Environmental Law or are reasonably
likely to give rise under any Environmental Law to
(i) costs, expenses, liabilities or obligations related to
any cleanup, remediation, investigation, disposal or corrective
action, (ii) claims arising for personal injury, property
damage or damage to natural resources, or (iii) fines,
penalties or injunctive relief.
(c) Neither Parent nor any of its Subsidiaries has
(i) received any notice of noncompliance with, violation
of, or liability or potential liability under any Environmental
Law or (ii) entered into any consent decree or order or is
subject to any order of any court or Governmental Entity or
tribunal under any Environmental Law or relating to the cleanup
of any Hazardous Materials, except for any such matters as do
not and are not reasonably likely to have a Parent Material
Adverse Effect.
(d) Parent has delivered to, or otherwise made available
for inspection by, the Company true, complete and correct copies
and results of any material reports, studies, analyses, tests or
monitoring possessed or initiated by Parent pertaining to
Hazardous Materials in, on, beneath or adjacent to any property
currently or formerly owned, operated or leased by Parent or any
of its Subsidiaries, or regarding Parents or any of its
Subsidiaries compliance with or liability or potential
liability under applicable Environmental Laws.
Section 4.14 Intellectual
Property. Parent and its Subsidiaries own or
possess adequate licenses or other valid rights to use all
intellectual property used or held for use in connection with
their respective businesses as currently being conducted, except
where the failure to own such intellectual property or possess
such licenses and other rights does not and is not reasonably
likely to have, individually or in the aggregate, a Parent
Material Adverse Effect. Neither Parent nor any of its
Subsidiaries has received notice of any claims challenging the
validity of such intellectual property, licenses or rights that
are reasonably likely to have, individually or in the aggregate,
a Parent Material Adverse Effect. To the knowledge of Parent,
the conduct of Parents and its Subsidiaries
respective businesses as currently conducted does not infringe
on any intellectual property rights of others, except as would
not be reasonably likely to have, individually or in the
aggregate, a Parent Material Adverse Effect. To the knowledge of
Parent, there is no infringement of any intellectual property
owned by Parent or any of its Subsidiaries that is reasonably
likely to have, individually or in the aggregate, a Parent
Material Adverse Effect.
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Section 4.15 Decrees,
Etc. Except for such matters as do not and are
not reasonably likely to have, individually or in the aggregate,
a Parent Material Adverse Effect (i) no order, writ, fine,
injunction, decree, judgment, award or determination of any
Governmental Entity or any arbitral or other dispute resolution
body has been issued or entered against Parent or any Subsidiary
of Parent or any of Parents officers or directors (in
their capacities as such) that continues to be in effect that
affects the ownership or operation of any of their respective
assets or the conduct of their respective businesses, and
(ii) since January 1, 2000, no criminal order, writ,
fine, injunction, decree, judgment or determination of any
Governmental Entity has been issued against Parent or any
Subsidiary of Parent.
Section 4.16 Insurance. Except
for such matters as do not and are not reasonably likely to
have, individually or in the aggregate, a Parent Material
Adverse Effect:
(a) Parent and its Subsidiaries maintain insurance coverage
with financially responsible insurance companies in such amounts
and against such losses as are customary in the international
offshore drilling business as of the date hereof.
(b) No event relating specifically to Parent or its
Subsidiaries (as opposed to events affecting the drilling
service industry in general) has occurred that is reasonably
likely, after the date of this Agreement, to result in an upward
adjustment in premiums under any insurance policies they
maintain. Excluding insurance policies that have expired and
been replaced in the ordinary course of business, no excess
liability, hull or protection and indemnity insurance policy has
been canceled by the insurer within one year prior to the date
hereof, and to Parents knowledge, no threat in writing has
been made to cancel (excluding cancellation upon expiration or
failure to renew) any such insurance policy of Parent or any
Subsidiary of Parent during the period of one year prior to the
date hereof. Prior to the date hereof, no event has occurred,
including the failure by Parent or any Subsidiary of Parent to
give any notice or information or by giving any inaccurate or
erroneous notice or information, which materially limits or
impairs the rights of Parent or any Subsidiary of Parent under
any such excess liability, hull or protection and indemnity
insurance policies.
Section 4.17 No
Brokers. Parent has not entered into any
contract, arrangement or understanding with any Person which may
result in the obligation of the Company or Parent to pay any
finders fees, brokerage or other like payments in
connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby, except
that Parent has retained Deutsche Bank Securities Inc. as its
financial advisor, the arrangements with which have been
disclosed in writing to the Company prior to the execution and
delivery of this Agreement.
Section 4.18 Recommendation
of Board of Directors; Opinion of Financial Advisor.
(a) The Board of Directors of Parent, at a meeting duly
called and held, adopted resolutions (i) determining that
this Agreement and the transactions contemplated hereby are
advisable and in the best interests of Parent,
(ii) approving this Agreement and the transactions
contemplated hereby, (iii) determining that it would be in
the best interests of the shareholders of Parent that an
ordinary resolution to approve the delivery of Parent ADSs in
the Merger be submitted to the shareholders of Parent and
directing that it be so submitted in accordance with this
Agreement and (iv) recommending approval of the delivery of
Parent ADSs in the Merger by the shareholders of Parent, which
resolutions, as of the date of this Agreement, have not been
subsequently rescinded, modified or withdrawn.
(b) The Board of Directors of Parent has received the
opinion of Deutsche Bank Securities Inc., dated as of the date
of this Agreement, that, as of the date of such opinion, and
subject to the assumptions, limitations, qualifications and
conditions set forth therein, the Merger Consideration to be
paid in respect of each share of Common Stock of the Company is
fair, from a financial point of view, to Parent.
Section 4.19 Company
Share Ownership. Neither Parent nor any of its
Subsidiaries owns any shares of capital stock of the Company or
any other securities convertible into or otherwise exercisable
to acquire shares in the capital of the Company.
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Section 4.20 Vote
Required. The only vote of the holders of any
class or series of Parent share capital necessary to approve any
transaction contemplated by this Agreement is the vote of the
holders of Class A Ordinary Shares required by the rules of
the NYSE to approve the delivery of Parent ADSs in the Merger
(the Parent Shareholder Approval).
Section 4.21 Ownership
of Drilling Units.
(a) As of the date hereof, Parent or a Subsidiary of Parent
has good and marketable title to the drilling units listed in
Parents most recent fleet status report posted on
Parents website, in each case free and clear of all Liens
except for (i) defects or irregularities of title or
encumbrances of a nature that do not materially impair the
ownership or operation of these assets and which have not had
and are not reasonably likely to, individually or in the
aggregate, have a Parent Material Adverse Effect,
(ii) Liens that secure obligations not yet due and payable
or, if such obligations are due and have not been paid, Liens
securing such obligations that are being diligently contested in
good faith and by appropriate proceedings (any such contests
involving an amount in excess of $25 million being
described in Section 4.21 of the Parent Disclosure
Schedule), (iii) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being
contested in good faith, (iv) Liens in connection with
workmens compensation, unemployment insurance or other
social security, old age pension or public liability obligations
not yet due and payable or which are being contested in good
faith, (v) operators, vendors, suppliers of
necessaries to Parents drilling units, carriers,
warehousemens, repairmens, mechanics,
workmens, materialmens, construction or shipyard
liens (during repair or upgrade periods) or other like Liens
arising by operation of law in the ordinary course of business
or statutory landlords liens, each of which is in respect
of obligations that have not been outstanding more than
90 days (so long as no action has been taken to file or
enforce such Liens within said
90-day
period) or which are being contested in good faith and
(vi) other Liens disclosed in the Parent Disclosure
Schedule (the Liens described in clauses (i), (ii), (iii), (iv),
(v) and (vi), collectively, Parent Permitted
Liens). No such asset is leased under an operating
lease from a lessor that, to Parents knowledge, has
incurred non-recourse indebtedness to finance the acquisition or
construction of such asset.
(b) Except as would not have, individually or in the
aggregate, a Parent Material Adverse Effect, Parent has caused
the drilling units listed in Parents most recent fleet
status report posted on Parents website to be maintained
consistent with general practice in the offshore drilling
industry, and all such drilling units are in good operating
condition and repair consistent with general practice in the
offshore drilling industry.
Section 4.22 Undisclosed
Liabilities. Neither Parent nor any of its
Subsidiaries has any liabilities or obligations of any nature,
whether or not fixed, accrued, contingent or otherwise, except
liabilities and obligations that (i) are disclosed in the
Parent Reports filed prior to the date of this Agreement,
(ii) are referred to in Section 4.22 of the Parent
Disclosure Schedule, (iii) were incurred since
September 30, 2010 in the ordinary course of business
consistent with past practice or (iv) do not and are not
reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect.
Section 4.23 Certain
Contracts.
(a) Section 4.23 of the Parent Disclosure Schedule
contains a list of all of the following contracts, commitments
or agreements (other than those set forth on an exhibit index in
the Parent Reports filed prior to the date of this Agreement) to
which Parent or any Subsidiary of Parent is a party or by which
any of them or their assets is bound as of the date of this
Agreement: (i) any non-competition agreement that purports
to limit the manner in which, or the localities in which, all or
any portion of their respective businesses is conducted, other
than any such limitation that is not material to Parent and its
Subsidiaries, taken as a whole, and will not be material to
Parent and its Subsidiaries, taken as a whole, following the
Effective Time, (ii) any drilling unit construction,
repair, modification, life extension, overhaul or conversion
contract for an amount in excess of $50 million,
with respect to which the drilling unit has not been
delivered and paid for, (iii) any drilling contracts of one
year or greater remaining duration, including fixed price
customer options, (iv) any contract or agreement, other
than agreements among Parent
and/or its
wholly-owned Subsidiaries, for the borrowing of money with a
borrowing capacity or outstanding indebtedness of
$50 million or more, (v) any employment agreement
between Parent or any of its Subsidiaries, on the one hand, and
any of Parents officers and key employees, on the other
hand, (vi) any agreement which, upon the consummation of
the Merger or any other
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transaction contemplated by this Agreement, will (either alone
or upon the occurrence of any additional acts or events,
including the passage of time) result in any payment or benefit
(whether of severance pay or otherwise) becoming due, or the
acceleration or vesting of any right to any payment or benefits,
from Parent or the Company or any of their respective
Subsidiaries to any officer, director, consultant or employee of
any of the foregoing, (vii) any agreement which is a
material joint venture agreement, joint operating agreement,
partnership agreement or other similar contract or agreement
involving a sharing of profits and expenses with one or more
third Persons, (viii) any agreement the benefits of which
will be increased, or the vesting of the benefits of which will
be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement (including any stock
option plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan) or (ix) any material
contract (as such term is defined in Item 601(b)(10)
of
Regulation S-K
of the SEC). Each contract, arrangement, commitment or
understanding of the type described in this
Section 4.23(a), whether or not included as an exhibit to
any Parent Report or included in Section 4.23 of the Parent
Disclosure Schedule, is referred to herein as a
Parent Material Contract, and for
purposes of Section 5.1 and the bringdown of
Section 4.23(b) pursuant to Section 6.2, Parent
Material Contract shall include any such contract,
arrangement, commitment or understanding that is entered into
after the date of this Agreement.
(b) Each Parent Material Contract is, to the knowledge of
Parent, in full force and effect, and Parent and each of its
Subsidiaries have in all material respects performed all
obligations required to be performed by them to date under each
Parent Material Contract to which it is a party, except where
such failure to be binding or in full force and effect or such
failure to perform does not and is not reasonably likely to
create, individually or in the aggregate, a Parent Material
Adverse Effect. Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, neither Parent nor any of its
Subsidiaries (x) knows of, or has received written notice
of, any breach of or violation or default under (nor, to the
knowledge of Parent, does there exist any condition which with
the passage of time or the giving of notice or both would result
in such a violation or default under) any Parent Material
Contract or (y) has received written notice of the desire
of the other party or parties to any such Parent Material
Contract to cancel, terminate, modify or repudiate such contract
or exercise remedies thereunder. Except as would not be
reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect, the consummation of the
transactions contemplated by this Agreement will not breach or
violate any Parent Material Contract or permit any other party
to a Parent Material Contract to exercise rights adverse to
Parent. Each Parent Material Contract is enforceable by Parent
or a Subsidiary of Parent in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to creditors rights and
general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity), except where such unenforceability is not reasonably
likely to create, individually or in the aggregate, a Parent
Material Adverse Effect.
Section 4.24 Capital
Expenditure Program. As of the date of this
Agreement, Section 4.24 of the Parent Disclosure Schedule
accurately sets forth in all material respects, for each of
Parents construction, repair, modification, life
extension, overhaul or conversion capital expenditure programs,
the capital expenditures for all such programs that were
forecasted to be incurred in 2011 on a quarterly basis, as
previously provided to the Company. The construction in progress
attributable to the newbuilds and included in the consolidated
balance sheet of Parent at September 30, 2010 included in
the Parent Reports (excluding capitalized interest on such
newbuilds), together with the projected capital expenditures for
such newbuilds previously provided to the Company, equal the
projected total construction costs to complete such newbuilds,
as at the time of such forecast.
Section 4.25 Derivative
Transactions.
(a) Section 4.25 of the Parent Disclosure Schedule
contains a complete and correct list of all Derivative
Transactions (including each outstanding commodity or financial
hedging position) entered into by Parent or any of its
Subsidiaries or for the account of any of its customers as of
the date of this Agreement.
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(b) Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a
Parent Material Adverse Effect: (i) all such Derivative
Transactions were, and any Derivative Transactions entered into
after the date of this Agreement will be, entered into in
accordance with Applicable Laws, and in accordance with the
investment, securities, commodities, risk management and other
policies, practices and procedures employed by Parent and its
Subsidiaries, and were, and will be, entered into with
counterparties that Parent believed at the time, and still
believes, to be financially responsible and able to understand
(either alone or in consultation with their advisers) and to
bear the risks of such Derivative Transactions; and
(ii) Parent and each of its Subsidiaries have, and will
have, duly performed all of their respective obligations under
the Derivative Transactions to the extent that such obligations
to perform have accrued, and, to the knowledge of Parent, there
are and will be no breaches, violations, collateral
deficiencies, requests for collateral or demands for payment, or
defaults or allegations or assertions of such by any party
thereunder.
Section 4.26 Disclosure
Controls and Procedures. Parent has established
and maintains disclosure controls and procedures (as
defined in
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) that are reasonably designed to ensure that
all material information (both financial and non-financial)
required to be disclosed by Parent in the reports that it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and that all such information is
accumulated and communicated to Parents management as
appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the Chief Executive
Officer and Chief Financial Officer of Parent required under the
Exchange Act with respect to such reports. Since January 1,
2009, neither Parent nor its independent auditors have
identified any significant deficiencies or
material weaknesses in Parents or any of its
Subsidiaries internal controls as contemplated under
Section 404 of the Sarbanes-Oxley Act.
Section 4.27 Affiliate
Transactions. There are no material agreements,
contracts, transfers of assets or liabilities or other
commitments or transactions (other than Parent Benefit Plans
described in Section 4.11 of the Parent Disclosure Schedule
and Parent Material Contracts listed in Section 4.23 of the
Parent Disclosure Schedule or in the exhibit list of a Parent
Report), whether or not entered into in the ordinary course of
business, to or by which Parent or any of its Subsidiaries, on
the one hand, and any of their respective Affiliates (other than
Parent or any of its direct or indirect wholly owned
Subsidiaries) on the other hand, are or have been a party or
otherwise bound or affected, and that (a) are currently
pending, in effect or have been in effect at any time since
December 31, 2009 or (b) involve continuing
liabilities and obligations that, individually or in the
aggregate, have been, are or will be material to Parent and its
Subsidiaries taken as a whole.
Section 4.28 Disclaimer.
(a) Except for the representations and warranties contained
in this Article 4 of this Agreement, the Company
acknowledges that none of Parent, Delaware Sub or Merger Sub or
any other Person on their behalf makes any other express or
implied representation or warranty with respect to Parent,
Delaware Sub or Merger Sub with respect to any other information
provided to the Company. Without limiting the generality of the
foregoing, none of Parent, Delaware Sub or Merger Sub or any
other Person will have or be subject to any liability or
indemnification obligation to the Company or any other Person
resulting from the distribution to the Company, or use by the
Company of, any such information, including any information,
documents, projections, forecasts or other material made
available to the Company in certain data rooms or
management presentations in expectation of the transactions
contemplated by this Agreement.
(b) In connection with investigation by the Company of
Parent and its Subsidiaries, the Company has received or may
receive from Parent
and/or
Parents Subsidiaries certain projections, forward-looking
statements and other forecasts and certain business plan
information. The Company acknowledges that there are
uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that the Company is
familiar with such uncertainties, that the Company is taking
full responsibility for making its own evaluation of the
adequacy and accuracy of all estimates, projections and other
forecasts and plans so furnished to it (including the
reasonableness of the assumptions underlying such estimates,
projections,
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forecasts or plans), and that, absent fraud or willful
misrepresentation, the Company shall have no claim against
anyone with respect thereto. Accordingly, the Company
acknowledges that Parent makes no representation or warranty
with respect to such estimates, projections, forecasts or plans
(including the reasonableness of the assumptions underlying such
estimates, projections, forecasts or plans).
ARTICLE 5
COVENANTS
Section 5.1 Conduct
of Company and Parent Business. Prior to the
Effective Time, except as set forth in the Parent Disclosure
Schedule or the Company Disclosure Schedule or as expressly
contemplated by any other provision of this Agreement or as
required by Applicable Laws (provided that the party proposing
to take such action has provided the other party with advance
notice of the proposed action to the extent practicable), unless
the other party has consented in writing thereto, each of Parent
and the Company:
(a) shall, and shall cause each of its Subsidiaries to,
conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(b) shall use its reasonable best efforts, and shall cause
each of its Subsidiaries to use its reasonable best efforts, to
preserve intact their business organizations and goodwill
(except that any of its wholly owned Subsidiaries may be merged
with or into, or be consolidated with any of its wholly owned
Subsidiaries or may be liquidated into it or any of its wholly
owned Subsidiaries), keep available the services of their
respective officers and employees and maintain satisfactory
relationships with those Persons having business relationships
with them;
(c) shall not amend, in the case of the Company, its
Certificate of Incorporation or Bylaws or, in the case of
Parent, its Articles of Association;
(d) in the case of Parent, shall not permit or allow
Delaware Sub to amend its Certificate of Incorporation or Bylaws
or Merger Sub to amend its Certificate of Formation or Limited
Liability Company Agreement and shall not take, or permit or
allow Delaware Sub to take, any action that is reasonably likely
to cause Delaware Sub to be rendered insolvent or to materially
reduce its net assets;
(e) shall (i) promptly notify the other of any
material change in its condition (financial or otherwise) or
business or any termination, cancellation, repudiation or
material breach of any Parent Material Contract or Company
Material Contract, as applicable (or communications received
from third parties indicating that the same may be
contemplated), or any material litigation or proceedings
(including arbitration and other dispute resolution proceedings)
or material governmental complaints, investigations or hearings
(or communications indicating that the same may be
contemplated), and (ii) give prompt notice to the other of
any change, occurrence, effect, condition, fact, event, or
circumstance known to such party that is reasonably likely,
individually or taken together with all other changes,
occurrences, effects, conditions, facts, events and
circumstances known to such party, to result in a Material
Adverse Effect on such party; provided, however,
that (x) no unintentional failure by Parent to provide a
required notice under this Section 5.1(e) with respect to
any matter that would not result in a failure of the condition
set forth in Section 6.2(ii) or Section 6.2(iii) shall
result in a failure of the condition set forth in
Section 6.2(i), and (y) no unintentional failure by
the Company to provide a required notice under this
Section 5.1(e) with respect to any matter that would not
result in a failure of the condition set forth in
Section 6.3(ii) or Section 6.3(iii) shall result in a
failure of the condition set forth in Section 6.3(i);
(f) 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, other than those filed
via the SECs EDGAR system;
(g) shall not and shall cause each of its Subsidiaries not
to, (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights or
vesting of other equity-based awards existing on the date hereof
and disclosed in Section 5.1(g) of the Parent Disclosure
Schedule, in the case of Parent, or except pursuant to the
exercise of warrants, conversion rights, Company Stock Options
and
A-37
other contractual rights or the vesting of Company Restricted
Stock Awards or Company RSU Awards outstanding on the date
hereof and disclosed in Section 5.1(g) of the Company
Disclosure Schedule, in the case of the Company, or pursuant to
the exercise or vesting of awards granted after the date hereof
and expressly permitted under this Agreement or in connection
with transactions permitted by Section 5.1(j), issue,
grant, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any of its capital shares of any
class or of any other such securities or agreements of such
party or any of its Subsidiaries, or adjust, split, combine or
reclassify any capital shares or other equity interests or
otherwise change its capitalization as it existed on the date
hereof (other than intercompany transactions relating to
securities of wholly owned Subsidiaries effected by a party
and/or one
or more of its wholly owned Subsidiaries), other than grants of
Parent Options or other awards or Company Stock Options or other
awards, as the case may be, to new hires or promoted employees
in the ordinary course of business consistent with past practice
and in accordance with Section 5.1(g) of the Parent
Disclosure Schedule, in the case of Parent, or
Section 5.1(g) of the Company Disclosure Schedule, in the
case of the Company; (ii) amend or otherwise modify any
option, warrant, conversion right or other right to acquire any
of its capital shares existing or outstanding on the date
hereof; (iii) with respect to any of its former, present or
future employees, increase any compensation or benefits, or
enter into, amend or extend (or permit the extension of) any
employment or consulting agreement, except in each case in the
ordinary course of business consistent with past practice;
(iv) with respect to any of its former, present or future
officers (at the vice president level or above) or directors,
increase any compensation or benefits or enter into, amend or
extend (or permit the extension of) any employment or consulting
agreement; (v) adopt any new employee benefit plan (or any
award grant thereunder) or agreement (including any stock
option, stock benefit or stock purchase plan) or amend (except
as required by Applicable Laws) any existing employee benefit
plan or agreement in any material respect, except for changes
which are less favorable to participants in such plans or the
holder of any such agreement or which are deemed necessary to
comply with Section 409A of the Code; (vi) except as
approved by good faith action of the Board of Directors of such
party after the party has provided the other parties with
advance written notice of the proposed action and consulted in
advance with the other parties regarding such action, terminate
any executive officer without cause or permit circumstances to
exist that would give any executive officer a right to terminate
employment if the termination would entitle such executive
officer to receive enhanced separation payments upon
consummation of the Merger; or (vii) in the case of the
Company, permit any holder of an option or other equity-based
award to acquire shares of Company Common Stock outstanding on
the date hereof to have shares withheld upon the applicable
taxable event, for tax purposes, in excess of the number of
shares needed to satisfy the minimum statutory withholding
requirements for federal and state tax withholding, or otherwise
required to satisfy the withholding requirements under the
Companys policy with respect to foreign tax obligations;
(h) shall not and shall cause each of its Subsidiaries not
to, (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any of its capital
stock, whether payable in cash, stock or any other property or
right (other than a dividend, distribution or payment from a
direct or indirect wholly owned Subsidiary to that party
and/or one
or more of its direct or indirect wholly owned Subsidiaries or,
in the case of Parent, its regular quarterly dividend of $0.35
per Class A Ordinary Share) or (ii) redeem, purchase
or otherwise acquire any shares of its capital stock or capital
stock of any of its Subsidiaries (other than wholly owned
Subsidiaries but including, in the case of Parent, Delaware
Sub), or any other securities or agreements of the type
described in Section 5.1(g)(i), except (1) as required
by the terms of any capital stock of, or other equity interests
in, such party or any of its Subsidiaries outstanding on the
date of this Agreement and described in
Section 5.1(h)(ii)(1) of such partys Disclosure
Schedule, (2) as contemplated by any Parent Benefit Plan or
the Company Benefit Plan, as the case may be, existing on the
date of this Agreement and described in
Section 5.1(h)(ii)(2) of such partys Disclosure
Schedule or (3) in the case of the Company, as contemplated
by any employment agreement of the Company existing on the date
of this Agreement and described in Section 5.1(h)(ii)(3) of
the Company Disclosure Schedule;
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(i) shall not, and shall cause each of its Subsidiaries not
to, sell, lease or otherwise dispose of any of its assets
(including capital stock of Subsidiaries) which are individually
or in the aggregate material to it and its Subsidiaries as a
whole except for (i) sales of surplus equipment,
(ii) sales of other assets in the ordinary course of
business, or (iii) sales, leases or other transfers between
such party and its wholly-owned Subsidiaries or between those
Subsidiaries;
(j) shall not, and shall cause each of its Subsidiaries not
to, except pursuant to contractual commitments in effect on the
date hereof and disclosed in Section 5.1(j) of the Parent
Disclosure Schedule or Section 5.1(j) of the Company
Disclosure Schedule, acquire or agree to acquire by merging or
consolidating with, or by purchasing an equity interest in or a
substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or
other business organization or division thereof, in each case
(i) for an aggregate consideration for all such
acquisitions in excess of $25 million (excluding
acquisitions approved in writing by each party and intercompany
acquisitions effected by Parent
and/or one
of Parents wholly owned Subsidiaries or by the Company
and/or one
of the Companys wholly owned Subsidiaries) or
(ii) where a filing under the HSR Act or any
non-U.S. Antitrust
Laws is required;
(k) shall not, except as may be required as a result of a
change in GAAP, change any of the material accounting principles
or practices used by it;
(l) shall, and shall cause each of its Subsidiaries to, use
reasonable efforts to maintain with financially responsible
insurance companies insurance in such amounts and against such
risks and losses as are customary for such party;
(m) shall not, and shall cause each of its Subsidiaries not
to, (i) make or rescind any material election relating to
taxes, including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or
other investments where it has the capacity to make such binding
election, (ii) settle or compromise any material claim,
action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, or
(iii) change in any material respect any of its methods of
reporting any item for tax purposes from those employed in the
preparation of its tax returns for the most recent taxable year
for which a return has been filed, except as may be required by
Applicable Laws;
(n) shall not, and shall cause each of its Subsidiaries not
to, (i) incur any indebtedness for borrowed money
(excluding intercompany indebtedness effected by Parent
and/or one
of Parents wholly owned Subsidiaries or by the Company
and/or one
of the Companys wholly owned Subsidiaries) in excess of,
in the case of Parent, the amount of available borrowing
capacity existing from time to time under Parents existing
revolving credit facility described in the Parent Reports filed
prior to the date of this Agreement and the amounts contemplated
by the Financing and, in the case of the Company, the amount of
available borrowing capacity existing from time to time under
the Companys existing revolving credit facility described
in the Company Reports as filed prior to the date of this
Agreement, or guarantee any such indebtedness or issue or sell
any debt securities or warrants or rights to acquire any debt
securities of it or any of its Subsidiaries or guarantee any
debt securities of others, (ii) except in the ordinary
course of business or with or between its Subsidiaries, enter
into any material lease (whether such lease is an operating or
capital lease) or create any material Liens on its property in
connection with any indebtedness thereof (other than Permitted
Liens) or (iii) make or commit to make aggregate capital
expenditures in excess of $50 million per quarter for each
quarter from the date of this Agreement to the Effective Time
over the capital expenditures forecast disclosed in
Section 4.24 of the Parent Disclosure Schedule or
Section 3.24 of the Company Disclosure Schedule for such
quarter, excluding capital expenditures to repair or replace
equipment necessary to continue operation on any drilling unit
in a manner consistent with the operation of such drilling unit
as of the date of this Agreement;
(o) shall not, and shall cause each of its Subsidiaries not
to, purchase or otherwise acquire any Class A Ordinary
Shares, Parent ADSs or shares of Company Common Stock except
transactions in the ordinary course by or pursuant to Parent
Benefit Plans or Company Benefit Plans, respectively;
A-39
(p) (i) shall not, and shall cause each of its
Subsidiaries not to, take any action that would, or would
reasonably be expected to, prevent, materially delay or
materially impede the consummation of the Merger and the other
transactions contemplated by this Agreement; and
(ii) subject to Section 5.4, shall not, and shall
cause each of its Subsidiaries not to, take any action that is
reasonably likely to delay materially or adversely affect the
ability of any of the parties hereto to obtain any consent,
authorization, order or approval of any governmental commission,
board or other regulatory body or the expiration of any
applicable waiting period required to consummate the
transactions contemplated by this Agreement;
(q) shall not, and shall cause each of its Subsidiaries not
to, mortgage, pledge, hypothecate, grant any security interest
in any of its assets, or otherwise subject any of its assets to
any other Lien other than a Parent Permitted Lien or a Company
Permitted Lien, as the case may be;
(r) shall (i) not agree or commit, in writing or
otherwise, to take any of the foregoing actions and
(ii) cause each of its Subsidiaries not to agree or commit,
in writing or otherwise, to take any of the foregoing actions
that refer to Subsidiaries; and
(s) unless in the good faith opinion of its Board of
Directors, after consultation with its outside legal advisors,
the following would be inconsistent with its fiduciary duties,
(i) shall not terminate, amend, modify or waive any
provision of any agreement containing a standstill covenant to
which it is a party; and (ii) during such period shall
enforce, to the fullest extent permitted under Applicable Law,
the provisions of such agreement, including by obtaining
injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any
court of the United States of America or any state having
jurisdiction.
Section 5.2 No
Solicitation by the Company.
(a) The Company agrees that (i) neither it nor any of
its Subsidiaries shall, and it shall not authorize or permit any
officers, directors, employees, agents or representatives of the
Company or any of its Subsidiaries (including any investment
banker, attorney or accountant retained by it or any of its
Subsidiaries) (the Company
Representatives) to, and on becoming aware of it
will use its reasonable best efforts to stop such Company
Representative from continuing to, directly or indirectly,
solicit, initiate or knowingly encourage (including by way of
furnishing nonpublic information), or take any action designed
to approve, endorse, recommend, or facilitate, directly or
indirectly, any inquiry, proposal or offer (including any
proposal or offer to its stockholders) with respect to a tender
or exchange offer, merger, consolidation, business combination,
purchase or similar transaction or series of transactions (other
than the transactions contemplated by this Agreement) involving,
individually or in the aggregate, 20% or more of the assets, net
revenues or net income of the Company and its Subsidiaries on a
consolidated basis or 20% or more of any class of the voting
securities of the Company, including any merger, consolidation,
business combination, purchase or similar transaction in which
20% or more of the Companys voting securities is issued to
a third party or its stockholders (any such inquiry, proposal or
offer being hereinafter referred to as a Company
Acquisition Proposal), or cooperate with or
assist, participate or engage in any substantive discussions or
negotiations concerning a Company Acquisition Proposal, or
amend, terminate, waive or fail to enforce, or grant any consent
under, any confidentiality, standstill or similar agreement, or
resolve to propose or agree to do any of the foregoing; and
(ii) it will immediately cease and cause to be terminated
any existing negotiations with any parties conducted heretofore
with respect to any of the foregoing; provided that
(1) nothing contained in this Agreement shall prevent the
Company or its Board of Directors from (A) complying with
Rule 14e-2
promulgated under the Exchange Act with regard to a Company
Acquisition Proposal, (B) prior to the Cutoff Date,
providing information (pursuant to a confidentiality agreement
in reasonably customary form with terms at least as restrictive
in all matters as the Confidentiality Agreement dated
December 18, 2010, between Parent and the Company (the
Confidentiality Agreement) (provided
that such agreement may allow the counterparty thereto to make a
Company Acquisition Proposal to the Companys Board of
Directors in connection with the negotiation and discussions
permitted by this Section 5.2) and which does not contain
terms that prevent the Company from complying with its
obligations under this Section 5.2) to or engaging in any
negotiations or substantive discussions with any Person who has
made an unsolicited bona fide written Company Acquisition
Proposal that the Board of Directors of the Company determines
in good faith
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constitutes, or could reasonably be expected to result in, a
Company Superior Proposal, to the extent the Board of Directors
of the Company, after consultation with its outside legal
advisors, determines that the failure to do so would be
inconsistent with its fiduciary obligations, or (C) prior
to the Cutoff Date, terminating, amending, modifying or waiving
any provision of any agreement containing a standstill covenant
to the extent permitted pursuant to Section 5.1(s) hereof
and (2) notwithstanding anything in this Agreement to the
contrary, the Board of Directors of the Company or any committee
thereof may make a Company Adverse Recommendation Change in
accordance with Section 5.3(d). For the purposes of making
a Company Superior Proposal determination pursuant to this
Section 5.2(a), it is understood that such determination
necessarily will (i) be based o n limited information
compared to the determination made for purposes of
Section 7.3(b), (ii) require assumptions that shall be
made in the good faith judgment of the Company Board of
Directors and (iii) not be as complete or informed as, and
will be distinct from, a Company Superior Proposal determination
made for purposes of Section 7.3(b). For the avoidance of
doubt, it is understood that a Company Superior Proposal
determination made for purposes of this Section 5.2(a)
shall not constitute a Company Superior Proposal determination
for any other purpose under this Agreement (except for
Section 7.5(a)(i)(A)(1)(a)) and shall not by itself
constitute a Company Adverse Recommendation Change for purposes
of this Agreement. Without limiting the foregoing, it is
understood that any violation of this Section 5.2 by any
Subsidiary of the Company or the Company Representatives shall
be deemed to be a breach of this Section 5.2 by the Company.
(b) As promptly as practicable after receipt thereof (and
in any event within 24 hours), and prior to participating
in any substantive discussions or negotiations, the Company will
notify Parent orally and in writing of any request for
information from any Person that has made a Company Acquisition
Proposal (or has indicated to the Company that it is seeking
such information in contemplation of making a Company
Acquisition Proposal) or the receipt of any Company Acquisition
Proposal or any inquiry with respect to a Company Acquisition
Proposal, including the identity of the Person or group engaging
in such substantive discussions or negotiations, requesting such
information or making such Company Acquisition Proposal, and the
material terms and conditions of any Company Acquisition
Proposal. The Company will (i) keep Parent reasonably
informed on a timely basis (and in any event within
24 hours) of the status and material details of any Company
Acquisition Proposals, (ii) provide to Parent as soon as
practicable (and in any event within 24 hours) after
receipt or delivery thereof with copies of all correspondence
and other written material sent or provided to the Company from
any third party in connection with any Company Acquisition
Proposal or sent or provided by the Company to any third party
in connection with any Company Acquisition Proposal and
(iii) provide or make available to Parent any material
nonpublic information concerning the Company or any of its
Subsidiaries that is provided to the Person making such Company
Acquisition Proposal which was not previously provided or made
available to Parent as promptly as practicable (and in any event
within 24 hours) after it provides such information to such
Person. Any written notice under this Section 5.2 shall be
given by facsimile or electronic mail with receipt confirmed or
personal delivery. Notwithstanding anything in this Agreement to
the contrary, no failure by the Company to comply with any
notice or delivery requirement set forth in this
Section 5.2 shall constitute a breach of this
Section 5.2 unless such failure is intentional or
materially prejudicial to Parent.
(c) Without limiting the ability to terminate, amend,
modify or waive any provision of any agreement containing a
standstill covenant to the extent permitted pursuant to
Section 5.1(s), nothing in this Section 5.2 shall
permit the Company to enter into any agreement with respect to a
Company Acquisition Proposal during the term of this Agreement,
it being agreed that during the term of this Agreement (except
pursuant to Section 7.3(b)), the Company shall not enter
into any agreement with any Person that provides for,
constitutes or relates to, a Company Acquisition Proposal, other
than a confidentiality agreement in reasonably customary form
with terms at least as restrictive in all matters as the
Confidentiality Agreement (provided that such agreement may
allow the counterparty thereto to make a Company Acquisition
Proposal to the Companys Board of Directors in connection
with the negotiation and discussions permitted by this
Section 5.2) and which does not contain terms that prevent
the Company from complying with its obligations under this
Section 5.2 and an executed copy of which shall be promptly
(and in any event within 24 hours) provided to Parent.
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(d) For purposes hereof:
(i) Company Adverse Recommendation
Change means to (A) withdraw (or amend or
modify in a manner adverse to Parent), or publicly propose to
withdraw (or amend or modify in a manner adverse to Parent), the
approval, recommendation or declaration of advisability by the
Board of Directors of the Company or any such committee thereof
of this Agreement, the Merger or the other transactions
contemplated by this Agreement or (B) recommend, adopt or
approve, or propose publicly to recommend, adopt or approve, any
Company Acquisition Proposal; and
(ii) Company Superior Proposal
means an unsolicited bona fide written Company Acquisition
Proposal with respect to all the outstanding Company Common
Stock or all or substantially all the assets of the Company
that, in the good faith judgment of the Board of Directors of
the Company, taking into account the likelihood of financing,
stockholder approval and other requirements for consummation,
after consultation with a financial advisor of recognized
national reputation, is superior to the Merger.
Section 5.3 Meetings
of Shareholders to Consider the Merger.
(a) Notwithstanding any other provision of this Agreement,
unless this Agreement is terminated in accordance with the terms
hereof, Parent shall submit the delivery of Parent ADSs in the
Merger to its shareholders, whether or not the Board of
Directors of Parent or the Company, as the case may be,
withdraws, modifies or changes its recommendation and
declaration regarding the foregoing matters (whether or not
permitted by the terms of this Agreement).
(b) Notwithstanding any other provision of this Agreement,
unless this Agreement is terminated in accordance with the terms
hereof, the Company shall submit the adoption of this Agreement
to its stockholders, whether or not the Board of Directors of
the Company withdraws, modifies or changes its recommendation
and declaration regarding the foregoing matter (whether or not
permitted by the terms of this Agreement).
(c) Parent, through its Board of Directors, shall recommend
approval of the delivery of Parent ADSs in the Merger, and
shall, subject to its fiduciary duties, solicit from its
shareholders proxies in favor of such matters; provided,
however, that the Board of Directors of Parent may at any
time prior to the Cutoff Date make a Parent Adverse
Recommendation Change, if (i) in the good faith opinion of
such Board of Directors the failure to do so would be
inconsistent with its fiduciary obligations, (ii) the Board
of Directors of Parent provides the Company with at least two
Business Days prior written notice of its intention to
make a Parent Adverse Recommendation Change and specifying the
material events giving rise thereto, (iii) during such two
Business Day period, Parent shall, and shall cause its
respective financial and legal advisors to, consider any
adjustment in the terms and conditions of this Agreement that
the Company may propose so as to enable the Board of Directors
of Parent to proceed with its recommendation to approve the
delivery of Parent ADSs in the Merger and (iv) at the end
of such two Business Day period, the Board of Directors of
Parent maintains its determination that failure to make a Parent
Adverse Recommendation Change would be inconsistent with its
fiduciary obligations (after taking into account any proposed
modifications to the terms of this Agreement). If, within 10
Business Days prior to the scheduled meeting date, the Board of
Directors of Parent determines that failure to make a Parent
Adverse Recommendation Change would be inconsistent with its
fiduciary obligations, Parent shall be permitted to adjourn or
postpone the Parent shareholders meeting (including any
postponements or adjournments thereof) for up to 10 Business
Days.
(d) The Company, through its Board of Directors, shall
recommend adoption of this Agreement, and, subject to its
fiduciary duties, solicit from its stockholders proxies in favor
of such matter; provided, however, that the Board
of Directors of the Company may at any time prior to the Cutoff
Date make a Company Adverse Recommendation Change, if
(i) in the good faith opinion of such Board of Directors
the failure to do so would be inconsistent with its fiduciary
obligations, (ii) the Board of Directors of the Company
provides Parent with at least two Business Days prior
written notice of its intention to make a Company Adverse
Recommendation Change and specifying the material events giving
rise thereto, (iii) during such two Business Day period,
the Company shall, and shall cause its financial and legal
advisors to, consider any adjustment in the terms and conditions
of this Agreement that Parent may propose so as to enable the
Board of Directors of
A-42
the Company to proceed with its recommendation of the adoption
this Agreement and (iv) at the end of such two Business Day
period, the Board of Directors of the Company maintains its
determination that failure to make a Company Adverse
Recommendation Change would be inconsistent with its fiduciary
obligations (after taking into account any proposed
modifications to the terms of this Agreement). If, within 10
Business Days prior to the scheduled meeting date, the Board of
Directors of the Company determines that failure to make a
Company Adverse Recommendation Change would be inconsistent with
its fiduciary obligations, the Company shall be permitted to
adjourn or postpone the Company stockholders meeting (including
any postponements or adjournments thereof) for up to 10 Business
Days.
(e) Parent and the Company shall use their reasonable best
efforts to hold the Parent shareholders meeting and the Company
stockholders meeting on the same day and as soon as reasonably
practicable after the date of this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, Parent or
the Company may adjourn or postpone the Parent shareholder
meeting or the Company stockholder meeting, as applicable,
(i) to ensure that any supplement or amendment to the Proxy
Statement/Prospectus is provided to its shareholders
sufficiently in advance of the vote to be held at such meeting,
(ii) to solicit additional proxies for the purpose of
obtaining the Parent Shareholder Approval or the Company
Stockholder Approval, as applicable, or (iii) for an
absence of a quorum.
Section 5.4 Filings;
Reasonable Best Efforts, Etc.
(a) Subject to the terms and conditions herein provided,
Parent and the Company shall:
(i) make their respective required filings under the HSR
Act and any applicable
non-U.S. competition,
antitrust or premerger notification laws
(Non-U.S. Antitrust
Laws) to be made pursuant to Section 6.1(b)
and shall share equally all filing fees incident thereto, which
filings shall be made promptly, and which filings as required
under the HSR Act and the antitrust, trade and competition laws
of the jurisdictions set forth on Section 5.4(a) of the Company
Disclosure Schedule shall be made in not more than 15 Business
Days from the date hereof, and thereafter shall promptly make
any other required submissions under the HSR Act or other such
laws;
(ii) use their reasonable best efforts to cooperate with
one another in (a) determining which filings are required
to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained
prior to the Effective Time from, Governmental Entities of the
United States, the several states, and
non-U.S. jurisdictions
in connection with the execution and delivery of this Agreement
and the consummation of the Merger and the transactions
contemplated hereby; and (b) timely making all such filings
and timely seeking all such consents, approvals, permits or
authorizations without causing a Parent Material Adverse Effect
or a Company Material Adverse Effect;
(iii) promptly notify each other of any communication
concerning this Agreement or the transactions contemplated
hereby to that party from any Governmental Entity and permit the
other party to review in advance any proposed communication
concerning this Agreement or the transactions contemplated
hereby to any Governmental Entity;
(iv) not agree to participate in any meeting or material
discussion with any Governmental Entity in respect of any
filings, investigation or other inquiry concerning this
Agreement or the transactions contemplated hereby unless it
consults with the other party in advance and, to the extent
permitted by such Governmental Entity, gives the other party the
opportunity to attend and participate in such meeting or
discussion;
(v) furnish the other party with copies of all
correspondence, filings and communications (and memoranda
setting forth the substance thereof) between them and their
Affiliates and their respective representatives on the one hand,
and any Governmental Entity or members or any such
authoritys staff on the other hand, with respect to this
Agreement and the transactions contemplated hereby; and
(vi) furnish the other party with such necessary
information and reasonable assistance as such other party and
its Affiliates may reasonably request in connection with their
preparation of necessary filings,
A-43
registrations or submissions of information to any Governmental
Entity, including any filings necessary or appropriate under the
provisions of the HSR Act or any applicable
Non-U.S. Antitrust
Laws.
(b) Without limiting Section 5.4(a), but subject to
Section 5.4(c), Parent and the Company shall:
(i) each use reasonable best efforts to avoid the entry of,
or to have vacated, terminated or modified, any decree, order or
judgment that would restrain, prevent or delay the
Closing; and
(ii) each use reasonable best efforts to take any and all
steps necessary to obtain any consents or eliminate any
impediments to the Merger.
(c) Nothing in this Agreement shall require Parent or the
Company to take any Competition Action to obtain any consents,
approvals, permits or authorizations or to remove any
impediments to the Merger relating to the HSR Act,
Non-U.S. Antitrust
Laws, or other U.S. or
non-U.S. antitrust,
competition or premerger notification trade regulation law,
regulation or order (Antitrust Laws)
or to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order or other order in any
suit or proceedings relating to Antitrust Laws. For purposes of
this Agreement, Competition Action
means, with respect to Parent or the Company, to dispose of any
of its assets or to limit its freedom of action with respect to
any of its businesses, or to consent to any disposition of its
assets or limits on its freedom of action with respect to any of
its businesses, whether prior to or after the Effective Time, or
to commit or agree to any of the foregoing, in each case other
than dispositions, limitations or consents, commitments or
agreements which in each such case may be conditioned upon the
consummation of the Merger and the transactions contemplated
hereby and which, in the reasonable good faith judgment of both
Parent and the Company, in each such case do not and are not
reasonably likely to individually or in the aggregate have
either a Parent Material Adverse Effect or a Company Material
Adverse Effect. Notwithstanding anything contained in this
Agreement to the contrary, neither Parent nor the Company shall
take or agree to take any Competition Action without the prior
written agreement of the other.
Section 5.5 Inspection. From
the date hereof to the Effective Time, each of Parent and the
Company shall allow all designated officers, attorneys,
accountants and other representatives of Parent or the Company,
as the case may be, access, at all reasonable times, upon
reasonable notice, to the records and files, correspondence,
audits and properties, as well as to all information relating to
commitments, contracts, titles and financial position, or
otherwise pertaining to the business, affairs and legal
compliance of Parent and the Company and their respective
Subsidiaries, including inspection of such properties, and will
instruct each of their respective employees, counsel and
financial advisors to cooperate with the Company or Parent, as
the case may be, in its investigation of the business of Parent
or the Company, respectively; provided that no
investigation pursuant to this Section 5.5 shall affect any
representation or warranty given by any party hereunder, and
provided further that notwithstanding the provision of
information or investigation by any party, no party shall be
deemed to make any representation or warranty except as
expressly set forth in this Agreement. Notwithstanding the
foregoing, no party shall be required to provide any information
which it reasonably believes it may not provide to the other
party by reason of Applicable Law, which constitutes information
protected by attorney/client or other applicable privilege, or
which it is required to keep confidential by reason of contract
or agreement with third parties. The parties hereto shall make
reasonable and appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding
sentence apply. Each of Parent and the Company agrees that it
shall not, and shall cause its respective representatives not
to, use any information obtained pursuant to this
Section 5.5 for any purpose unrelated to the consummation
of the transactions contemplated by this Agreement. All
non-public information obtained pursuant to this
Section 5.5 shall be governed by the Confidentiality
Agreement.
Section 5.6 Publicity. The
parties will use reasonable best efforts to consult with each
other before issuing any press release or public announcement
pertaining to this Agreement or the transactions contemplated
hereby and shall not issue any such press release or make any
such public announcement, except as may be required by
Applicable Law or by obligations pursuant to any listing
agreement with any national securities exchange, in which case
the party proposing to issue such press release or make such
public announcement shall use its reasonable best efforts to
consult in good faith with the other party before issuing any
such press releases or making any such public announcements.
A-44
Section 5.7 Registration
Statements.
(a) Each of Parent and the Company shall cooperate and
promptly prepare, and Parent shall file with the SEC, as soon as
practicable, a registration statement on
Form S-4
(the
Form S-4)
under the Securities Act, with respect to the Parent ADSs (and
Class A Ordinary Shares represented thereby) deliverable in
connection with the Merger, a portion of which Registration
Statement shall also serve as the joint proxy statement with
respect to the meetings of the shareholders of Parent and of the
Company in connection with the transactions contemplated by this
Agreement (the Proxy
Statement/Prospectus). To the extent necessary,
Parent shall cause the ADS Depositary to prepare and file with
the SEC, no later than the date prescribed by the rules and
regulations under the Securities Act, a registration statement,
or a post-effective amendment thereto, as applicable, on
Form F-6
(the
Form F-6)
with respect to the Parent ADSs deliverable in connection with
the Merger. The respective parties will cause the Proxy
Statement/Prospectus, the
Form S-4
and the
Form F-6
to comply as to form in all material respects with the
applicable provisions of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Each of Parent and the
Company shall use its reasonable best efforts to have the
Form S-4
and the
Form F-6
declared effective by the SEC as promptly as practicable. Each
of Parent and the Company shall use its reasonable best efforts
to obtain, prior to the effective date of the
Form S-4,
all necessary
non-U.S.,
state securities law or Blue Sky permits or
approvals required to carry out the transactions contemplated by
this Agreement. Each party will advise the others, promptly
after it receives notice thereof, of the time when the
Form S-4
and the
Form F-6
have become effective or any supplement or amendment has been
filed, the issuance of any stop order, the suspension of the
qualification of the Parent ADSs (or the Class A Ordinary
Shares represented thereby) deliverable in connection with the
Merger for offering or sale in any jurisdiction or any request
by the SEC for amendment of the Proxy Statement/Prospectus, the
Form S-4
or the
Form F-6
or comments thereon and responses thereto or requests by the SEC
for additional information. Each of the parties shall also
promptly provide each other party copies of all written
correspondence received from the SEC and summaries of all oral
comments received from the SEC in connection with the
transactions contemplated by this Agreement. Each of the parties
shall promptly provide each other party with drafts of all
correspondence intended to be sent to the SEC in connection with
the transactions contemplated by this Agreement and allow each
such party the opportunity to comment thereon prior to delivery
to the SEC.
(b) Parent and the Company shall each use its reasonable
best efforts to cause the Proxy Statement/Prospectus to be
mailed to its shareholders as promptly as practicable after the
Form S-4
is declared effective under the Securities Act.
(c) Each of Parent and the Company shall ensure that the
information provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto,
at the time of mailing thereof and at the time of the respective
meetings of shareholders of Parent and the Company, or, in the
case of information provided by it for inclusion in the
Form S-4
or any amendment or supplement thereto, at the time it becomes
effective, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(d) (i) In the event that Parent determines in its
reasonable discretion that it is necessary or advisable to
deliver a prospectus to residents of the United Kingdom pursuant
to the UK prospectus rules made by the UK Listing Authority
(UKLA) under Part VI of UK FSMA
(such rules the UK Prospectus Rules),
as promptly as practicable thereafter, but in no event later
than the initial filing of the
Form S-4,
Parent shall prepare and file with the UKLA for its approval a
draft copy of such prospectus (the Parent UK
Prospectus), and Parent shall cause the Parent UK
Prospectus to comply as to form and substance in all material
respects with the requirements of all applicable laws. The
Company shall prepare and furnish all information concerning
itself as Parent may reasonably request in connection with the
preparation of the Parent UK Prospectus, including, without
limitation, by supplying all such information, procuring such
financial statements and audit reports thereon in accordance
with the UK Prospectus Rules, giving all such undertakings,
executing all such documents, paying all such fees and doing or
procuring to be done all such things as may be necessary or
required by the UKLA or otherwise for the purposes of complying
with the UK Prospectus Rules and obtaining the approval of the
UKLA. To the extent that Parent determines to proceed
A-45
with such a prospectus, Parent shall use reasonable best efforts
to obtain formal approval of the Parent UK Prospectus by the
UKLA concurrently with the effectiveness of the registration
statement on
Form S-4,
including, without limitation, by supplying all such
information, procuring such financial statements and audit
reports thereon in accordance with the UK Prospectus Rules,
giving all such undertakings, executing all such documents and
doing or procuring to be done all such things as may be
necessary or required by the UKLA or otherwise for the purposes
of complying with the UK Prospectus Rules and obtaining the
approval of the UKLA. As promptly as practicable after the
Parent UK Prospectus is approved by the UKLA and, in any event,
no later than the time that the Proxy Statement/Prospectus is
provided to its stockholders, the Company shall cause the Parent
UK Prospectus to be mailed or delivered or otherwise made
available to the record and beneficial stockholders of the
Company resident in the United Kingdom, and Parent shall publish
it in accordance with applicable law.
(ii) The Company and its counsel shall be given a
reasonable opportunity to review and comment on any such Parent
UK Prospectus and any amendments or supplements thereto (in each
case prior to the publication thereof) and Parent will in good
faith take into account any reasonable comments made by, or
reasonable requests of, the Company and its counsel. Parent
shall promptly advise the Company upon becoming aware of
(i) the time when the Parent UK Prospectus has been
approved by the UKLA or any supplementary prospectus has been
filed or (ii) any comments, responses or requests from the
UKLA relating to the Parent UK Prospectus.
(iii) The information supplied by the Company for inclusion
in any such Parent UK Prospectus and any announcement to any
regulatory information service in connection with the Parent UK
Prospectus shall not at the time the Parent UK Prospectus is
first mailed to stockholders of the Company and is first
published and at the time of the meeting of the stockholders of
the Company, and in the case of any such announcement at the
time it is provided by the Company to the Parent, contain any
statement, promise or forecast which is misleading, false or
deceptive in a material particular, conceal any material facts
or create a false or misleading impression. For the purposes of
Parent complying with the UK Prospectus Rules, the Company shall
promptly advise Parent upon becoming aware of any significant
new factor, material mistake or inaccuracy relating to the
information concerning the Company which should be disclosed to
enable the stockholders of the Company to make an informed
assessment of the assets and liabilities, financial position,
profits and losses, and prospects of Parent following the Merger.
Section 5.8 Listing
Application. Parent shall promptly prepare and
submit to the NYSE a listing application covering the Parent
ADSs deliverable in connection with the Merger and to obtain,
prior to the Effective Time, approval for the listing of such
Parent ADSs, subject to official notice of issuance.
Section 5.9 Rule 16b-3
Approval. The Board of Directors of Parent or a
committee thereof, at or prior to the Effective Time, shall
adopt resolutions specifically approving, for purposes of
Rule 16b-3
(Rule 16b-3)
under the Exchange Act, the receipt, pursuant to
Section 2.1, of Parent ADSs and Class A Ordinary
Shares represented thereby, and of options or other rights (to
the extent provided in this Agreement) to acquire Parent ADSs
and Class A Ordinary Shares represented thereby, by
executive officers of the Company who become executive officers
of Parent subject to
Rule 16b-3.
Section 5.10 Expenses. Whether
or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
expenses, except (i) as Section 5.11,
Section 5.13 and Section 7.5 otherwise provide,
(ii) that Parent and the Company shall share equally
(A) the fees incident to the filings referred to in
Section 5.4(a)(i), (B) the SEC and other filing fees
incident to the
Form S-4
and the Proxy Statement/Prospectus and the costs and expenses
associated with printing and mailing the Proxy
Statement/Prospectus, (C) the UKLA and other filing fees
incident to the Parent UK Prospectus and the costs and expenses
associated with printing and mailing the Parent UK Prospectus,
if such Parent UK Prospectus is required pursuant to
Section 5.7(d), and (D) the fees associated with the
NYSE listing referred to in Section 5.8,
and/or
(iii) as otherwise agreed in writing by the parties.
A-46
Section 5.11 Indemnification
and Insurance.
(a) From and after the Effective Time, Parent and the
Surviving Entity shall indemnify, defend and hold harmless to
the fullest extent permitted under Applicable Law each Person
who is, or has been at any time prior to the Effective Time, an
officer or director of the Company (or any Subsidiary thereof)
and each Person who served at the request of the Company as a
director, officer, trustee, or fiduciary of another corporation,
partnership, joint venture, trust, pension or other employee
benefit plan or enterprise (individually, an
Indemnified Party and, collectively,
the Indemnified Parties) against all
losses, claims, damages, liabilities, costs or expenses
(including attorneys fees), judgments, fines, penalties
and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions,
by them in their capacities as such, whether commenced, asserted
or claimed before or after the Effective Time. In the event of
any such claim, action, suit, proceeding or investigation (an
Action), (i) Parent and the
Surviving Entity shall pay, as incurred, the fees and expenses
of counsel selected by the Indemnified Party, which counsel
shall be reasonably acceptable to Parent and the Surviving
Entity, in advance of the final disposition of any such Action
to the fullest extent permitted by Applicable Law and, if
required, upon receipt of any undertaking required by Applicable
Law, and (ii) Parent and the Surviving Entity will
cooperate in the defense of any such matter; provided,
however, Parent and the Surviving Entity shall not be
liable for any settlement effected without their written consent
(which consent shall not be unreasonably withheld or delayed),
and provided further, that Parent and the Surviving Entity shall
not be obligated pursuant to this Section 5.11 to pay the
fees and disbursements of more than one counsel for all
Indemnified Parties in any single Action, unless, in the good
faith judgment of any of the Indemnified Parties, there is or
may be a conflict of interests between two or more of such
Indemnified Parties, in which case there may be separate counsel
for each similarly situated group.
(b) The rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any
action or suit, in the Companys Certificate of
Incorporation and Bylaws of the indemnitees specified therein
with respect to matters occurring through the Effective Time,
shall survive the Merger for a period of not less than six years
and shall not be amended during such period.
(c) At or prior to the Effective Time, the Company shall
use its reasonable best efforts to purchase a tail
directors and officers liability insurance policy
covering for at least six years after the Effective Time the
Indemnified Parties who are, or at any time prior to the
Effective Time were, covered by the Companys existing
directors and officers liability insurance policies
on terms no less advantageous to the Indemnified Parties than
such existing insurance with respect to matters arising on or
before the Effective Time, covering without limitation the
transactions contemplated hereby. If the Company does not
purchase such a policy, then for a period of six years after the
Effective Time, Parent and the Surviving Entity shall cause to
be maintained officers and directors liability
insurance covering the Indemnified Parties who are, or at any
time prior to the Effective Time were, covered by the
Companys existing officers and directors
liability insurance policies on terms no less advantageous to
the Indemnified Parties than such existing insurance, provided
that Parent and the Surviving Entity shall not be required to
pay annual premiums in excess of 300% of the last annual premium
paid by the Company prior to the date hereof (the amount of
which premium is set forth in Section 5.11(c) of the
Company Disclosure Schedule), but in such case shall purchase as
much coverage as reasonably practicable for such amount. In
either case, Parent and the Surviving Entity will maintain such
policies in full force and effect and honor the obligations
thereunder.
(d) The rights of each Indemnified Party hereunder shall be
in addition to any other rights such Indemnified Party may have
under the Certificate of Incorporation, Bylaws or comparable
organizational documents of the Company or any of its
Subsidiaries, as applicable, under Applicable Law or otherwise.
The provisions of this Section 5.11 shall survive the
consummation of the Merger and expressly are intended to benefit
each of the Indemnified Parties.
(e) In the event Parent, the Surviving Entity or any of
their respective successors or assigns (i) consolidates
with or merges into any other Person and shall not be the
continuing or surviving entity in such consolidation or merger
or (ii) transfers all or substantially all of its
properties and assets to any Person, then
A-47
and in either such case, proper provision shall be made so that
the successors and assigns of Parent or the Surviving Entity, as
the case may be, shall assume the obligations set forth in this
Section 5.11.
(f) From and after the Effective Time, Parent shall cause
the directors of Parent designated by the Company pursuant to
Section 1.5 to be covered by the directors and
officers liability insurance to the same extent and on the
same terms and conditions as such insurance coverage may be
provided from time to time for Parents other directors.
Section 5.12 Employee
Matters.
(a) From and after the Effective Time, Parent shall, and
shall cause the Surviving Entity or any employing Subsidiary to,
provide any person employed by the Company or any of its
Subsidiaries as of the day immediately prior to the Effective
Time (the Affected Employees) employee
benefits that are no less favorable in the aggregate than those
provided by the Company (with the exception of the Company ESPP
and its supplemental executive retirement plans) immediately
prior to the Effective Time or, in the sole discretion of
Parent, those provided by Parent or its Subsidiaries to
similarly situated employees of Parent or its applicable
Subsidiary. From and after the Effective Time, with respect to
the year ended December 31, 2011, Affected Employees shall
be eligible to participate in such annual bonus plans as are
sponsored by Parent or its Subsidiaries for similarly situated
employees of Parent or the applicable Subsidiary and shall have
a bonus opportunity under such plan that is no less than that of
similarly situated employees of Parent or the applicable
Subsidiary who are eligible to participate in such plan but only
with respect to the portion of the calendar year in which such
Affected Employees are employees of Parent or its Subsidiaries.
From and after the Effective Time, the Affected Employees who
are working for the Company or any of its Subsidiaries in the
United States will continue to be considered to be employees at
will pursuant to the applicable employment at-will laws or
doctrines, subject to any express written agreement to the
contrary with such employee, and the Affected Employees who are
working for the Company or any of its Subsidiaries outside the
United States will remain on his or her terms of employment in
place immediately prior to the Effective Time. For the sake of
clarity, Parent or its Subsidiaries shall have no obligation to
continue to employ or engage the Affected Employees following
the Effective Time other than obligations in accordance with
Applicable Law or collective bargaining contracts. From and
after the Effective Time, Parent shall honor, and shall cause
the Surviving Entity to honor, each compensation and benefit
arrangement listed in Section 5.12(a) of the Company
Disclosure Schedule and to perform the obligations of the
Company thereunder. For the avoidance of doubt, nothing in this
Agreement shall be considered a contract between Parent and its
Subsidiaries and any of the Affected Employees or consideration
for, or inducement with respect to, any such employees
continued employment.
(b) With respect to each Affected Employee, Parent shall
credit, or cause its Subsidiaries to credit, the period of
employment and service recognized by the Company or any of its
Subsidiaries immediately prior to the Effective Time (for
purposes of its corresponding plans, programs, policies or
similar employment-related arrangements) to have been employment
and service with Parent or any of its Subsidiaries for purposes
of determining the Affected Employees eligibility to join
(subject to satisfaction of all non-service related eligibility
criteria) and vesting (but not benefit accrual for any purpose
other than vacation pay, severance and termination pay, sick
leave, post-retirement health coverage and satisfaction of early
retirement criteria) under all employee benefit plans, programs,
policies or similar employment related arrangements of Parent
and its Subsidiaries in which the Affected Employee is eligible
to participate; provided, however, no such credit
shall be provided to the extent that it would result in a
duplication of credit or benefits, and nothing in this
Section 5.12 shall be interpreted to provide any right to
Affected Employees to participate in Parents equity
incentive plans at the same level as Affected Employees may have
participated in Companys equity incentive plans. Parent
shall waive, and to the extent necessary to effect the terms
hereof, shall use its best efforts to cause the relevant
insurance carriers and other third parties to waive, any
restrictions and limitations for medical conditions existing as
of the Effective Time of those Affected Employees and their
dependents who were covered immediately prior to the Effective
Time under a group health plan maintained by Parent or the
Company, but only to the extent that such medical condition
would be covered by Parents group health plan if it were
not a pre-existing condition and only to the extent that such
limitations would not have applied under Parent or the
Companys group health plan prior to the Effective Time.
Further, Parent shall offer, or
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cause its Subsidiaries to offer, at the Effective Time to each
Affected Employee coverage under a group health plan (as defined
in Section 5000(b)(1) of the Code) which credits such
Affected Employee towards the deductibles, coinsurance and
maximum
out-of-pocket
provisions imposed under such group health plan, for the year
during which the Effective Time (or such later date as the
Affected Employees participate in such group health plan)
occurs, with any applicable expenses already incurred during
such year under Parents or the Companys group health
plan.
(c) Prior to the Effective Time, Parent and the Company
will cooperate in good faith to establish a process to promptly
integrate the Parent Benefit Plans and the Company Benefit Plans
following the Effective Time.
(d) The Company shall establish a date before the Effective
Time as the final purchase date under the terms of the
Companys Employee Stock Purchase Plan (the
Company ESPP), and shall cause all
accumulated cash balances credited to the account of each
participant in the Company ESPP on such final purchase date to
be applied to purchase the number of shares of Company Common
Stock that could be purchased with such amounts on such date
pursuant to the Company ESPP. Each participant who would
otherwise have been entitled to receive a fractional share of
Company Common Stock, after giving effect to the purchase of
Company Common Stock contemplated by this Section 5.12(d),
shall receive, in lieu thereof, a cash disbursement (without
interest) of such participants contributions credited to
his or her account and not applied to such purchase. The Company
shall take any and all actions necessary or appropriate,
including notification to the affected participants of the new
purchase date and termination of the Company ESPP, to cause the
Company ESPP to terminate on such final purchase date, after
giving effect to the purchases of Company Common Stock
contemplated by this Section 5.12(d), and shall not
thereafter offer any plan, program or arrangement for the
purchase of shares of Company Common Stock by means of payroll
deductions.
(e) Except with respect to offers of employment to
prospective new employees in the ordinary course of business
consistent with past practices, the Company shall not make, and
shall cause its Subsidiaries not to make, any representations or
promises, oral or written, to any of their employees concerning
continued employment following the Effective Time, or the terms
and conditions of that employment, except in writing with the
prior written consent of Parent.
(f) Notwithstanding the foregoing, nothing in this
Agreement, whether express or implied, shall be treated as an
amendment or other modification of any Parent Benefit Plan,
Company Benefit Plan or compensation or benefit plan, program or
arrangement of Parent or its Subsidiaries, or shall limit the
right of Parent, the Company or any of their Subsidiaries, to
amend, terminate or otherwise modify any such plan, program or
arrangement. In the event that (i) a party other than
Parent, the Company or any of their Subsidiaries makes a claim
or takes other action to enforce any provision in this Agreement
as an amendment to any such plan or arrangement, and
(ii) such provision is deemed to be an amendment to such
plan, program or arrangement even though not explicitly
designated as such in this Agreement, then such provision shall
lapse retroactively and shall have no amendatory effect.
(g) For the avoidance of doubt, Parent deems that the
Merger and the transactions contemplated by this Agreement
constitute a change of control of the Company with respect to
the plans, agreements and arrangements specified in
Section 5.12(g) of the Company Disclosure Schedule.
Section 5.13 Financing.
(a) Parent has delivered to the Company true and correct
copies of an executed debt commitment letter and related term
sheet and fee letter (redacted for confidential terms)
(collectively, the Financing
Commitments) with Deutsche Bank AG Cayman Islands
Branch, Deutsche Bank Securities Inc. and Citigroup Global
Markets Inc. pursuant to which, and subject to the terms and
conditions thereof, the Financing Sources have committed to
provide Parent with loans in the amounts described therein, the
proceeds of which may be used to consummate the Merger and the
other transactions contemplated hereby (such loans and any
financing arrangements or securities offerings to supplement or
supersede such loans, as the context requires, the
Financing). Financing
Sources means Deutsche Bank AG Cayman Islands
Branch, Deutsche Bank
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Securities Inc., Citigroup Global Markets Inc., and their
respective affiliates, and any other entities that have
committed or will commit to provide or arrange the Financing. To
the knowledge of each party, no event has occurred which, with
or without notice, lapse of time or both, could reasonably be
expected to constitute a material breach by any party hereto or
failure to satisfy a condition precedent set forth in the
Financing Commitments. Notwithstanding anything in this
Agreement to the contrary, the Financing Commitments may be
superseded at the option of Parent after the date of this
Agreement but prior to the Effective Time by new Financing
Commitments, including financing commitments from one or more
additional or other parties, in accordance with this
Section 5.13 (the New Financing
Commitments); provided, however, that,
without the written consent of the Company (which consent shall
not be unreasonably withheld, conditioned or delayed), any such
New Financing Commitments shall not (A) reduce the
aggregate amount of the Financing (except to the extent of any
proceeds of any securities offering of Parent or one of its
Subsidiaries after the date hereof), (B) add new (or
modify, in a manner materially adverse to Parent, any existing)
conditions precedent or contingencies to the funding on the
Closing Date of the Financing as set forth in the Financing
Commitments or the Definitive Financing Agreements or
(C) prevent, impede or delay the consummation of the Merger
and the other transactions contemplated by this Agreement. In
such event, the term Financing
Commitments as used herein shall be deemed to
include the New Financing Commitments to the extent then in
effect. Parent shall deliver to the Company copies of any such
New Financing Commitments as promptly as practicable (and no
later than one Business Day) after execution thereof.
(b) Parent shall use its reasonable best efforts to obtain
the Financing on the terms and conditions described in the
Financing Commitments or terms more favorable (taken as a whole)
to Parent. Parent shall use its reasonable best efforts
(consistent with the terms and obligations of each party under
this Agreement) to (i) maintain in effect the Financing
Commitments (unless superseded with New Financing Commitments),
(ii) negotiate definitive agreements with respect thereto
on the terms and conditions contained in the Financing
Commitments (including any flex provisions therein)
(the Definitive Financing Agreements)
and execute and deliver to the Company a copy thereof as
promptly as practicable (and no later than one Business Day)
after such execution, (iii) satisfy on a timely basis all
conditions applicable to the Financing in the Financing
Commitments or Definitive Financing Agreements, as applicable,
and comply with its obligations thereunder, and
(iv) consummate the Financing at or prior to the Closing.
Parent shall give the Company prompt notice upon becoming aware
of any termination of the Financing Commitments. Parent shall
keep the Company informed on a reasonably current basis and in
reasonable detail of the status of its efforts to arrange the
Financing. In the event that either party becomes aware of any
event or circumstance that makes procurement of any portion of
the Financing unlikely to occur in the manner or from the
sources contemplated in the Financing Commitments, that party
shall promptly (but in any event not later than one Business Day
after becoming aware thereof) notify the other parties and
Parent shall use its reasonable best efforts (and the Company
shall provide such assistance as Parent may reasonably request)
to arrange as promptly as practicable any such portion from
alternative sources on terms and conditions which would not have
any of the effects specified in clauses (A), (B),
and/or
(C) of Section 5.13(a). Parent shall give the Company
prompt oral and written notice (but in any event not later than
one Business Day after the occurrence thereof) of (1) any
breach or default by any party to the Financing Commitments or
Definitive Financing Agreements, and (2) the receipt of any
written notice or other written communication from any financing
source with respect to any (x) breach, default, termination
or repudiation by any party to the Financing Commitments or
Definitive Financing Agreements or any provision thereof or
(y) dispute or disagreement between or among any parties to
the Financing Commitments or Definitive Financing Agreements.
Parent shall take and shall use reasonable best efforts to cause
its Subsidiaries, and shall cause each of its and their
respective representatives, including legal and accounting, to
take all actions reasonably necessary in connection with the
Financing. At the reasonable request of Parent, the Company
shall provide, and shall use reasonable best efforts, consistent
with the terms of and the obligations of each party under this
Agreement, to cause its Subsidiaries, and shall cause each of
its and their respective representatives, including legal and
accounting, to provide all cooperation reasonably requested by
Parent in connection with the Financing. In performing its
respective foregoing obligations under this Section 5.13,
each of Parent, Parents Subsidiaries, the Company and the
Companys Subsidiaries shall use its reasonable best
efforts to (i) provide reasonably required information
relating to that party and its Subsidiaries to the Financing
Sources and other prospective lenders, investors, underwriters
or initial
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purchasers providing or arranging the Financing, (ii) cause
its senior management and advisors to participate in meetings,
drafting sessions and due diligence sessions in connection with
the Financing, including meetings with prospective lenders,
investors and representatives of ratings agencies,
(iii) assist in the preparation of (A) any offering
documents, bank information memorandum, prospectuses and
similar documents and information material for any portion of
the Financing within thirty days of the date of this Agreement
and thereafter, and (B) materials for rating agency
presentations, including execution and delivery of customary
representation letters in connection with bank information
memoranda, (iv) reasonably cooperate with the marketing
efforts for any portion of the Financing, including any
commercially reasonable efforts to ensure that any syndication
effort benefits from any existing banking relationship,
(v) execute and deliver (or use reasonable best efforts to
obtain from its advisors), and cause its Subsidiaries to execute
and deliver (or obtain from its advisors), customary
certificates (including a certificate of the principal financial
officer of Parent, the Company or any Subsidiary of Parent or
the Company with respect to solvency matters), accounting
comfort letters (including consents of accountants for use of
their reports in any materials relating to the Financing), legal
opinions, surveys, title insurance or other documents and
instruments relating to guarantees, the pledge of collateral and
other matters ancillary to the Financing as may be reasonably
necessary in connection with the Financing, (vi) enter into
one or more secured or unsecured credit or other agreements on
terms satisfactory to Parent and that are reasonably necessary
in connection with the Financing immediately prior to the
Effective Time, (vii) as promptly as practicable, furnish
the Financing Sources and, in the case of the Company and its
Subsidiaries, Parent with all financial and other information,
including projections, regarding Parent, the Company and their
respective Subsidiaries as may be reasonably necessary of a type
generally used in connection with a syndicated bank financing as
well as a registered public offering or an offering pursuant to
Rule 144A of the Securities Act, (viii) provide the
financial information required by the Financing Commitments,
(ix) take all actions reasonably necessary in connection
with any necessary pay off of existing indebtedness and the
release of related Liens (including any necessary prepayment of
the Companys existing indebtedness on or prior to the
Closing Date), and (x) take all corporate actions, subject
to the occurrence of the Closing, reasonably necessary to permit
the consummation of the Financing and the direct borrowing or
incurrence of all of the proceeds of the Financing, by Parent
immediately following the Effective Time; provided,
however, that no obligation of Parent or the Company or
any of their respective Subsidiaries under any such agreement,
certificate, document or instrument shall be required to be
effective until the Effective Time and, other than commitment or
underwriting fees and invoiced expenses with respect to the
Financing Commitments, which Parent shall pay when due, none of
Parent, the Company or any of their respective Subsidiaries
shall be required to incur any liability in connection with the
Financing prior to the Effective Time.
(c) Parent shall indemnify and hold harmless the Company
and its Subsidiaries and their respective officers, directors
and other representatives from and against any and all losses or
damages suffered or incurred by them in connection with the
arrangement and completion of the Financing and any information
utilized in connection therewith, except with respect to
information in respect of the Company and its Subsidiaries
supplied by the Company specifically for inclusion or
incorporation by reference therein.
Section 5.14 Company
Rights Agreement. Prior to the Effective Time,
the Companys Board of Directors shall take any action
(including, as necessary, amending or terminating (but with
respect to termination, only as of immediately prior to the
Effective Time) the Company Rights Agreement) necessary to cause
the Final Expiration Date (as defined in the Rights
Agreement) of the Company Rights to occur immediately prior to
the Effective Time so that the Company Rights will expire
immediately prior to the Effective Time. Other than (a) with the
prior written consent of Parent or (b) pursuant to, and
immediately prior to, termination of this Agreement by the
Company in compliance with Section 7.3(b), neither the
Companys Board of Directors nor the Company shall
(i) take any other action to terminate the Company Rights
Agreement, redeem the Company Rights, cause any person (other
than Parent and its Affiliates) not to be or become an
Acquiring Person, or otherwise amend the Company
Rights Agreement in a manner adverse to Parent or its Affiliates
or (ii) take any action so that the restrictions on
business combinations set forth in Section 203 of the DGCL
are not, except as provided in Section 3.29, applicable to
any agreement, transaction or Person.
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Section 5.15 Deferred Prosecution
Agreement. Effective as of the Effective Time,
Parent agrees to be bound, and the Surviving Entity shall
continue to be bound, by the obligations of the Company set
forth in the Deferred Prosecution Agreement, dated
November 4, 2010, between the Company and the
U.S. Department of Justice, to the extent required thereby.
Section 5.16 No
Solicitation by Parent.
(a) Parent agrees that (i) neither it nor any of its
Subsidiaries shall, and it shall not authorize or permit any
officers, directors, employees, agents or representatives of
Parent or any of its Subsidiaries (including any investment
banker, attorney or accountant retained by it or any of its
Subsidiaries) (the Parent
Representatives) to, and on becoming aware of it
will use its reasonable best efforts to stop such Parent
Representative from continuing to, directly or indirectly,
solicit, initiate, encourage or participate in any discussions
or knowingly encourage (including by way of furnishing nonpublic
information), or take any action designed to approve, endorse,
recommend, or facilitate, directly or indirectly, any inquiry,
proposal or offer (including any proposal or offer to its
shareholders) with respect to a tender or exchange offer, scheme
of arrangement, merger, consolidation, business combination,
purchase or similar transaction or series of transactions (other
than the transactions contemplated by this Agreement) involving,
individually or in the aggregate, 20% or more of the assets, net
revenues or net income of Parent and its Subsidiaries on a
consolidated basis or 20% or more of any class of the voting
securities of Parent, including any merger, consolidation,
business combination, purchase or similar transaction in which
20% or more of Parents voting securities is issued to a
third party or its shareholders (any such inquiry, proposal or
offer being hereinafter referred to as a Parent
Alternative Proposal), or cooperate with or
assist, participate or engage in any substantive discussions or
negotiations concerning a Parent Alternative Proposal, or amend,
terminate, waive or fail to enforce, or grant any consent under,
any confidentiality, standstill or similar agreement, or resolve
to propose or agree to do any of the foregoing; and (ii) it
will immediately cease and cause to be terminated any existing
negotiations with any parties conducted heretofore with respect
to any of the foregoing; provided that (1) nothing
contained in this Agreement shall prevent Parent or its Board of
Directors from (A) complying with
Rule 14e-2
promulgated under the Exchange Act with regard to a Parent
Alternative Proposal, (B) prior to the Cutoff Date,
providing information (pursuant to a confidentiality agreement
in reasonably customary form with terms at least as restrictive
in all matters as the Confidentiality Agreement (provided that
such agreement may allow the counterparty thereto to make a
Parent Alternative Proposal to the Parent Board of Directors in
connection with the negotiation and discussions permitted by
this Section 5.16) and which does not contain terms that
prevent Parent from complying with its obligations under this
Section 5.16) to or engaging in any negotiations or
substantive discussions with any Person who has made an
unsolicited bona fide written Parent Alternative Proposal that
the Board of Directors of Parent determines in good faith
constitutes, or could reasonably be expected to result in, a
Parent Superior Proposal, to the extent the Board of Directors
of Parent, after consultation with its outside legal advisors,
determines that the failure to do so would be inconsistent with
its fiduciary obligations, or (C) prior to the Cutoff Date,
terminating, amending, modifying or waiving any provision of any
agreement containing a standstill covenant to the extent
permitted pursuant to Section 5.1(s) hereof and
(2) notwithstanding anything in this Agreement to the
contrary, the Board of Directors of Parent or any committee
thereof may make a Parent Adverse Recommendation Change in
accordance with Section 5.3(c). For the purposes of making
a Parent Superior Proposal determination pursuant to this
Section 5.16(a), it is understood that such determination
necessarily will (i) be based on limited information
compared to the determination made for purposes of
Section 7.4(c), (ii) require assumptions that shall be
made in the good faith judgment of the Parent Board of Directors
and (iii) not be as complete or informed as, and will be
distinct from, a Parent Superior Proposal determination made for
purposes of Section 7.4(c). For the avoidance of doubt, it
is understood that a Parent Superior Proposal determination made
for purposes of this Section 5.16(a) shall not constitute a
Parent Superior Proposal determination for any other purpose
under this Agreement (except for
Section 7.5(a)(iii)(C)(1)(a)), and shall not by itself
constitute a Parent Adverse Recommendation Change for purposes
of this Agreement. Without limiting the foregoing, it is
understood that any violation of this Section 5.16 by any
Subsidiary of Parent or the Parent Representatives shall be
deemed to be a breach of this Section 5.16 by Parent.
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(b) As promptly as practicable after receipt thereof (and
in any event within 24 hours), and prior to participating
in any substantive discussions or negotiations, Parent will
notify the Company orally and in writing of any request for
information from any Person that has made a Parent Alternative
Proposal (or has indicated to Parent that it is seeking such
information in contemplation of making a Parent Alternative
Proposal) or the receipt of any Parent Alternative Proposal or
any inquiry with respect to a Parent Alternative Proposal,
including the identity of the Person or group engaging in such
substantive discussions or negotiations, requesting such
information or making such Parent Alternative Proposal, and the
material terms and conditions of any Parent Alternative
Proposal. Parent will (i) keep the Company reasonably
informed on a timely basis (and in any event within
24 hours) of the status and material details of any Parent
Alternative Proposals, (ii) provide to the Company as soon
as practicable (and in any event within 24 hours) after
receipt or delivery thereof with copies of all correspondence
and other written material sent or provided to Parent from any
third party in connection with any Parent Alternative Proposal
or sent or provided by Parent to any third party in connection
with any Parent Alternative Proposal and (iii) provide or
make available to the Company any material nonpublic information
concerning Parent or any of its Subsidiaries that is provided to
the Person making such Parent Alternative Proposal which was not
previously provided or made available to the Company as promptly
as practicable (and in any event within 24 hours) after it
provides such information to such Person. Any written notice
under this Section 5.16 shall be given by facsimile or
electronic mail with receipt confirmed or personal delivery.
Notwithstanding anything in this Agreement to the contrary, no
failure by Parent to comply with any notice or delivery
requirement set forth in this Section 5.16 shall constitute
a breach of this Section 5.16 unless such failure is
intentional or materially prejudicial to the Company.
(c) Without limiting the ability to terminate, amend,
modify or waive any provision of any agreement containing a
standstill covenant to the extent permitted pursuant to
Section 5.1(s), nothing in this Section 5.16 shall
permit Parent to enter into any agreement with respect to a
Parent Alternative Proposal during the term of this Agreement,
it being agreed that during the term of this Agreement (except
pursuant to Section 7.4(c)), Parent shall not enter into
any agreement with any Person that provides for, constitutes or
relates to, a Parent Alternative Proposal, other than a
confidentiality agreement in reasonably customary form with
terms at least as restrictive in all matters as the
Confidentiality Agreement (provided that such agreement may
allow the counterparty thereto to make a Parent Alternative
Proposal to the Parent Board of Directors in connection with the
negotiation and discussions permitted by this Section 5.16)
and which does not contain terms that prevent Parent from
complying with its obligations under this Section 5.16 and
an executed copy of which shall be promptly (and in any event
within 24 hours) provided to the Company.
(d) For the purposes hereof:
(i) Parent Adverse Recommendation
Change means to (A) withdraw (or amend or
modify in a manner adverse to the Company), or publicly propose
to withdraw (or amend or modify in a manner adverse to the
Company), the approval, recommendation or declaration of
advisability by the Board of Directors of Parent or any such
committee thereof of delivery of Parent ADSs in the Merger, this
Agreement, the Merger or the other transactions contemplated by
this Agreement or (B) recommend, adopt or approve, or
propose publicly to recommend, adopt or approve, any Parent
Alternative Proposal; and
(ii) Parent Superior Proposal
means an unsolicited bona fide written Parent Alternative
Proposal with respect to all the outstanding Class A
Ordinary Shares or Parent ADSs or all or substantially all the
assets of Parent that, in the good faith judgment of the Board
of Directors of Parent, taking into account the likelihood of
financing, shareholder approval and other requirements for
consummation, after consultation with a financial advisor of
recognized national reputation, is superior to the Merger.
ARTICLE 6
CONDITIONS
Section 6.1 Conditions to Each Partys
Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be subject
to the fulfillment or waiver by each of the parties to this
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Agreement (if capable of waiver having regard to and subject to
Applicable Laws) at or prior to the Closing Date of the
following conditions:
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(a)
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(i) The Parent Shareholder Approval shall have been
obtained; and
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(ii) The Company Stockholder Approval shall have been
obtained.
(b) (i) Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired
or been terminated, (ii) there shall not be pending or
threatened in writing any claim, proceeding or action by an
agency of the government of the United States seeking to
restrain, prohibit or rescind any transactions contemplated by
this Agreement as an actual or threatened violation of any
Antitrust Law, as applicable, or seeking to penalize a party for
completing any such transaction which in any of such cases is
reasonably likely to require any Competition Actions,
(iii) any mandatory waiting period under any applicable
Non-U.S. Antitrust
Laws of any jurisdiction set forth in Section 6.1(b) of the
Company Disclosure Schedule (a Required
Jurisdiction) shall have expired or been
terminated and (iv) there shall not remain in effect a
final or preliminary administrative order denying approval of or
prohibiting the Merger issued by a Governmental Entity with
jurisdiction to enforce any applicable
Non-U.S. Antitrust
Laws of any Required Jurisdiction, which order is reasonably
likely to require any Competition Actions.
(c) None of the parties hereto shall be subject to any
decree, order or injunction of a court of competent
jurisdiction, U.S. or
non-U.S.,
which prohibits the consummation of the Merger; provided,
however, that, prior to invoking this condition, each
party agrees to comply with Section 5.4, and with respect
to other matters not covered by Section 5.4, to use its
reasonable best efforts to have any such decree, order or
injunction lifted or vacated; and no statute, rule or regulation
shall have been enacted by any Governmental Entity which
prohibits or makes unlawful the consummation of the Merger.
(d) The
Form S-4
and
Form F-6
shall each have become effective and no stop order with respect
thereto shall be in effect, and the UKLA shall have approved the
Parent UK Prospectus, if such Parent UK Prospectus is required
pursuant to Section 5.7(d).
(e) The Parent ADSs to be delivered pursuant to the Merger
and the other transactions contemplated by this Agreement shall
have been authorized for listing on the NYSE, subject to
official notice of issuance.
Section 6.2 Conditions to Obligation of the
Company to Effect the Merger. The obligation of
the Company to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Closing Date of the
conditions that (i) Parent, Delaware Sub and Merger Sub
shall have performed, in all material respects, their covenants
and agreements contained in this Agreement required to be
performed on or prior to the Closing Date, (ii) (x) the
representations and warranties of Parent, Delaware Sub and
Merger Sub set forth in Section 4.1 shall be true and
correct in all respects (except, in each such case, for any
inaccuracies that are de minimis in the aggregate) at and as of
the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case
as of such date) and (y) the representations and warranties
of Parent, Delaware Sub and Merger Sub set forth in
Section 4.2 and Section 4.3 shall be true and correct
in all respects (except, in each such case, for any inaccuracies
that are de minimis in the aggregate) both at and as of the date
of this Agreement and as of the Closing Date, as if made at and
as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date), (iii) the
representations and warranties of each of Parent, Delaware Sub
and Merger Sub set forth in this Agreement (other than the
representations and warranties set forth in Section 4.1,
Section 4.2 and Section 4.3) shall be true and correct
(without giving effect to any limitation as to
materiality or Parent Material Adverse
Effect set forth therein) as of the Closing Date, as if
made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such date), except in
the case of this clause (iii) where the failure of such
representations and warranties to be so true and correct
(without giving effect to any limitation as to
materiality or Parent Material Adverse
Effect set forth therein), individually or in the
aggregate, has not had, and would not be reasonably likely to
have or result in, a Parent Material Adverse Effect, and
(iv) the Company shall have received a certificate of each
of Parent, Delaware Sub and Merger Sub, executed on its behalf
by its President or one of its Vice Presidents, dated the
Closing Date, certifying the satisfaction of the conditions set
out in clauses (i), (ii) and (iii) hereof.
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Section 6.3 Conditions to Obligation of
Parent and Merger Sub to Effect the Merger. The
obligation of Parent and Merger Sub to effect the Merger shall
be subject to the fulfillment or waiver at or prior to the
Closing Date of the conditions that (i) the Company shall
have performed, in all material respects, its covenants and
agreements contained in this Agreement required to be performed
on or prior to the Closing Date, (ii) (x) the
representations and warranties of the Company set forth in
Section 3.1 shall be true and correct in all respects
(except, in each such case, for any inaccuracies that are de
minimis in the aggregate) at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly made
as of an earlier date, in which case as of such date) and
(y) the representations and warranties of the Company set
forth in Section 3.2 and Section 3.3 shall be true and
correct in all respects (except, in each such case, for any
inaccuracies that are de minimis in the aggregate) both at and
as of the date of this Agreement and as of the Closing Date, as
if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date),
(iii) the representations and warranties of the Company set
forth in this Agreement (other than the representations and
warranties set forth in Section 3.1, Section 3.2 and
Section 3.3) shall be true and correct (without giving
effect to any limitation as to materiality or
Company Material Adverse Effect set forth therein)
as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in
which case as of such date), except in the case of this
clause (iii) where the failure of such representations and
warranties to be so true and correct (without giving effect to
any limitation as to materiality or Company
Material Adverse Effect set forth therein), individually
or in the aggregate, has not had, and would not be reasonably
likely to have or result in, a Company Material Adverse Effect,
and (iv) Parent shall have received a certificate of the
Company, executed on its behalf by its President or one of its
Vice Presidents, dated the Closing Date, certifying the
satisfaction of the conditions set out in clauses (i),
(ii) and (iii) hereof.
ARTICLE 7
TERMINATION
Section 7.1 Termination by Mutual
Consent. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after
receipt of the Parent Shareholder Approval and the Company
Stockholder Approval, by the mutual written consent of Parent
and the Company.
Section 7.2 Termination by Parent or the
Company. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after
(except as otherwise provided below) receipt of the Parent
Shareholder Approval and the Company Stockholder Approval, by
action of the Board of Directors of Parent or the Company if:
(a) the Merger shall not have been consummated by
February 3, 2012; provided, however, that the
right to terminate this Agreement pursuant to this
clause (a) shall not be available to any party whose
failure to perform or observe in any material respect any of its
obligations under this Agreement in any manner shall have been
the cause of, or resulted in, the failure of the Merger to occur
on or before such date;
(b) a meeting (including adjournments and postponements) of
the Companys stockholders for the purpose of obtaining the
approval required by Section 6.1(a)(ii) shall have been
held and such stockholder approval shall not have been obtained;
provided, however, that the right to terminate this
Agreement pursuant to this Section 7.2(b) shall not be
available to the Company where the failure to obtain the Company
Stockholder Approval is proximately caused by (i) a
withdrawal, modification or change in the Company Board of
Directors recommendation that is not permitted by
Section 5.3(d) or (ii) a breach by the Company of
Section 5.2.
(c) a meeting (including adjournments and postponements) of
Parents shareholders for the purpose of obtaining the
approvals required by Section 6.1(a)(i) shall have been
held and such shareholder approval shall not have been obtained;
provided, however, that the right to terminate this
Agreement pursuant to this Section 7.2(c) shall not be
available to Parent where the failure to obtain the Parent
Shareholder Approval is proximately caused by (i) a
withdrawal, modification or change in the Parent Board of
Directors recommendation that is not permitted by
Section 5.3(c) or (ii) a breach by Parent of
Section 5.16; or
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(d) a U.S. federal, state or
non-U.S. court
of competent jurisdiction or federal, state or
non-U.S. governmental,
regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
nonappealable; provided, however, that the party
seeking to terminate this Agreement pursuant to this
clause (d) shall have complied with Section 5.4 and,
with respect to other matters not covered by Section 5.4,
shall have used its reasonable best efforts to remove such
injunction, order or decree.
Section 7.3 Termination by the
Company. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after
(except as otherwise provided below) receipt of the Parent
Shareholder Approval and the Company Stockholder Approval, by
action of the Board of Directors of the Company, after
consultation with its outside legal advisors, if:
(a) (i) there has been a breach by Parent, Delaware
Sub or Merger Sub of any representation, warranty, covenant or
agreement set forth in this Agreement or if any representation
or warranty of Parent, Delaware Sub or Merger Sub shall have
become untrue, in either case such that the conditions set forth
in Section 6.2 would not be satisfied and (ii) such
breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given to
Parent by the Company; provided, however, that the
right to terminate this Agreement pursuant to this
Section 7.3(a) shall not be available to the Company if it,
at such time, is in breach of any representation, warranty,
covenant or agreement set forth in this Agreement such that the
conditions set forth in Section 6.3 shall not be satisfied;
(b) prior to the Cutoff Date, (i) the Board of
Directors of the Company has received a Company Superior
Proposal, (ii) in light of such Company Superior Proposal
the Board of Directors of the Company shall have determined in
good faith, after consultation with its outside legal advisors
and financial advisors, that proceeding with the Merger would be
inconsistent with its fiduciary obligations, (iii) the
Company has complied in all material respects with
Section 5.2, (iv) the Company has previously paid (or
concurrently pays) the fee provided for under
Section 7.5(a)(i), and (v) the Board of Directors of
the Company concurrently approves, and the Company concurrently
enters into, a binding definitive written agreement providing
for the implementation of such Company Superior Proposal;
provided that the Company may not effect such termination
pursuant to this Section 7.3(b) unless and until
(i) Parent receives at least three Business Days
prior written notice from the Company of its intention to effect
such termination pursuant to this Section 7.3(b); and
(ii) during such three Business Day period, the Company
shall, and shall cause its financial and legal advisors to,
consider any adjustment in the terms and conditions of this
Agreement that Parent may propose (it being understood that in
the event of any material revisions to the Company Superior
Proposal, the Company shall be required to deliver a new written
notice to Parent pursuant to this Section 7.3(b) and to
comply with the requirements of this Section 7.3(b) with
respect to such new written information, except that all
references in this proviso to three Business Days shall be
deemed to be references to two Business Days in such
event); or
(c) a Parent Adverse Recommendation Change shall have
occurred or the Board of Directors of Parent or any committee
thereof has resolved to make a Parent Adverse Recommendation
Change; provided that the approvals required by
Section 6.1(a)(i) have not been obtained prior to such
termination.
Section 7.4 Termination by
Parent. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after
(except as otherwise provided below) receipt of the Parent
Shareholder Approval and the Company Stockholder Approval, by
action of the Board of Directors of Parent, after consultation
with its outside legal advisors, if:
(a) (i) there has been a breach by the Company of any
representation, warranty, covenant or agreement set forth in
this Agreement or if any representation or warranty of the
Company shall have become untrue, in either case such that the
conditions set forth in Section 6.3 would not be satisfied
and (ii) such breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is
given by Parent to the Company; provided, however,
that the right to terminate this Agreement pursuant to this
Section 7.4(a) shall not be available to Parent if it, at
such time, is in breach of any representation, warranty,
covenant or agreement set forth in this Agreement such that the
conditions set forth in Section 6.2 shall not be satisfied;
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(b) a Company Adverse Recommendation Change shall have
occurred or the Board of Directors of the Company or any
committee thereof shall have resolved to make a Company Adverse
Recommendation Change; provided that the approvals
required by Section 6.1(a)(ii) have not been obtained prior
to such termination; or
(c) prior to the Cutoff Date, (i) the Board of
Directors of Parent has received a Parent Superior Proposal,
(ii) in light of such Parent Superior Proposal the Board of
Directors of Parent shall have determined in good faith, after
consultation with its outside legal advisors and financial
advisors, that proceeding with the Merger would be inconsistent
with its fiduciary obligations, (iii) Parent has complied
in all material respects with Section 5.16,
(iv) Delaware Sub has previously paid (or concurrently
pays) the fee provided for under Section 7.5(a)(iii), and
(v) the Board of Directors of Parent concurrently approves,
and Parent concurrently enters into, a binding definitive
written agreement providing for the implementation of such
Parent Superior Proposal; provided that Parent may not
effect such termination pursuant to this Section 7.4(c)
unless and until (i) the Company receives at least three
Business Days prior written notice from Parent of its
intention to effect such termination pursuant to this
Section 7.4(c); and (ii) during such three Business
Day period, Parent shall, and shall cause its financial and
legal advisors to, consider any adjustment in the terms and
conditions of this Agreement that the Company may propose (it
being understood that in the event of any material revisions to
the Parent Superior Proposal, Parent shall be required to
deliver a new written notice to the Company pursuant to this
Section 7.4(c) and to comply with the requirements of this
Section 7.4(c) with respect to such new written
information, except that all references in this proviso to three
Business Days shall be deemed to be references to two Business
Days in such event).
Section 7.5 Effect
of Termination.
(a) (i) If this Agreement is terminated:
(A) by Parent or the Company pursuant to
Section 7.2(b) [failure to obtain Company Stockholder
Approval] (1) after the public disclosure of a Company
Acquisition Proposal (unless such disclosure occurs after the
date of the failure to obtain stockholder approval pursuant to
Section 7.2(b)), whether or not the Company Acquisition
Proposal is still pending or has been consummated, and either
(a) prior to such failure to obtain stockholder approval,
the Board of Directors of the Company determines that such
Company Acquisition Proposal constitutes a Company Superior
Proposal (as determined in accordance with the provisions of
Section 5.2) or (b) within 12 months after the
termination of this Agreement, the Company or any of its
Subsidiaries enters into a definitive agreement providing for a
Company Acquisition Proposal, or a Company Acquisition Proposal
is consummated, or (2) if the failure to obtain the Company
Stockholder Approval was proximately caused by a breach by the
Company of Section 5.2 or Section 5.3;
(B) by Parent pursuant to Section 7.4(b) [Company
Adverse Recommendation Change]; or
(C) by the Company pursuant to Section 7.3(b)
[Company fiduciary out];
then (x) at the time of entry into such definitive
agreement or consummation of such Company Acquisition Proposal,
in the case of clause (A)(1)(b), or (y) at the time of such
termination, in each other case, the Company shall pay Parent a
fee of $260,000,000 in cash by wire transfer to the account
designated by Parent in Section 7.5 of the Parent
Disclosure Schedule.
(ii) If this Agreement is terminated by the Company
pursuant to Section 7.3(b) and in accordance with the terms
thereof, no fee additional to the fee specified in
Section 7.3(b) shall be payable by the Company to Parent.
(iii) If this Agreement is terminated:
(A) by the Company pursuant to Section 7.3(c)
[Parent Adverse Recommendation Change];
(B) by Parent pursuant to Section 7.4(c) [Parent
fiduciary out]; or
(C) by Parent or the Company pursuant to
Section 7.2(c) [failure to obtain Parent Shareholder
Approval] (1) after the public disclosure of a Parent
Alternative Proposal (unless such disclosure occurs
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after the date of the failure to obtain shareholder approval
pursuant to Section 7.2(c)), whether or not the Parent
Alternative Proposal is still pending or has been consummated,
and either (a) prior to such failure to obtain shareholder
approval, the Board of Directors of Parent determines that such
Parent Alternative Proposal constitutes a Parent Superior
Proposal (as determined in accordance with the provisions of
Section 5.16(a)) or (b) within 12 months after
the termination of this Agreement, Parent or any of its
Subsidiaries enters into a definitive agreement providing for a
Parent Alternative Proposal, or a Parent Alternative Proposal is
consummated, or (2) if the failure to obtain the Parent
Shareholder Approval was proximately caused by a breach by
Parent of Section 5.3 or Section 5.16;
then (x) at the time of entry into such definitive
agreement or consummation of such Parent Alternative Proposal,
in the case of clause (C)(1)(b), or (y) at the time of such
termination in each other case, Delaware Sub shall pay to the
Company a fee of $260,000,000 in cash by wire transfer to the
account designated by the Company in Section 7.5 of the
Company Disclosure Schedule.
(iv) If this Agreement is terminated by Parent pursuant to
Section 7.4(c) and in accordance with the terms thereof, no
fee additional to the fee specified in Section 7.4(c) shall
be payable by Delaware Sub or Parent to the Company.
(b) If this Agreement is terminated (i) by the Company
or Parent pursuant to Section 7.2(a) [outside date]
and at the time of such termination the Agreement could have
been terminated by Parent pursuant to Section 7.4(a)
[Company breach] or (ii) by the Company or Parent
pursuant to Section 7.2(b) [failure to obtain Company
Stockholder Approval] (in either case other than in any
circumstances where a fee is payable under Section 7.5(a)),
then the Company shall pay to Parent a fee in the amount of
$50,000,000 (the Fee) in cash by wire
transfer to an account designated by Parent on the date of
termination of this Agreement. If this Agreement is terminated
by the Company or Parent (i) pursuant to
Section 7.2(a) [outside date] and at the time of such
termination this Agreement could have been terminated by the
Company pursuant to Section 7.3(a) [Parent breach]
or (ii) pursuant to Section 7.2(c) [failure to
obtain Parent Shareholder Approval] (in either case other
than in any circumstances where a fee is payable under
Section 7.5(a)), then Delaware Sub shall pay to the Company
the Fee in cash by wire transfer to an account designated by the
Company on the date of termination of this Agreement. In the
event the payment of a termination fee by the Company is
required pursuant to Section 7.5(a)(i)(A)(1)(b), and the
Company has already paid the Fee pursuant to this
Section 7.5(b), the amount of the Fee previously paid will
be offset against the termination fee payable pursuant to
Section 7.5(a)(i)(A)(1)(b). In the event the payment of a
termination fee by Delaware Sub is required pursuant to
Section 7.5(a)(iii)(C)(1)(b), and Delaware Sub has already
paid the Fee pursuant to this Section 7.5(b), the amount of
the Fee previously paid will be offset against the termination
fee payable pursuant to Section 7.5(a)(iii)(C)(1)(b).
(c) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 7, all
obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 7.5,
the last sentence of Section 5.5, and Section 5.10 and
except for the provisions of Section 8.2, Section 8.3,
Section 8.4, Section 8.6, Section 8.8,
Section 8.9, Section 8.11, Section 8.12,
Section 8.13, Section 8.14 and Section 8.15,
provided that nothing herein, including the payment of any
termination fee or the Fee, shall relieve any party from any
liability for any willful or intentional breach by such party of
any of its representations, warranties, covenants or agreements
set forth in this Agreement or any action for fraud and all
rights and remedies of such aggrieved party under this Agreement
in the case of such a willful or intentional breach or fraud, at
law or in equity, shall be preserved. The Confidentiality
Agreement shall survive any termination of this Agreement, and
the provisions of the Confidentiality Agreement shall apply to
all information and material delivered by any party hereunder.
(d) In the event that the Company shall fail to pay any
termination fee or the Fee when due, or Delaware Sub shall fail
to pay any termination fee or the Fee when due, as contemplated
in either case by Section 7.5, such fees shall accrue
interest for the period commencing on the date such fees became
past due, at a rate equal to the rate of interest publicly
announced by Citibank, in the City of New York, from time to
time during such period, as such banks prime lending rate.
In addition, if either party shall fail to pay any fees when
due, such owing party shall also pay to the owed party all of
the owed partys costs and expenses
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(including attorneys fees) in connection with efforts to
collect such fees. Each of the parties hereto acknowledge that
the fees and the other provisions of this Section 7.5 are
an integral part of this Agreement and that, without these
agreements, the other parties hereto would not enter into this
Agreement.
Section 7.6 Extension;
Waiver. At any time prior to the Effective Time,
each party may by action taken by its Board of Directors or by
any committee of the Board of Directors, or any director or
officer, properly delegated by the Board of Directors, to the
extent allowed under Applicable Law, (a) extend the time
for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 8
GENERAL
PROVISIONS
Section 8.1 Nonsurvival of Representations,
Warranties and Agreements. The representations
and warranties contained in this Agreement or in any
certificates or other documents delivered prior to or as of the
Effective Time shall survive until (but not beyond) the
Effective Time. The covenants and agreements of the parties
hereto shall survive the Effective Time without limitation
(except for those which, by their terms, contemplate a shorter
survival period and except for the covenants and agreements in
Section 5.2, Section 5.3, Section 5.4,
Section 5.6, Section 5.7, Section 5.8,
Section 5.14, and Section 5.16, which shall survive
until (but not beyond) the Effective Time).
Section 8.2 Notices. Except as
otherwise provided herein, any notice required to be given
hereunder shall be sufficient if in writing, and sent by
facsimile transmission or by electronic mail in portable
document format (.pdf) form, or by any other electronic
means intended to preserve the original graphic or pictorial
appearance of a document, or by courier or by overnight delivery
service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class
postage prepaid), addressed as follows:
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(a)
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if to Parent, Delaware
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Sub or Merger Sub:
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Ensco plc
6 Chesterfield Gardens
London W1J 5BQ England
Attention: Chief Financial Officer
Telephone: +44 (0) 20 7659 4660
Facsimile: +44 (0) 207 409 0399
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with a copy to:
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Baker & McKenzie LLP
100 New Bridge Street
London EC4V 6JA
United Kingdom
Attention: Helen Bradley
Telephone: +44 (0) 20 7919 1819
Facsimile: +44 (0) 20 7919 1999
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and
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Baker & McKenzie LLP
2001 Ross Avenue, Suite 2300
Dallas, TX 75201
Attention: Alan G. Harvey
Telephone: +1 214-978-3047
Facsimile: +1 214-978-3099
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(b)
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if to the Company:
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Pride International, Inc.
5847 San Felipe, Suite 3300
Houston, Texas 77057
Attention: Brady K. Long,
Vice
President, General Counsel
and
Secretary
Telephone: +1 713-789-1400
Facsimile: +1 713-268-4534
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with a copy to:
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Baker Botts L.L.P.
910 Louisiana Street, Suite 3200
Houston, TX 77002
Attention: J. David Kirkland
Tull
R. Florey
Telephone: +1 713-229-1101
Facsimile: +1 713-229-7701
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and
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Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: David A. Katz
Telephone: +1 212-403-1000
Facsimile: +1 212-403-2309
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or to such other address as any party shall specify by written
notice so given, and such notice shall be deemed to have been
delivered as of the date so telecommunicated, personally
delivered or received.
Section 8.3 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 (a) the provisions of
Section 5.11, (b) the right of the Companys
stockholders to receive the Merger Consideration after the
Closing (a claim with respect to which may not be made unless
and until the Closing shall have occurred), (c) the rights
of the Financing Sources to enforce their rights under
Section 8.13 and Section 8.14, and (d) the right
of each party, on behalf of its shareholders, to pursue damages
in the event of the other partys willful or intentional
breach of this Agreement or fraud, which right is hereby
acknowledged and agreed (collectively, the Third
Party Provision), nothing in this Agreement,
expressed or implied, is intended to confer on any Person other
than the parties hereto or their respective heirs, successors,
executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
The Third Party Provisions may be enforced by the beneficiaries
thereof.
Section 8.4 Entire
Agreement. This Agreement, the exhibits to this
Agreement, the Parent Disclosure Schedule, the Company
Disclosure Schedule and any documents delivered by the parties
in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede
all prior agreements and understandings among the parties with
respect thereto, except that the Confidentiality Agreement shall
continue in effect. No addition to or modification of any
provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
Section 8.5 Amendments. This
Agreement may be amended by the parties hereto, by action taken
or authorized by their Boards of Directors (or sole member, in
the case of Merger Sub), at any time before or after approval of
matters presented in connection with the Merger by the
shareholders of Parent or the Company, but after any such
shareholder approval, no amendment shall be made which by law
requires the further approval of shareholders without obtaining
such further approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.6 Governing
Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other
jurisdiction, are mandatorily applicable to the Merger or to
matters arising under
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or in connection with this Agreement, this Agreement and all
disputes and controversies arising hereunder or related hereto
shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to its rules of
conflicts of laws that would apply any other law.
Section 8.7 Counterparts. This
Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall
be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may
consist of a number of copies hereof each signed by less than
all, but together signed by all of the parties hereto.
Signatures to this agreement transmitted by facsimile
transmission, by electronic mail in portable document
format (.pdf) form, or by any other electronic means
intended to preserve the original graphic and pictorial
appearance of a document, will have the same effect as physical
delivery of the paper document bearing the original signature.
Section 8.8 Headings. Headings
of the Articles and Sections of this Agreement are for the
convenience of the parties only and shall be given no
substantive or interpretative effect whatsoever.
Section 8.9 Interpretation. In
this Agreement:
(a) Unless the context otherwise requires, words describing
the singular number shall include the plural and vice versa,
words denoting any gender shall include all genders, and words
denoting natural persons shall include corporations,
partnerships and other entities and vice versa.
(b) The phrase to the knowledge
of and similar phrases relating to knowledge of
Parent or the Company, as the case may be, shall mean, with
respect to Parent, the actual knowledge of Daniel W. Rabun,
William S. Chadwick, Jr., Jay W. Swent, Cary A.
Moomjian, Jr., Michael K. Wiley, Michael Howe and David A.
Armour and, with respect to the Company, the actual knowledge of
Louis A. Raspino, Imran Toufeeq, Brian C. Voegele, Kevin C.
Robert, Lonnie D. Bane, Brady K. Long, Brian Moffatt and Leonard
E. Travis.
(c) As used in this Agreement, any reference to any fact,
circumstance, event, change, effect or occurrence having a
Material Adverse Effect with respect
to any Person means any fact, circumstance, event, change,
effect or occurrence that, individually or in the aggregate,
with all other facts, circumstances, events, changes, effects or
occurrences, has had or would be reasonably likely to have a
material adverse effect on the assets, properties, business,
results of operation or condition (financial or otherwise) of
such Person and its Subsidiaries, taken as a whole, or that
would be reasonably likely to prevent or materially delay or
materially impair the ability of such Person to perform its
obligations hereunder or to consummate the Merger or the other
transactions contemplated hereby, but shall not include
(i) facts, circumstances, events, changes, effects or
occurrences generally affecting the drilling services industry
or the economy or the financial or securities markets in the
United States, in any region in which such Person operates or
elsewhere in the world, including any regulatory or political
conditions or developments, or any outbreak or escalation of
hostilities, declared or undeclared acts of war, terrorism or
insurrection, except to the extent any fact, circumstance,
event, change, effect or occurrence relative to other comparable
industry participants materially disproportionately impacts the
assets, properties, business, results of operation or condition
(financial or otherwise) of such Person and its Subsidiaries,
taken as a whole, (ii) facts, circumstances, events,
changes, effects or occurrences to the extent related to the
impact of the BP Macondo well incident in the U.S. Gulf of
Mexico upon past, current
and/or
future deepwater and other offshore drilling operations in
general, and as respects past, current and future actual or de
facto drilling permit issuance and operations delays, moratoria
or suspensions, past, current, new
and/or
future regulatory, legislative or permitting requirements
(including requirements related to equipment, safety and
operations), past, current
and/or
future lease sales and other governmental activities that may
impact or have impacted deepwater and other offshore operations
in the U.S. Gulf of Mexico in general, (iii) facts,
circumstances, events, changes, effects or occurrences to the
extent directly resulting from the announcement of the execution
of this Agreement or the consummation of the transactions
contemplated hereby (without diminishing the effect of any
representations or warranties herein), (iv) fluctuations in
the price or trading volume of the securities of such Person;
provided that the exception in this clause (iv)
shall not prevent or otherwise affect a determination that any
fact, circumstance, event, change, effect or occurrence
underlying such fluctuation (unless otherwise excluded under the
other clauses of this Section 8.9(c)) has resulted in, or
contributed to, a Material Adverse Effect with respect to such
Person, (v) facts, circumstances, events, changes, effects
or occurrences to the extent resulting from any changes in
Applicable Law or in
A-61
GAAP (or the interpretation thereof) after the date hereof,
(vi) facts, circumstances, events, changes, effects or
occurrences to the extent resulting from any legal proceedings
made or brought by any of the current or former shareholders of
such Person (on their own behalf or on behalf of such Person)
arising out of or related to this Agreement or any of the
transactions contemplated hereby or (vii) any failure by
such Person to meet any published analyst estimates or
expectations of such Persons revenue, earnings or other
financial performance or results of operations for any period or
any failure by such Person to meet its internal budgets, plans
or forecasts of its revenues, earnings or other financial
performance or results of operations; provided that the
exception in this clause (vii) shall not prevent or
otherwise affect a determination that any fact, circumstance,
event, change, effect or occurrence underlying such failure
(unless otherwise excluded under the other clauses of this
Section 8.9(c)) has resulted in, or contributed to, a
Material Adverse Effect with respect to such Person.
(d) The term Subsidiary, when
used with respect to any party, means any corporation or other
organization (including a limited liability company), whether
incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the
securities or other interests having by their terms ordinary
voting power to elect a majority of the board of directors or
others performing similar functions with respect to such
corporation or other organization or any organization of which
such party is a general partner.
(e) The term Cutoff Date, when
used with respect to the Company, means the time the condition
set forth in Section 6.1(a)(ii) is satisfied and, when used
with respect to Parent, means the time the condition set forth
in Section 6.1(a)(i) is satisfied.
(f) When a reference is made in this Agreement to Articles
or Sections, such reference shall be to an Article or a Section
of this Agreement unless otherwise indicated.
(g) Whenever the words include,
includes or
including are used in this Agreement
they shall be deemed to be followed by the words without
limitation.
(h) The phrase the date of this
Agreement, date hereof
and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to February 6, 2011.
(i) Any statute, rule or regulation defined or referred to
herein means such statute, rule or regulation as from time to
time amended, modified or supplemented, including by succession
of comparable successor statutes, rules and regulations and
references to all attachments thereto and instruments
incorporated therein.
(j) The phrase made available
when used in this Agreement shall mean that the information
referred to has been made available to the party to whom such
information is to be made available.
(k) The phrase Business Day when
used in this Agreement shall mean any day, other than a
Saturday, Sunday and any day which is a legal holiday under the
laws of the States of Delaware or Texas or City of London or is
a day on which banking institutions located in the States of
Delaware, Texas or New York or City of London are authorized or
required by law or other governmental action to close.
(l) References to $ shall mean
U.S. dollars. References to
£ shall mean British pounds
sterling.
(m) Each of the parties hereto acknowledges that this
Agreement has been prepared jointly by the parties hereto, and
shall not be strictly construed against any party. As a
consequence, the parties do not intend that the presumptions of
any laws or rules relating to the interpretation of contracts
against the drafter of any particular clause should be applied
to this Agreement and therefore waive their effects.
(n) Each of the parties is a sophisticated legal entity or
Person that was advised by experienced counsel and, to the
extent it deemed necessary, other advisors in connection with
this Agreement. Accordingly, each of the parties hereby
acknowledges that (i) no party has relied or will rely in
respect of this Agreement or the transactions contemplated by
this Agreement upon any documents or written or oral information
previously furnished to or discovered by it or its
representatives, other than as set forth in this Agreement
(including the Company Disclosure Schedule and the Parent
Disclosure Schedule), (ii) there are no representations or
warranties by or on behalf of any party hereto or any of its
Affiliates or representatives other than those
A-62
expressly set forth in this Agreement or in certificates
delivered by the parties pursuant to Section 6.2(iv) or
Section 6.3(iv), and (iii) the parties
respective rights and obligations with respect to this Agreement
and the events giving rise thereto will be solely as set forth
in this Agreement.
Section 8.10 Waivers. Except
as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained
in this Agreement. No failure or delay on the part of any party
hereto in the exercise of any right hereunder shall impair such
right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement in this
Agreement, nor shall any single or partial exercise of any such
right preclude any other or further exercise thereof or any
other right. The waiver by any party hereto of a breach of any
provision hereunder shall not operate or be construed as a
waiver of any prior or subsequent breach of the same or any
other provision hereunder. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
Section 8.11 Incorporation of
Exhibits. The exhibits attached hereto and
referred to herein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
Section 8.12 Severability. Any
term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions
of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.
Section 8.13 Enforcement
of Agreement.
(a) The parties hereto agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms
and provisions hereof, this being in addition to any other
remedy to which they are entitled at law or in equity. No party
shall object to the other parties right to specific
performance as a remedy for breach of this Agreement.
(b) Each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of the Court of Chancery of
the State of Delaware or, if such court lacks subject matter
jurisdiction, any Federal court located in the State of Delaware
in the event any dispute arises out of this Agreement or any of
the transactions contemplated herein, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and
(iii) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated herein in
any court other than the Court of Chancery of the State of
Delaware or, if such court lacks subject matter jurisdiction,
any Federal court sitting in the State of Delaware.
Notwithstanding the foregoing, each of the parties hereto agrees
that it will not bring, support, or permit any of their
respective Affiliates to bring, support or permit any of their
Affiliates from bringing any action, cause of action, claim,
cross-claim, third-party claim or proceeding of any kind or
description, whether in law or in equity, whether in contract or
in tort or otherwise, against the Financing Sources in any way
relating to this Agreement or any of the transactions
contemplated by this Agreement, including but not limited to any
dispute arising out of or relating in any way to the Financing
Commitments or the performance thereof, in any forum other than
the federal or New York State courts located in the Borough of
Manhattan in the City of New York (and appellate courts thereof).
(c) Parent designates and appoints Delaware Sub and its
registered agent in the State of Delaware and such Persons
successors and assigns as its lawful agent in the United States
of America upon which may be served, and which may accept and
acknowledge, for and on behalf of such party all process in any
action, suit or proceedings that may be brought against such
party in any of the courts referred to in this
Section 8.13, and agrees that such service of process, or
the acceptance or acknowledgment thereof by said agent, shall be
valid, effective and binding in every respect.
A-63
Section 8.14 Waiver of Jury
Trial. EACH OF PARENT, THE COMPANY, DELAWARE SUB
AND MERGER SUB HEREBY IRREVOCABLY WAIVES FOR ITSELF, AND ITS
RESPECTIVE AFFILIATES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ALL RIGHTS OF TRIAL BY JURY IN ANY CLAIM, SUIT, ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 8.15 No Recourse. This
Agreement may only be enforced against, and any claims or causes
of action that may be based upon, arise out of or relate to this
Agreement, or the negotiation, execution or performance of this
Agreement may only be made against the entities that are
expressly identified as parties hereto and no past, present or
future affiliate, director, officer, employee, incorporator,
member, manager, partner, shareholder, agent, attorney or
representative of any party hereto shall have any liability for
any obligations or liabilities of the parties to this Agreement
or for any claim based on, in respect of, or by reason of, the
transactions contemplated hereby. The obligations of Delaware
Sub pursuant to Section 7.5 shall be performed solely by
Delaware Sub, and Parent shall not be required to, and shall
not, provide any direct or indirect financial assistance to the
performance of such obligations whether by way of gift,
guarantee, security, indemnity, loan, novation or assignment of
rights under a loan, contribution or transfer of assets,
assumption of liability or other contractual obligations or
otherwise.
[Signatures
on next page]
A-64
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day
and year first written above.
ENSCO PLC
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Name:
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Daniel W. Rabun
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Title:
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President and Chief Executive Officer
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PRIDE INTERNATIONAL, INC.
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Name:
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Louis A. Raspino
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Title:
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President and Chief Executive Officer
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ENSCO VENTURES LLC
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Name:
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Dean A. Kewish
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Title:
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Vice President and Secretary
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ENSCO INTERNATIONAL INCORPORATED
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Name:
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Dean A. Kewish
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Title:
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Vice President and Secretary
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Signature Page -
Agreement and Plan of Merger
A-65
Exhibit A
CERTIFICATE
OF INCORPORATION
OF
PRIDE INTERNATIONAL, INC.
FIRST. The name of the corporation is Pride
International, Inc.
SECOND. The address of the corporations
registered office in the State of Delaware is Corporation
Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, Delaware, 19801. The registered agent in
charge thereof is The Corporation Trust Company.
THIRD. 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.
FOURTH. The total number of shares of stock which the
corporation shall have authority to issue is 1,000. All such
shares are to be Common Stock, par value of $0.01 per share, and
are to be of one class.
FIFTH. Unless and except to the extent that the
bylaws of the corporation shall so require, the election of
directors of the corporation need not be by written ballot.
SIXTH. In furtherance and not in limitation of the
powers conferred by the laws of the State of Delaware, the Board
of Directors of the corporation is expressly authorized to make,
alter and repeal the bylaws of the corporation.
SEVENTH. No director of the corporation shall be
personally liable to the corporation or any of its stockholders
for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing provisions shall not
eliminate or limit the liability of a director (i) for any
breach of such directors 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 Delaware General Corporation Law (DGCL), as the
same exists or as such provision may hereafter be amended,
supplemented or replaced, or (iv) for any transactions from
which such director derived an improper personal benefit. If the
DGCL is amended after the 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 such law, as so
amended. Any repeal or modification of this Article Seventh
by 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.
EIGHTH. The corporation reserves the right at any
time, and from time to time, to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation,
and other provisions authorized by the laws of the State of
Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and all rights,
preferences and privileges of any nature conferred upon
stockholders, directors or any other persons by and pursuant to
this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in
this Article Eighth.
A-66
ANNEX B
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Board of Directors
Ensco plc
6 Chesterfield Gardens
London W1J 5BQ
England
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Deutsche
Bank Securities Inc.
Global Banking
Mergers & Acquisitions
60 Wall Street
New York, NY 10005
|
February 6, 2011
Lady and Gentlemen:
Deutsche Bank Securities Inc. (Deutsche Bank) has
acted as financial advisor to Ensco plc (Ensco) in
connection with an Agreement and Plan of Merger, dated as of
February 6, 2011 (the Merger Agreement), by and
among Ensco, Pride International, Inc. (Pride),
ENSCO Ventures LLC, an indirect wholly-owned subsidiary of Ensco
(Merger Sub), and ENSCO International Incorporated,
an indirect wholly-owned subsidiary of Ensco, which provides,
among other things, for the merger of Merger Sub with and into
Pride, as a result of which Pride will become a wholly-owned
subsidiary of Ensco (the Transaction). As set forth
more fully in the Merger Agreement, as a result of the
Transaction, each share of common stock, par value $0.01 per
share (the Pride Common Stock), of Pride (other than
dissenting shares and shares owned by Pride, Ensco or any of
their respective wholly-owned subsidiaries) will be converted
into the right to receive (i) $15.60 in cash (the
Cash Consideration) and (ii) 0.4778 (the
Exchange Ratio) American Depositary Shares (the
Ensco ADSs), each representing one Class A
ordinary share, nominal value $0.10 per share, of Ensco (the
Stock Consideration and, together with the Cash
Consideration, the Merger Consideration);
provided, that, if determined by Ensco, certain Cash-Only
Shares (as defined in the Merger Agreement) may receive, in lieu
of the Stock Consideration, an additional amount in cash equal
to the product of the Exchange Ratio and the Final Parent Stock
Price (as defined in the Merger Agreement).
You have requested our opinion, as investment bankers, as to the
fairness of the Merger Consideration to be paid in respect of
each share of Pride Common Stock, from a financial point of
view, to Ensco.
In connection with our role as financial advisor to Ensco, and
in arriving at our opinion, we reviewed certain publicly
available financial and other information concerning Ensco and
Pride and certain internal analyses, financial forecasts and
other information relating to Ensco, Pride and the combined
company prepared by management of Ensco. We have also held
discussions with certain senior officers and other
representatives and advisors of Ensco and Pride regarding the
businesses and prospects of Ensco, Pride and the combined
company, including certain cost savings and operating synergies
projected by the management of Ensco to result from the
Transaction. In addition, we have (i) reviewed the reported
prices and trading activity for both the Ensco ADSs and the
Pride Common Stock, (ii) compared certain financial and
stock market information for Ensco and Pride with, to the extent
publicly available, similar information for certain other
companies we considered relevant whose securities are publicly
traded, (iii) to the extent publicly available, reviewed
the financial terms of certain recent business combinations or
acquisition transactions which we deemed relevant,
(iv) reviewed the Merger Agreement, and (v) performed
such other studies and analyses and considered such other
factors as we deemed appropriate.
We have not assumed responsibility for independent verification
of, and have not independently verified, any information,
whether publicly available or furnished to us, concerning Ensco
or Pride, including, without limitation, any financial
information considered in connection with the rendering of our
opinion. Accordingly, for purposes of
B-1
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Board of
Directors
Ensco plc
Page 2
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our opinion, we have, with your knowledge and permission,
assumed and relied upon the accuracy and completeness of all
such information. We have not conducted a physical inspection of
any of the properties or assets, and have not prepared or
obtained any independent evaluation or appraisal of any of the
assets or liabilities (including any contingent, derivative or
off-balance-sheet assets or liabilities), of Ensco, Pride or any
of their respective subsidiaries, nor have we evaluated the
solvency or fair value of Ensco, Pride or the combined company
(or the impact of the Transaction thereon) under any law
relating to bankruptcy, insolvency or similar matters. With
respect to the financial forecasts, including, without
limitation, the analyses and forecasts of the amount and timing
of certain cost savings, operating efficiencies, revenue
effects, financial synergies and other strategic benefits
projected by management of Ensco to be achieved as a result of
the Transaction (collectively, the Synergies), made
available to Deutsche Bank and used in our analyses, we have
assumed with your knowledge and permission that such forecasts
have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of
Ensco as to the matters covered thereby. In rendering our
opinion, we express no view as to the reasonableness of such
forecasts and projections, including, without limitation, the
Synergies, or the assumptions on which they are based. Our
opinion is necessarily based upon economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. We expressly disclaim any
undertaking or obligation to advise any person of any change in
any fact or matter affecting our opinion of which we become
aware after the date hereof.
For purposes of rendering our opinion, we have assumed with your
permission that, in all respects material to our analysis, the
Transaction will be consummated in accordance with the terms of
the Merger Agreement, without any material waiver, modification
or amendment of any term, condition or agreement. We also have
assumed that all material governmental, regulatory or other
approvals and consents required in connection with the
consummation of the Transaction will be obtained and that in
connection with obtaining any necessary governmental, regulatory
or other approvals and consents, no restrictions, terms or
conditions will be imposed that would be material to our
analysis. We are not legal, regulatory, tax or accounting
experts and have relied on the assessments made by Ensco and its
advisors with respect to such issues.
This opinion has been approved and authorized for issuance by a
Deutsche Bank fairness opinion review committee and is addressed
to, and for the use and benefit of, the Board of Directors of
Ensco in connection with and for the purposes of its evaluation
of the Transaction. This opinion is limited to the fairness of
the Merger Consideration to be paid in respect of each share of
Pride Common Stock, from a financial point of view, to Ensco as
of the date hereof. This opinion does not address any other
terms of the Transaction or the Merger Agreement. You have not
asked us to, and this opinion does not, address the fairness of
the Transaction, or any consideration received in connection
therewith, to the holders of any class of securities, creditors
or other constituencies of Ensco, nor does it address the
fairness of the contemplated benefits of the Transaction. We
express no opinion as to the merits of the underlying decision
by Ensco to engage in the Transaction or the relative merits of
the Transaction as compared to any alternative transactions or
business strategies. Nor do we express any opinion, and this
opinion does not constitute a recommendation, as to how any
holder of Ensco ADSs or Ensco Class A ordinary shares
should vote with respect to the Transaction. In addition, we do
not express any view or opinion as to the fairness, financial or
otherwise, of the amount or nature of any compensation payable
to or to be received by any of the officers, directors, or
employees of any parties to the Transaction, or any class of
such persons, in connection with the Transaction relative to the
Merger Consideration. This opinion does not in any manner
address the prices at which the Ensco ADSs, the Pride Common
Stock or any other securities will trade following the
announcement or consummation of the Transaction.
Deutsche Bank will be paid a fee for its services as financial
advisor to Ensco in connection with the Transaction, a portion
of which became payable upon the earlier of delivery of this
opinion and execution of the Merger Agreement and a substantial
portion of which is contingent upon consummation of the
Transaction. Ensco has also agreed to reimburse Deutsche Bank
for its expenses, and to indemnify Deutsche Bank against certain
liabilities, in connection with its engagement. We are an
affiliate of Deutsche Bank AG (together with its affiliates, the
DB
B-2
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Board of
Directors
Ensco plc
Page 3
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Group). One or more members of the DB Group have, from
time to time, provided, and are currently providing, investment
banking, commercial banking (including extension of credit) and
other financial services to Ensco or its affiliates for which it
has received, and in the future may receive, compensation,
including acting as a lender under Enscos $700,000,000
revolving credit facility since May 2010 (aggregate
commitment $40,000,000). One or more members of the DB Group
have, from time to time, provided investment banking, commercial
banking (including extension of credit) and other financial
services to Pride or its affiliates for which it has received
compensation but the DB Group has not provided any such services
to Pride or its affiliates in the last two years. The DB Group
also may provide investment and commercial banking services to
Ensco, Pride or their respective affiliates in the future, for
which we would expect the DB Group to receive compensation. In
addition, one or more members of the DB Group have agreed to
provide financing to Ensco in connection with the Transaction.
In the ordinary course of business, members of the DB Group may
actively trade in the securities and other instruments and
obligations of Ensco, Pride or their respective affiliates for
their own accounts and for the accounts of their customers.
Accordingly, the DB Group may at any time hold a long or short
position in such securities, instruments and obligations.
Based upon and subject to the foregoing assumptions,
limitations, qualifications and conditions, it is Deutsche
Banks opinion as investment bankers that, as of the date
hereof, the Merger Consideration to be paid in respect of each
share of Pride Common Stock is fair, from a financial point of
view, to Ensco.
Very truly yours,
/s/ Deutsche Bank Securities Inc.
DEUTSCHE BANK SECURITIES INC.
B-3
ANNEX C
Goldman Sachs & Co
ï
85 Broad Street
ï
New York, New York 10004
Tel: 212 902 1000
PERSONAL
AND CONFIDENTIAL
February 6, 2011
Board of Directors
Pride International, Inc.
5847 San Felipe Street
Suite 3300
Houston, TX 77057
Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders (other than Ensco plc
(Ensco) and its affiliates) of the outstanding
shares of common stock, par value $0.01 per share (the
Shares), of Pride International, Inc. (the
Company) of the Consideration (as defined below) to
be paid to such holders pursuant to the Agreement and Plan of
Merger, dated as of February 6, 2011 (the
Agreement), by and among Ensco, ENSCO Ventures LLC,
a wholly owned subsidiary of Ensco (Acquisition
Sub), ENSCO International Incorporated, a wholly owned
subsidiary of Ensco, and the Company. The Agreement provides
that Acquisition Sub will be merged with and into the Company
and each outstanding Share, other than Excluded Shares (as
defined in the Agreement) will be converted into the right to
receive $15.60 in cash (the Cash Consideration) and
0.4778 American Depositary Shares of Ensco (Ensco
ADSs), each duly and validly issued against the deposit of
an equal number of Class A Ordinary Shares, nominal value
$0.10 per share (Ensco Class A Ordinary
Shares), of Ensco (the Stock Consideration;
together with the Cash Consideration, the
Consideration), subject to certain procedures and
limitations contained in the Agreement, as to which we express
no opinion.
Goldman, Sachs & Co. and its affiliates are engaged in
investment banking and financial advisory services, commercial
banking, securities trading, investment management, principal
investment, financial planning, benefits counseling, risk
management, hedging, financing, brokerage activities and other
financial and non-financial activities and services for various
persons and entities. In the ordinary course of these activities
and services, Goldman, Sachs & Co. and its affiliates
may at any time make or hold long or short positions and
investments, as well as actively trade or effect transactions,
in the equity, debt and other securities (or related derivative
securities) and financial instruments (including bank loans and
other obligations) of the Company, Ensco, any of their
respective affiliates and third parties or any currency or
commodity that may be involved in the transaction contemplated
by the Agreement (the Transaction) for their own
account and for the accounts of their customers. We have acted
as financial advisor to the Company in connection with, and have
participated in certain of the negotiations leading to, the
Transaction. We expect to receive fees for our services in
connection with the Transaction, the principal portion of which
is contingent upon consummation of the Transaction, and the
Company has agreed to reimburse our expenses arising, and
indemnify us against certain liabilities that may arise, out of
our engagement. We have provided certain investment banking
services to the Company and its affiliates from time to time for
which our Investment Banking Division has received, and may
receive, compensation, including having acted as bookrunner with
respect to the public offering of the Companys
8.5% Senior Notes due June 2019 (aggregate principal amount
$500,000,000) in May 2009, financial advisor to the Company with
respect to the spin-off of Seahawk Drilling in August 2009 and
bookrunner with respect to the public offering of the
Companys 6.875% Senior Notes due June 2020 and
7.875% Senior Notes due 2040 (aggregate principal amount
C-1
Board of Directors
Pride International, Inc.
February 6, 2011
Page Two
$1,200,000,000) in August 2010. We also have provided certain
investment banking services to Ensco and its affiliates from
time to time for which our Investment Banking Division has
received, and may receive, compensation, including having acted
as advisor to Ensco with respect to the attempted acquisition of
Scorpion Offshore Limited in May 2010. We may also in the future
provide investment banking services to the Company, Ensco and
their respective affiliates for which our Investment Banking
Division may receive compensation.
In connection with this opinion, we have reviewed, among other
things, the Agreement; annual reports to stockholders and Annual
Reports on
Form 10-K
of the Company and Ensco for the five years ended
December 31, 2009; certain interim reports to stockholders
and Quarterly Reports on
Form 10-Q
of the Company and Ensco; certain other communications from the
Company and Ensco to their respective stockholders; certain
publicly available research analyst reports for the Company and
Ensco; certain internal financial analyses and forecasts for
Ensco prepared by its management; certain internal financial
analyses and forecasts for the Company prepared by its
management and certain financial analyses and forecasts for
Ensco prepared by the management of the Company, including the
Base Case Forecasts for each of the Company and Ensco (the
Base Case Forecasts), in each case, as approved for
our use by the Company; and certain cost savings and operating
synergies projected by the management of the Company to result
from the Transaction, as approved for our use by the Company
(the Synergies). We have also held discussions with
members of the senior managements of the Company and Ensco
regarding their assessment of the strategic rationale for, and
the potential benefits of, the Transaction and the past and
current business operations, financial condition and future
prospects of the Company and Ensco; reviewed the reported price
and trading activity for the Shares, Ensco Class A Ordinary
Shares and Ensco ADSs; compared certain financial and stock
market information for the Company and Ensco with similar
information for certain other companies the securities of which
are publicly traded; reviewed the financial terms of certain
recent business combinations in the offshore drilling industry
and in other industries; and performed such other studies and
analyses, and considered such other factors, as we deemed
appropriate.
For purposes of rendering this opinion, we have relied upon and
assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, legal, regulatory, tax, accounting and other
information provided to, discussed with or reviewed by, us; and
we do not assume any responsibility for any such information. In
that regard, we have assumed with your consent that the Base
Case Forecasts and the Synergies have been reasonably prepared
on a basis reflecting the best currently available estimates and
judgments of the management of the Company. We have not made an
independent evaluation or appraisal of the assets and
liabilities (including any contingent, derivative or other
off-balance-sheet assets and liabilities) of the Company or
Ensco or any of their respective subsidiaries and we have not
been furnished with any such evaluation or appraisal. We have
assumed that all governmental, regulatory or other consents and
approvals necessary for the consummation of the Transaction will
be obtained without any adverse effect on the Company or Ensco
or on the expected benefits of the Transaction in any way
meaningful to our analysis. We also have assumed that the
Transaction will be consummated on the terms set forth in the
Agreement, without the waiver or modification of any term or
condition the effect of which would be in any way meaningful to
our analysis.
Our opinion does not address the underlying business decision of
the Company to engage in the Transaction, or the relative merits
of the Transaction as compared to any strategic alternatives
that may be available to the Company; nor does it address any
legal, regulatory, tax or accounting matters. This opinion
addresses only the fairness from a financial point of view, as
of the date hereof, of the Consideration to be paid to the
holders (other than Ensco and its affiliates) of Shares pursuant
to the Agreement. We do not express any view on, and our opinion
does not address, any other term or aspect of the Agreement or
Transaction or any term or aspect of any other agreement or
instrument contemplated by the Agreement or entered into or
amended in connection with the Transaction, including, without
limitation, the fairness of the Transaction to, or any
consideration received in connection therewith by, the holders
of any other class of securities, creditors, or other
constituencies of the Company; nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of the Company, or
C-2
Board of Directors
Pride International, Inc.
February 6, 2011
Page Three
class of such persons, in connection with the Transaction,
whether relative to the Consideration to be paid to the holders
(other than Ensco and its affiliates) of Shares pursuant to the
Agreement or otherwise. We are not expressing any opinion as to
the prices at which Ensco Class A Ordinary Shares or Ensco
ADSs will trade at any time or as to the impact of the
Transaction on the solvency or viability of the Company or Ensco
or the ability of the Company or Ensco to pay their respective
obligations when they come due. Our opinion is necessarily based
on economic, monetary, market and other conditions as in effect
on, and the information made available to us as of, the date
hereof and we assume no responsibility for updating, revising or
reaffirming this opinion based on circumstances, developments or
events occurring after the date hereof. Our advisory services
and the opinion expressed herein are provided for the
information and assistance of the Board of Directors of the
Company in connection with its consideration of the Transaction
and such opinion does not constitute a recommendation as to how
any holder of Shares should vote with respect to such
Transaction or any other matter. This opinion has been approved
by a fairness committee of Goldman, Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Consideration to be paid to holders
(other than Ensco and its affiliates) of Shares pursuant to the
Agreement is fair from a financial point of view to such holders.
Very truly yours,
(GOLDMAN, SACHS & CO.)
C-3
ANNEX D
SECTION 262
OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
corporation; the words stock and share
mean and include what is ordinarily meant by those words; and
the words depository receipt mean a receipt or other
instrument issued by a depository representing an interest in 1
or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 255, § 256,
§ 257, § 258, § 263 or
§ 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 255, 256, 257, 258, 263 and 264
of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 or
§ 267 of this title is not owned by the parent
immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a
D-1
provision, the procedures of this section, including those set
forth in subsections (d) and (e) of this section,
shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for notice of such meeting (or such members who received
notice in accordance with § 255(c) of this title) with
respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of
the constituent corporations, and shall include in such notice a
copy of this section and, if 1 of the constituent corporations
is a nonstock corporation, a copy of § 114 of this
title. Each stockholder electing to demand the appraisal of such
stockholders shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholders shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholders shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection
and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228, § 253, or § 267 of this
title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall
notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section and, if 1 of
the constituent corporations is a nonstock corporation, a copy
of § 114 of this title. Such notice may, and, if given
on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holders
shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
holders shares. If such notice did not notify stockholders
of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of
such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such
a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such
second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holders shares in
accordance with this subsection. An affidavit of the secretary
or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who
D-2
is otherwise entitled to appraisal rights, may commence an
appraisal proceeding by filing a petition in the Court of
Chancery demanding a determination of the value of the stock of
all such stockholders. Notwithstanding the foregoing, at any
time within 60 days after the effective date of the merger
or consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation.
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of
D-3
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 20.
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Indemnification
of Officers and Directors
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The following is only a general summary of certain aspects of
English law and Enscos Articles of Association related to
indemnification of directors and officers, and does not purport
to be complete. It is qualified in its entirety by reference to
the detailed provisions of the Companies Act 2006 and of
Enscos Articles of Association.
English law does not permit a company to exempt any director or
certain officers from any liability arising from negligence,
default, breach of duty or breach of trust against the company.
However, despite this prohibition, an English company is
permitted to purchase and maintain insurance for a director or
executive officer of the company against any such liability.
Shareholders can ratify by ordinary resolution a directors
or certain officers conduct amounting to negligence,
default, breach of duty or breach of trust in relation to the
company.
Article 145 of Enscos Articles of Association
provides that Ensco, to the extent permitted by the Companies
Act 2006, will (a) indemnify to any extent any person who
is or was a director or officer of Ensco, or a director or
officer of any associated company, directly or indirectly
(including by funding any expenditure incurred or to be incurred
by him) against any loss or liability, whether in connection
with any negligence, default, breach of duty or breach of trust
by him or otherwise, in relation to Ensco or any associated
company; (b) indemnify to any extent any person who is or
was a director or officer of an associated company that is a
trustee of an occupational pension scheme, directly or
indirectly (including by funding any expenditure incurred or to
be incurred by him) against any liability incurred by him in
connection with the companys activities as trustee of an
occupational pension scheme; (c) create a trust fund, grant
a security interest
and/or use
other means (including, without limitation, letters of credit,
surety bonds
and/or other
similar arrangements), as well as enter into contracts providing
indemnification to the full extent authorized or permitted by
law to ensure the payment of such amounts as may become
necessary to effect indemnification as provided therein, or
elsewhere.
As permitted by the Companies Act 2006, Ensco also maintains a
directors and officers insurance policy which
insures the directors and officers of Ensco against liability
asserted against such persons in such capacity whether or not
such directors or officers have the right to indemnification
pursuant to the Articles of Association or otherwise.
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Item 21.
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Exhibits
and Financial Statement Schedules.
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Exhibit No.
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Description
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2
|
.1
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Agreement and Plan of Merger by and among Ensco plc, Pride
International, Inc., ENSCO International Incorporated, and ENSCO
Ventures LLC, dated February 6, 2011 (incorporated by
reference to Exhibit 2.1 to the Registrants Current
Report on
Form 8-K
filed on February 7, 2011).
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2
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.2**
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Amendment to Agreement and Plan of Merger by and among Ensco
plc, Pride International, Inc., ENSCO International
Incorporated, and ENSCO Ventures LLC, dated March 1, 2011.
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3
|
.1
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Articles of Association of Ensco International plc (incorporated
by reference to Exhibit 99.1 to the Registrants
Current Report on
Form 8-K
filed on December 16, 2009, File
No. 1-8097).
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3
|
.2
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Certificate of Incorporation on Change of Name (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on April 1, 2010, File
No. 1-8097).
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4
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.1
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Deposit Agreement, dated as of September 29, 2009, by and
among ENSCO International Limited (now known as Ensco plc),
Citibank, N.A., as Depositary, and the holders and beneficial
owners of American Depositary Shares issued thereunder
(incorporated by reference to Exhibit 4.1 to the
Registration Statement of ENSCO International Limited on
Form S-4
(File
No. 333-162975)
filed on November 9, 2009).
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II-1
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Exhibit No.
|
|
Description
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|
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4
|
.2
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Form of American Depositary Receipt for American Depositary
Shares representing Deposited Class A Ordinary Shares of
Ensco plc (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed on April 1, 2010, File
No. 1-8097).
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5
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.1**
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Opinion of Baker & McKenzie LLP, London, counsel to
Ensco, regarding legality of securities being registered.
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23
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.1**
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Consents of Baker & McKenzie LLP, London (included in
Exhibit 5.1).
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23
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.2*
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Consent of KPMG LLP, Independent Registered Public Accounting
Firm of Pride.
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23
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.3*
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Consent of KPMG LLP, Independent Registered Public Accounting
Firm of Ensco.
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24
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.1**
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Powers of Attorney.
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99
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.1**
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Form of Pride proxy card.
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99
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.2**
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Form of Ensco proxy card.
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99
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.3**
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Form of Ensco voting instruction card.
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99
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.4*
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Consent of Deutsche Bank Securities Inc.
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99
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.5*
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Consent of Goldman, Sachs & Co.
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A copy of any omitted schedules will be provided to the SEC upon
request. |
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* |
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Filed herewith. |
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** |
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Previously filed. |
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
II-2
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants annual report
pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus:
(i) that is filed pursuant to paragraph
(c) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request,
and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
(g) The undersigned registrant hereby undertakes to supply
by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 3 to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in London, England, on
April 22, 2011.
Ensco plc
Daniel W. Rabun
Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement has been
signed by the following persons in the capacities indicated
below.
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Signature
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Title
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Date
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/s/ Daniel
W. Rabun
Daniel
W. Rabun
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Chairman, President and Chief
Executive Officer
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April 22, 2011
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*
James
W. Swent III
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Senior Vice President Chief
Financial Officer
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April 22, 2011
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*
David
A. Armour
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Vice President Finance
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April 22, 2011
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*
Douglas
J. Manko
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Controller and Assistant Secretary
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April 22, 2011
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*
J.
Roderick Clark
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Director
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April 22, 2011
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*
C.
Christopher Gaut
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Director
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April 22, 2011
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*
Gerald
W. Haddock
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Director
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April 22, 2011
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*
Thomas
L. Kelly II
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Director
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April 22, 2011
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*
Keith
O. Rattie
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Director
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April 22, 2011
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*
Rita
M. Rodriguez
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Director
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April 22, 2011
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II-4
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Signature
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Title
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Date
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*
Paul
E. Rowsey, III
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Director
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April 22, 2011
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/s/ Cary
A. Moomjian, Jr.
Cary
A. Moomjian, Jr.
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Company Secretary and Authorized Representative in the United
States
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April 22, 2011
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*By: /s/ Daniel
W. Rabun
Daniel
W. Rabun
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Attorney-in-fact
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April 22, 2011
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II-5
EXHIBIT INDEX
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2
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.1
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Agreement and Plan of Merger by and among Ensco plc, Pride
International, Inc., ENSCO International Incorporated, and ENSCO
Ventures LLC, dated February 6, 2011 (incorporated by
reference to Exhibit 2.1 to the Registrants Current
Report on
Form 8-K
filed on February 7, 2011).
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2
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.2**
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Amendment to Agreement and Plan of Merger by and among Ensco
plc, Pride International, Inc., ENSCO International
Incorporated, and ENSCO Ventures LLC, dated March 1, 2011.
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3
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.1
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Articles of Association of Ensco International plc (incorporated
by reference to Exhibit 99.1 to the Registrants
Current Report on
Form 8-K
filed on December 16, 2009, File
No. 1-8097).
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3
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.2
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Certificate of Incorporation on Change of Name (incorporated by
reference to Exhibit 3.1 to the Registrants Current
Report on
Form 8-K
filed on April 1, 2010, File
No. 1-8097).
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4
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.1
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Deposit Agreement, dated as of September 29, 2009, by and
among ENSCO International Limited (now known as Ensco plc),
Citibank, N.A., as Depositary, and the holders and beneficial
owners of American Depositary Shares issued thereunder
(incorporated by reference to Exhibit 4.1 to the
Registration Statement of ENSCO International Limited on
Form S-4
(File
No. 333-162975)
filed on November 9, 2009).
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4
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.2
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Form of American Depositary Receipt for American Depositary
Shares representing Deposited Class A Ordinary Shares of
Ensco plc (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on
Form 8-K
filed on April 1, 2010, File
No. 1-8097).
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5
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.1**
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Opinion of Baker & McKenzie LLP, London, counsel to
Ensco, regarding legality of securities being registered.
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23
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.1**
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Consents of Baker & McKenzie LLP, London (included in
Exhibit 5.1).
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23
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.2*
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Consent of KPMG LLP, Independent Registered Public Accounting
Firm of Pride.
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23
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.3*
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Consent of KPMG LLP, Independent Registered Public Accounting
Firm of Ensco.
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24
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.1**
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Powers of Attorney.
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99
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.1**
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Form of Pride proxy card.
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99
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.2**
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Form of Ensco proxy card.
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99
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.3**
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Form of Ensco voting instruction card.
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99
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.4*
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Consent of Deutsche Bank Securities Inc.
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99
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.5*
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Consent of Goldman, Sachs & Co.
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|
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A copy of any omitted schedules will be provided to the SEC upon
request. |
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* |
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Filed herewith. |
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** |
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Previously filed. |
II-6