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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under sec.240.14a-12
PRIDE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
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(2) Aggregate number of securities to which transaction applies:
63,000,000
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
$1,186,290,000
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(5) Total fee paid:
$237,258
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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[PRIDE LOGO] [MARINE DRILLING LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The boards of directors of Pride International, Inc. and Marine Drilling
Companies, Inc. have each unanimously approved a transaction that will combine
the two companies. The boards of directors of Pride and Marine believe that the
combined company, as a larger entity with a substantially larger equity market
capitalization and a strong balance sheet, will command a higher valuation in
the stock market and be a stronger competitor than either company would be on a
stand-alone basis. We believe that the transaction will benefit the shareholders
of both companies, and we ask for your support in voting for the merger
proposals at our meetings.
When the mergers are completed, shareholders of Marine will own one share
of "New Pride," a Delaware corporation to be named Pride International, Inc.
that has been formed to become the successor of the combined companies, for each
share of Marine common stock they currently own. Shareholders of Pride also will
own one share of New Pride for each share of Pride common stock they currently
own.
The combined company will be owned approximately 56% by Pride shareholders
and 44% by Marine shareholders. The board of directors of the combined company
will consist of four members of Pride's board and four members of Marine's
board. The chief executive officer of the combined company will be Paul A.
Bragg, Pride's chief executive officer. The chairman of the board of directors
of the combined company will be Robert L. Barbanell, Marine's chairman of the
board.
The transaction cannot be completed without the approval of the merger
agreement by Pride's shareholders and Marine's shareholders. We have scheduled
separate meetings to be held on , 2001 for our respective shareholders to
vote on these proposals. The times and places of these meetings are set forth in
the attached notices.
THE PRIDE AND MARINE BOARDS OF DIRECTORS EACH RECOMMENDS THAT ITS
SHAREHOLDERS VOTE "FOR" THE MERGERS.
This document provides you with detailed information about the transaction
and the shareholder meetings. You can also obtain financial and other
information about Pride and Marine from documents filed with the Securities and
Exchange Commission. We encourage you to carefully read this entire document and
the documents incorporated by reference before voting, PARTICULARLY THE RISK
FACTORS BEGINNING ON PAGE 12.
ROBERT L. BARBANELL
Chairman of the Board
Marine Drilling Companies, Inc.
PAUL A. BRAGG
President and Chief Executive Officer
Pride International, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED IN THE
MERGERS OR DETERMINED IF THIS JOINT PROXY STATEMENT/ PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated , 2001 and is intended
to be mailed to shareholders of Pride and Marine on or about , 2001.
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PRIDE INTERNATIONAL, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 2001
We will hold a special meeting of the shareholders of Pride International,
Inc. on , 2001 at 9:00 a.m., Houston time, at , Houston, Texas, to
consider and vote upon a proposal to approve an Agreement and Plan of Merger,
dated as of May 23, 2001, including the issuance of Pride common stock to the
shareholders of Marine Drilling Companies, Inc. Pursuant to the merger
agreement, which is attached as Annex A to the accompanying joint proxy
statement/prospectus, Marine will merge with and into a wholly owned subsidiary
of Pride and each share of Marine's common stock will be converted into one
share of common stock of Pride. Immediately thereafter, Pride will merge into a
newly organized Delaware corporation ("New Pride") to be renamed "Pride
International, Inc." and each outstanding share of Pride common stock (including
each Pride share issued in the Marine merger) will be converted into one share
of common stock of New Pride. The merger agreement is more fully described in
the accompanying joint proxy statement/prospectus.
Holders of record of Pride common stock at the close of business on ,
2001 are entitled to notice of, and to vote at, the special meeting and any
adjournment or postponement thereof. The approval of the merger agreement will
require the affirmative vote of the holders of at least a majority of the shares
of Pride common stock present, in person or by proxy, at the special meeting. If
your shares are held in an account at a brokerage firm or bank, you must
instruct them on how to vote your shares in order for them to be voted.
YOUR BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE TERMS AND
CONDITIONS OF THE MERGER AGREEMENT AND HAS RESOLVED THAT THE MERGER AGREEMENT
AND THE MERGERS ARE ADVISABLE TO AND IN THE BEST INTERESTS OF PRIDE AND ITS
SHAREHOLDERS. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT,
INCLUDING THE ISSUANCE OF PRIDE COMMON STOCK TO THE SHAREHOLDERS OF MARINE.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, DATE AND RETURN YOUR PROXY CARD IN THE ENCLOSED
ENVELOPE PROMPTLY OR AUTHORIZE THE INDIVIDUALS NAMED ON YOUR PROXY CARD TO VOTE
YOUR SHARES.
By order of the Board of Directors,
/s/ ROBERT RANDALL
ROBERT W. RANDALL
Secretary
, 2001
5847 San Felipe, Suite 3300
Houston, Texas 77057
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JOINT PROXY STATEMENT/PROSPECTUS DATED , 2001
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT PRIDE AND MARINE THAT IS NOT INCLUDED IN OR
DELIVERED WITH THIS DOCUMENT. SEE "WHERE YOU CAN FIND MORE INFORMATION"
BEGINNING ON PAGE 92 FOR A LISTING OF DOCUMENTS INCORPORATED BY REFERENCE. PRIDE
DOCUMENTS ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, UPON
REQUEST DIRECTED TO INVESTOR RELATIONS, PRIDE INTERNATIONAL, INC., 5847 SAN
FELIPE, SUITE 3300, HOUSTON, TEXAS 77057, TELEPHONE (713) 789-1400. MARINE
DOCUMENTS ARE AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, UPON
REQUEST DIRECTED TO INVESTOR RELATIONS, MARINE DRILLING COMPANIES, INC., ONE
SUGAR CREEK BOULEVARD, SUITE 600, SUGAR LAND, TEXAS 77478, (281) 243-3000. IF
YOU WOULD LIKE TO REQUEST ANY DOCUMENTS, PLEASE DO SO BY , 2001 IN
ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETINGS.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MERGERS..................... 1
SUMMARY..................................................... 3
RISK FACTORS................................................ 12
Risks Relating to the Mergers............................. 12
Risk Factors Relating to New Pride's Business Following
the Mergers............................................ 14
FORWARD-LOOKING INFORMATION................................. 17
THE SPECIAL MEETINGS........................................ 18
Joint Proxy Statement/Prospectus.......................... 18
Date, Time and Place of the Special Meetings.............. 18
Purpose of the Special Meetings........................... 18
Record Date; Voting at the Meeting; Quorum................ 18
Required Vote............................................. 18
Effect of Abstentions and Non-Votes....................... 19
Action to Be Taken under the Proxy........................ 19
Proxy Solicitation........................................ 20
THE MERGERS................................................. 21
Background of the Mergers................................. 21
Pride's Reasons for the Mergers........................... 24
Recommendation of Pride's Board of Directors.............. 27
Marine's Reasons for the Merger........................... 27
Recommendation of Marine's Board of Directors............. 28
Opinion of Salomon Smith Barney Inc....................... 29
Opinion of Morgan Stanley & Co. Incorporated.............. 34
Interests of Certain Persons in the Mergers............... 39
New Pride After the Mergers............................... 41
Conversion of Stock Options and Assumption of Stock
Plans.................................................. 42
Employee Benefit Matters.................................. 42
Exchange of Marine and Pride Common Stock Certificates for
New Pride Common Stock Certificates.................... 43
Dividends................................................. 43
Accounting Treatment and Considerations................... 43
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Certain United States Federal Income Tax Consequences..... 44
Regulatory Matters........................................ 46
Federal Securities Laws Consequences; Resale
Restrictions........................................... 47
Rights of Dissenting Shareholders......................... 47
New York Stock Exchange Listing........................... 47
THE MERGER AGREEMENT........................................ 48
Marine Merger............................................. 48
Reincorporation Merger.................................... 48
Covenants................................................. 48
Representations and Warranties............................ 54
Conditions to the Completion of the Mergers............... 55
Termination of the Merger Agreement....................... 56
Termination Fees and Expense Reimbursement................ 58
Amendment................................................. 58
RECIPROCAL STOCK OPTION AGREEMENTS.......................... 59
BUSINESS OF PRIDE........................................... 61
BUSINESS OF MARINE.......................................... 61
MARKET PRICE AND DIVIDEND INFORMATION....................... 62
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL
STATEMENTS................................................ 63
DESCRIPTION OF CAPITAL STOCK OF NEW PRIDE................... 70
COMPARISON OF RIGHTS OF SHAREHOLDERS........................ 75
EXPERTS..................................................... 90
INDEPENDENT ACCOUNTANTS..................................... 90
LEGAL MATTERS............................................... 91
WHERE YOU CAN FIND MORE INFORMATION......................... 91
Annex A -- Agreement and Plan of Merger
Annex B -- Opinion of Salomon Smith Barney Inc.
Annex C -- Opinion of Morgan Stanley & Co. Incorporated
Annex D -- New Pride Certificate of Incorporation
Annex E -- New Pride By-Laws
Annex F -- Pride Stock Option Agreement
Annex G -- Marine Stock Option Agreement
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QUESTIONS AND ANSWERS ABOUT THE MERGERS
Q. WHY ARE PRIDE AND MARINE PROPOSING THE MERGERS?
A. The boards of directors of Pride and Marine believe that the combined
company, as a larger entity with a substantially larger equity market
capitalization and a strong balance sheet, will command a higher valuation
in the stock market and be a stronger competitor than either company would
be on a stand-alone basis.
Q. PLEASE DESCRIBE THE PROPOSED MERGERS.
A. Two mutually dependent mergers are proposed. The first merger, which we
refer to as the "Marine merger," merges Marine into a subsidiary of Pride,
and converts Marine shares into Pride shares. The second merger, which we
refer to as the "reincorporation merger" and which will occur immediately
after the Marine merger, changes the state of incorporation of the combined
company from Louisiana to Delaware, and converts Pride (Louisiana) shares
into New Pride (Delaware) shares. Taken together, the mergers result in a
tax-free exchange of Marine and Pride shares for shares in New Pride on a
one-for-one basis.
The surviving company will be named Pride International, Inc. and the pro
forma ownership will be approximately 56% former shareholders of Pride and
44% former shareholders of Marine.
Q. WHAT WILL I RECEIVE AS A RESULT OF THE MERGERS?
A. Pride and Marine shareholders will each receive one share of New Pride
common stock for each share of Pride or Marine common stock they own at the
time of the mergers. The New Pride common stock will be listed on the New
York Stock Exchange under Pride's existing symbol "PDE."
Q. WHEN DO YOU EXPECT THE MERGERS TO BE COMPLETED?
A. We expect to complete the mergers as soon as possible following receipt of
shareholder and regulatory approvals.
Q. WHAT DO I NEED TO DO TO VOTE?
A. Both companies' shareholder meetings will take place on , 2001.
After carefully reading and considering the information contained in this
joint proxy statement/prospectus and the documents incorporated by
reference, please indicate on the enclosed proxy card how you want to vote.
Mail your signed proxy card in the enclosed return envelope as soon as
possible, so that your shares may be represented at your shareholder
meeting.
Q. WHAT VOTE DOES MY BOARD OF DIRECTORS RECOMMEND?
A. The Pride board of directors unanimously recommends that Pride's
shareholders vote in favor of approval of the merger agreement.
The Marine board of directors unanimously recommends that Marine's
shareholders vote in favor of approval of the merger agreement.
Q. WHAT SHOULD I DO IF I WANT TO CHANGE MY VOTE?
A. You can change your vote at any time before your proxy card is voted at
your shareholder meeting. You can do this in one of three ways:
- you can send a written notice stating that you would like to revoke your
proxy;
- you can complete and submit a later dated proxy card; or,
- you can attend your meeting and vote in person.
However, your attendance alone will not revoke your proxy. If you have
instructed a broker to vote your shares, you must follow the procedure
provided by your broker to change those instructions.
Q. WHAT IF I PLAN TO ATTEND THE SHAREHOLDER MEETING IN PERSON?
A. To ensure that your vote is counted, we recommend that you send in your
proxy anyway. You may still attend the meeting and vote in person.
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Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME WITHOUT MY INSTRUCTIONS?
A. We recommend that you contact your broker. Your broker can give you
directions on how to instruct the broker to vote your shares. Your broker
may not vote your shares unless the broker receives appropriate
instructions from you.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES?
A. No. Please do not send in any Marine or Pride stock certificates until you
receive written instructions after the mergers are completed.
Q. DOES NEW PRIDE INTEND TO PAY DIVIDENDS ON ITS COMMON STOCK?
A. No. New Pride does not currently intend to pay dividends on its common
stock. Neither Pride nor Marine currently pays dividends on its common
stock.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. PRIDE'S SHAREHOLDERS should contact the following:
Pride International, Inc.
5847 San Felipe, Suite 3300
Houston, TX 77057
Attention: Investor Relations
Phone: (713) 789-1400
MARINE'S SHAREHOLDERS should contact the following:
Marine Drilling Companies, Inc.
One Sugar Creek Center Boulevard,
Suite 600
Sugar Land, Texas 77478
Attention: Investor Relations
Phone: (281) 243-3000
ANY SHAREHOLDER may contact Pride's and Marine's proxy solicitor:
Georgeson Shareholder Communications Inc.
17 State Street
New York, NY 10004
Banks and Brokers Call Collect:
All Others Call Toll Free:
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SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus. To understand the mergers fully and for a more complete
description of the legal terms of the mergers, you should carefully read this
entire joint proxy statement/prospectus, including the annexes and the other
documents to which we have referred you in "Where You Can Find More Information"
on page 91. We have included page references in this summary to direct you to
more complete descriptions of the topics presented in this summary.
THE COMPANIES
PRIDE INTERNATIONAL, INC.
5847 San Felipe, Suite 3300
Houston, Texas 77057
Phone: (713) 789-1400
Pride is a leading international provider of contract drilling and related
services, operating both offshore and on land. Pride operates a global fleet of
305 rigs, including two ultra-deepwater drillships, nine semisubmersible rigs,
19 jackup rigs, five tender-assisted rigs, three barge rigs, 21 offshore
platform rigs and 246 land-based drilling and workover rigs. Pride operates in
more than 20 countries and marine provinces. For further information on Pride,
see "Business of Pride" on page 61.
MARINE DRILLING COMPANIES, INC.
One Sugar Creek Center Boulevard, Suite 600
Sugar Land, Texas 77478
Phone: (281) 243-3000
Marine engages in offshore contract drilling of oil and gas wells for
independent and major oil and gas companies. Operations are conducted in the
U.S. Gulf of Mexico and internationally. Marine owns and operates a fleet of 17
offshore drilling rigs consisting of five independent leg jack-up units, four of
which have a cantilever feature, ten mat supported jack-up units, five of which
have a cantilever feature, and two semi-submersible units. Additionally, Marine
owns one independent leg jack-up rig configured as an accommodation unit.
Currently, fifteen of Marine's rigs are located in the U.S. Gulf of Mexico, and
the three remaining rigs are in Southeast Asia, the North Sea and India. For
further information on Marine, see "Business of Marine" on page 61.
AM MERGER, INC.
5847 San Felipe, Suite 3300
Houston, Texas 77057
Phone: (713) 789-1400
AM Merger, Inc. is a Delaware corporation and wholly owned subsidiary of
Pride recently formed for the purpose of effecting the Marine merger.
PM MERGER, INC.
5847 San Felipe, Suite 3300
Houston, Texas 77057
Phone: (713) 789-1400
PM Merger, Inc. is a Delaware corporation and wholly owned subsidiary of
Pride recently formed for the purpose of effecting the reincorporation merger.
At the effective time of the reincorporation merger, PM Merger, Inc. will be
renamed Pride International, Inc. We refer to PM Merger, Inc., which will be the
surviving corporation of the reincorporation merger, as "New Pride."
THE STRUCTURE OF THE MERGERS
Two mutually dependent mergers are proposed. The first merger is a merger
of Marine into AM Merger, Inc., a newly formed subsidiary of Pride, with the
surviving corporation to be renamed Pride Marine, Inc. This Marine merger will
cause Marine to become a subsidiary of Pride and Marine common stock to be
converted into Pride common stock. The second merger is a merger of Pride into
New Pride, with New Pride as the surviving corporation. This reincorporation
merger will have the effect of changing the state of incorporation of the
combined company from Louisiana to Delaware, and converting Pride (Louisiana)
common stock, including common stock issued to former Marine shareholders, into
New Pride (Delaware) common stock. Taken together, the mergers result in a
tax-free exchange of Marine and Pride common stock for common stock in New Pride
on a one-for-one basis.
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THE SPECIAL MEETINGS (PAGE 18)
Special Meeting of Pride Shareholders. The Pride special meeting will be
held at on , 2001, at .
Special Meeting of Marine Shareholders. The Marine special meeting will be
held at on , 2001, at .
RECOMMENDATION OF THE BOARDS OF DIRECTORS (PAGES 27 AND 28)
To the Pride shareholders: The Pride board of directors believes that the
mergers are fair to you and in your best interest and unanimously voted to
approve the merger agreement and unanimously recommends that you vote FOR the
approval of the merger agreement, including the issuance of Pride common stock
in the Marine merger.
To the Marine shareholders: The Marine board of directors believes that
the mergers are fair to you and in your best interest and unanimously voted to
approve the merger agreement and unanimously recommends that you vote FOR the
approval of the merger agreement.
OPINIONS OF FINANCIAL ADVISORS (PAGES 29 AND 34)
Opinion of Pride's financial advisor. In deciding to approve the mergers,
the Pride board of directors received and considered the opinion of its
financial advisor, Salomon Smith Barney Inc., that, as of the date of the
opinion, the exchange ratio (taking into account both the Marine merger and the
reincorporation merger) is fair, from a financial point of view, to the holders
of Pride common stock on that date. The full text of the written opinion of
Salomon Smith Barney is attached as Annex B. Pride encourages you to read the
opinion carefully, as well as the description of the analyses and assumptions
upon which the opinion was based.
Opinion of Marine's financial advisor. In deciding to approve the mergers,
the Marine board of directors received and considered the opinion of its
financial advisor, Morgan Stanley & Co. Incorporated, that, as of the date of
the opinion, the merger consideration to be received by the holders of Marine
common stock is fair from a financial point of view to the holders of Marine
common stock. The full text of the written opinion of Morgan Stanley is attached
as Annex C. Marine encourages you to read the opinion carefully, as well as the
description of the analyses and assumptions upon which the opinion was based.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS (PAGE 39)
In considering the boards' recommendations, shareholders should be aware
that some officers and directors of Pride and Marine may have interests in the
mergers that may be different from, or in addition to, those of shareholders
generally, including the following:
- Jan Rask, who is currently president and chief executive officer of
Marine, will enter into a new two-year employment agreement with New
Pride as managing director for acquisitions and special projects;
- Sixteen Marine officers and key employees, including Jan Rask, have
employment or severance agreements with change of control provisions that
will be triggered by the mergers, entitling each of them to receive a
severance benefit of one-half to three times their annual salary and
target bonus if their employment is terminated within specified periods
of up to two years after the mergers;
- Outstanding options to purchase Marine common stock and restricted common
stock, including options and restricted shares held by officers and
directors of Marine, will become vested and the options will be
exercisable upon completion of the mergers;
- Four directors of Marine and four directors of Pride will become
directors of New Pride following the mergers;
- The current directors of Pride and Marine (other than Mr. Rask) who do
not become directors of New Pride will serve as advisory directors of New
Pride;
- Outstanding options to purchase Pride common stock held by nonemployee
directors of Pride became fully exercisable upon approval of the mergers
by the Pride board of directors; and
- Pride and Marine officers and directors will be indemnified by Pride and
New Pride as a result of the mergers.
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OVERVIEW OF THE MERGER AGREEMENT (PAGE 48)
The merger agreement is attached as Annex A to this joint proxy
statement/prospectus. The merger agreement is the document that governs the
mergers. You are urged to read this document carefully.
Conditions to the Completion of the Mergers (page 55)
Each of Pride's and Marine's obligation to complete the mergers is subject
to the satisfaction or waiver of a number of conditions, including the
following:
- approval by Pride's and Marine's shareholders of the merger agreement;
- the receipt by Pride and Marine from their respective tax counsel of
opinions that, for U.S. federal income tax purposes, the Marine merger
and the reincorporation merger will qualify as tax-free reorganizations
and no gain or loss will be recognized by the shareholders of Pride or
Marine as a result of the mergers;
- expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
- absence of any regulation, statute, or other action by any U.S. federal
or state or other governmental authority which prohibits the completion
of the mergers substantially on the terms of the merger agreement; and
- absence of any decree, order or injunction of a U.S. federal or state or
other court which prohibits the completion of the mergers.
Termination of the Merger Agreement (page 56)
The merger agreement may be terminated by the mutual written consent of
Marine and Pride. In addition, either Marine or Pride may terminate the merger
agreement if:
- the mergers have not been completed by December 31, 2001;
- Pride's shareholders fail to approve the merger agreement;
- Marine's shareholders fail to approve the merger agreement; or
- a court or governmental order, decree, ruling or other action permanently
prohibits the mergers and such an order, decree, ruling or other action
shall have become final and nonappealable.
The merger agreement may also be terminated by Pride if:
- Marine breaches any representation, warranty, covenant or agreement that
would give rise to a failure of a condition to the mergers and the breach
is not curable or is not cured within 30 days after receipt of a notice
of the breach;
- Marine's board (1) withdraws or materially modifies its approval or
recommendation of the mergers or (2) recommends a competing acquisition
proposal for Marine; or
- subject to various conditions, including giving prior written notice to
Marine and the payment of a $50 million termination fee, Pride executes
an agreement regarding an alternative transaction after the Pride board
determines that it is inconsistent with its fiduciary duties to proceed
with the mergers in the face of a superior alternative acquisition
proposal.
The merger agreement may also be terminated by Marine if:
- Pride breaches any representation, warranty, covenant or agreement that
would give rise to a failure of a condition to the mergers and the breach
is not curable or is not cured within 30 days after receipt of a notice
of the breach;
- Pride's board (1) withdraws or materially modifies its approval or
recommendation of the mergers or (2) recommends a competing acquisition
proposal for Pride; or
- subject to various conditions, including giving prior written notice to
Pride and the payment of a $50 million termination fee, Marine executes
an agreement regarding an alternative transaction after the Marine board
determines that it would be inconsistent with its fiduciary duties to
proceed
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with the mergers in the face of a superior alternative acquisition
proposal.
Termination Fees and Expense Reimbursement (page 58)
The merger agreement requires Pride to pay Marine a $50 million fee if:
- the merger agreement is terminated because Pride's shareholders do not
approve the merger agreement after the public announcement of a competing
acquisition proposal for Pride;
- the merger agreement is terminated by Marine because Pride's board
withdraws or materially modifies its approval or recommendation of the
mergers; or
- the merger agreement is terminated by Pride in order to permit Pride to
enter into an agreement concerning a superior alternative acquisition
proposal.
The merger agreement requires Marine to pay Pride a $50 million fee if:
- the merger agreement is terminated because Marine's shareholders do not
approve the merger agreement after the public announcement of a competing
acquisition proposal for Marine;
- the merger agreement is terminated by Pride because Marine's board
withdraws or materially modifies its approval or recommendation of the
mergers; or
- the merger agreement is terminated by Marine in order to enter into an
agreement concerning a superior alternative acquisition proposal.
The merger agreement requires Pride to pay Marine a fee of $5 million to
reimburse Marine for its costs and expenses if the merger agreement is
terminated because Pride's shareholders do not approve the merger agreement in
circumstances in which the $50 million fee is not payable.
The merger agreement requires Marine to pay Pride a fee of $5 million to
reimburse Pride for its costs and expenses if the merger agreement is terminated
because Marine's shareholders do not approve the merger agreement in
circumstances in which the $50 million fee is not payable.
"No Solicitation" Provisions (page 53)
The merger agreement contains provisions prohibiting either party from
seeking an alternative transaction. These "no solicitation" provisions prohibit
either party from taking any action to solicit a competing acquisition proposal
as described on pages 53 through 54. The merger agreement does not, however,
prohibit either party or its board of directors from considering, and
potentially recommending, an unsolicited written superior proposal from a third
party.
RECIPROCAL STOCK OPTION AGREEMENTS (PAGE 59)
Each of Pride and Marine has granted the other company an option to
purchase up to 19.9% of its outstanding shares. An option becomes exercisable if
the grantee becomes entitled to receive the $50 million termination fee payable
by the grantor of the option under the merger agreement. The grantee's profit
under each stock option, together with the amount of any termination fee, is
capped at $50 million.
REGULATORY MATTERS (PAGE 46)
Pride and Marine made appropriate filings in June 2001 under the U.S.
Hart-Scott-Rodino Antitrust Improvements Act. Certain other countries in which
Pride and Marine have operations may also review the mergers under their
antitrust laws. It is anticipated that all required regulatory clearances will
have been obtained prior to the special meetings of Pride's and Marine's
shareholders; however, such clearances do not have the effect of conferring
immunity against legal or regulatory challenges against the mergers.
ACCOUNTING TREATMENT AND CONSIDERATIONS (PAGE 43)
The mergers are intended to qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting,
the assets and liabilities of Pride and Marine will be carried forward to the
balance sheet of the combined company at their recorded carrying amounts,
results of operations of the combined company will include income of Pride and
Marine for the entire fiscal period in which the combination occurs, and
historical results of operations of
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the separate companies for fiscal years prior to the mergers will be combined
and reported as the results of operations of the combined company.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (PAGE 44)
Pride's Shareholders
We expect that the Pride shareholders' exchange of Pride common stock for
shares of New Pride generally will not cause Pride shareholders to recognize any
gain or loss for U.S. federal income tax purposes.
Marine's Shareholders
We expect that the Marine shareholders' exchange of Marine shares for Pride
shares and the subsequent exchange of Pride shares for shares of New Pride
generally will not cause Marine shareholders to recognize any gain or loss for
U.S. federal income tax purposes.
THIS TAX TREATMENT MAY NOT APPLY TO SOME SHAREHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGERS FOR A SHAREHOLDER MAY BE COMPLICATED. THE
CONSEQUENCES WILL DEPEND ON EACH SHAREHOLDER'S SPECIFIC SITUATION AND ON
VARIABLES NOT WITHIN THE CONTROL OF PRIDE, MARINE OR NEW PRIDE. EACH SHAREHOLDER
SHOULD CONSULT A TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE MERGERS,
INCLUDING ANY ESTATE, GIFT, STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES OF THE
MERGERS.
NO APPRAISAL RIGHTS
Under applicable law, none of the shareholders of Pride or Marine has any
right to an appraisal of the value of their shares in connection with the
mergers.
LISTING OF NEW PRIDE SHARES (PAGE 47)
An application has been filed to list the shares of New Pride common stock
on the New York Stock Exchange under the symbol "PDE."
COMPARISON OF RIGHTS OF SHAREHOLDERS (PAGE 75)
The rights of Marine common shareholders currently are governed by the
Texas Business Corporation Act and Marine's articles of incorporation and
bylaws. The rights of Pride common shareholders currently are governed by the
Louisiana Business Corporation Law and Pride's articles of incorporation and
bylaws. The rights of New Pride's common stockholders will be governed by the
Delaware General Corporation Law and by New Pride's certificate of incorporation
and bylaws, which are attached hereto as Annexes D and E. See pages 75 through
90 for more specific information.
MARKET PRICE AND DIVIDEND INFORMATION (PAGE 62)
Pride common stock and Marine common stock are both traded on the New York
Stock Exchange. On May 23, 2001, the last trading day before Pride and Marine
announced the mergers, Pride common stock closed at $32.65 per share and Marine
common stock closed at $27.72 per share. On , 2001, the most
recent practicable date before the date of this document, Pride common stock
closed at $ . per share and Marine common stock closed at $ . per
share. The market price of both stocks will fluctuate before the mergers, but
the exchange ratio is fixed. You should obtain current share price quotations
for Pride common stock and Marine common stock.
Neither Pride nor Marine has paid any cash dividends on its common stock
since becoming a publicly held corporation. New Pride does not initially intend
to pay dividends on its common stock. In addition, the ability of New Pride to
pay cash dividends in the future will be restricted by the covenants related to
debt that it will assume from Pride. The desirability of paying such future
dividends could also be materially affected by U.S. and foreign tax
considerations.
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF PRIDE
The following table sets forth summary historical consolidated financial
information of Pride as of and for each of the years in the five-year period
ended December 31, 2000 and as of and for each of the three-month periods ended
March 31, 2001 and 2000.
Such data have been derived from, and should be read in conjunction with,
the audited consolidated financial statements and other financial information
contained in Pride's Annual Report for the year ended December 31, 2000 and the
unaudited consolidated interim financial information contained in Pride's
Quarterly Reports on Form 10-Q for the three months ended March 31, 2001 and
2000, including the notes thereto, incorporated by reference in this joint proxy
statement/prospectus.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF
OPERATIONS DATA
Revenues............. $ 270,354 $ 170,083 $ 909,007 $ 619,385 $ 835,563 $ 699,788 $407,174
Earnings (loss) from
operations......... 38,494 11,321 93,676 (33,714) 140,963 108,385 40,142
Net earnings (loss)
before
extraordinary
item............... 11,962 (6,893) 736 (55,767) 77,517 103,995 22,728
Net earnings
(loss)............. 11,962 (6,893) 736 (51,883) 77,517 103,995 22,728
Net earnings (loss)
per share before
extraordinary item
Basic.............. $ 0.17 $ (0.11) $ 0.01 $ (1.06) $ 1.55 $ 2.42 $ 0.85
Diluted............ $ 0.16 $ (0.11) $ 0.01 $ (1.06) $ 1.39 $ 2.16 $ 0.77
Net earnings (loss)
per share after
extraordinary item
Basic.............. $ 0.17 $ (0.11) $ 0.01 $ (0.99) $ 1.55 $ 2.42 $ 0.85
Diluted............ $ 0.16 $ (0.11) $ 0.01 $ (0.99) $ 1.39 $ 2.16 $ 0.77
BALANCE SHEET DATA
(AT END OF PERIOD)
Working capital...... $ 192,800 $ 188,997 $ 94,392 $ 132,671 $ 64,617 $ 103,733 $ 62,722
Property and
equipment, net..... 2,596,725 1,919,179 2,020,123 1,893,680 1,725,787 1,171,647 375,249
Total assets......... 3,415,405 2,471,578 2,676,928 2,388,677 2,177,507 1,541,501 542,062
Long-term debt and
lease obligations,
net of current
portion............ 1,659,839 1,160,099 1,162,320 1,148,886 970,475 523,875 187,008
Shareholders'
equity............. 1,101,176 891,187 958,096 825,269 763,402 685,157 201,797
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF MARINE
The following table sets forth summary historical consolidated financial
information of Marine as of and for each of the years in the five-year period
ended December 31, 2000 and as of and for each of the three-month periods ended
March 31, 2001 and 2000.
Such data have been derived from, and should be read in conjunction with,
the audited consolidated financial statements and other financial information
contained in Marine's Annual Report for the year ended December 31, 2000 and the
unaudited consolidated interim financial information contained in Marine's
Quarterly Reports on Form 10-Q for the three months ended March 31, 2001 and
2000, including the notes thereto, incorporated by reference in this joint proxy
statement/prospectus.
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA
Revenues..................... $ 84,874 $ 52,480 $264,031 $115,406 $228,015 $190,257 $110,329
Earnings (loss) from
operations................. 37,729 10,605 86,961 (4,329) 93,371 87,608 31,485
Net earnings (loss).......... 23,959 4,778 48,265 (6,130) 60,821 58,380 20,670
Net earnings (loss) per share
Basic...................... $ 0.41 $ 0.08 $ 0.83 $ (0.11) $ 1.16 $ 1.13 $ 0.46
Diluted.................... $ 0.40 $ 0.08 $ 0.81 $ (0.11) $ 1.15 $ 1.11 $ 0.45
BALANCE SHEET DATA (AT END OF
PERIOD)
Working capital.............. $ 33,028 $ 20,843 $ 30,992 $ 30,816 $ 6,699 $ 55,472 $ 96,671
Property and equipment,
net........................ 592,396 615,137 601,242 607,840 431,629 260,487 148,737
Total assets................. 651,020 658,913 660,705 666,142 475,684 334,182 254,947
Long-term debt, net of
current portion............ 32,000 150,000 75,000 180,000 50,000 -- 9,000
Shareholders' equity......... 513,150 438,108 486,336 412,745 361,588 295,742 221,733
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UNAUDITED PRO FORMA COMBINED SUMMARY FINANCIAL DATA
The following table sets forth unaudited pro forma combined summary
financial data which are presented to give effect to the mergers under the
pooling of interests method of accounting. The income statement data for the
three-month period ended March 31, 2001 and for each of the years in the three-
year period ended December 31, 2000 have been prepared assuming that the mergers
were consummated on January 1, 1998. The balance sheet data assume that the
mergers were consummated on March 31, 2001.
The unaudited pro forma combined summary financial data do not purport to
represent what the financial position or results of operations of New Pride
actually would have been had the mergers occurred on the dates indicated or to
project New Pride's financial position or results of operations for any future
date or period. Furthermore, the unaudited pro forma combined summary financial
data do not reflect any cost savings or other synergies which may result from
the mergers or any other changes which may occur as the result of
post-combination activities and other matters. In addition, the unaudited pro
forma combined summary statements of operations data exclude estimates of
non-recurring charges directly attributable to the mergers that will be charged
to operations in the quarter in which the mergers are actually consummated.
The unaudited pro forma combined summary financial data should be read in
conjunction with the historical consolidated financial statements of Pride and
Marine, including the notes thereto, incorporated by reference in this joint
proxy statement/prospectus and the unaudited condensed pro forma combined
financial statements, including the notes thereto, contained elsewhere herein.
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------
2001 2000 1999 1998
--------------- ---------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA
Revenues....................................... $355,228 $1,173,038 $734,791 $1,063,578
Earnings (loss) from operations................ 76,223 180,637 (38,043) 234,334
Net earnings (loss) before extraordinary
item......................................... 35,921 49,001 (61,897) 138,338
Net earnings (loss)............................ 35,921 49,001 (58,013) 138,338
Net earnings (loss) per share before extraordinary item
Basic........................................ $ 0.28 $ 0.40 $ (0.57) $ 1.35
Diluted...................................... $ 0.26 $ 0.39 $ (0.57) $ 1.28
Net earnings (loss) per share after
extraordinary item
Basic........................................ $ 0.28 $ 0.40 $ (0.54) $ 1.35
Diluted...................................... $ 0.26 $ 0.39 $ (0.54) $ 1.28
MARCH 31, 2001
--------------
(IN THOUSANDS)
BALANCE SHEET DATA
Working capital............................................. $ 204,828
Property and equipment, net................................. 3,189,121
Total assets................................................ 4,066,425
Long-term debt and lease obligations, net of current
portion................................................... 1,691,839
Shareholders' equity........................................ 1,593,326
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COMPARATIVE PER SHARE DATA
The following table sets forth selected historical per share data for Pride
and Marine and selected unaudited pro forma combined per share data after giving
effect to the proposed mergers under the pooling of interests method of
accounting. The pro forma combined earnings per share data have been prepared
assuming that the mergers were consummated on January 1, 1998. The pro forma
combined book value per share data assume that the mergers were consummated on
the last day of each period presented. The information presented in the table is
derived from and should be read in conjunction with the unaudited condensed pro
forma combined financial statements, including the notes thereto, included in
this joint proxy statement/prospectus, and the separate audited and unaudited
financial statements of Pride and Marine, including the notes thereto,
incorporated by reference herein.
Pro forma amounts are not necessarily indicative of results of operations
or financial position that would have resulted had the mergers been consummated
on the dates indicated and should not be construed as being indicative of future
performance.
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -----------------------
2001 2000 1999 1998
------------ ------ ------ -----
PRIDE
Earnings (loss) per share before extraordinary item:
Basic................................................ $ 0.17 $ 0.01 $(1.06) $1.55
Diluted.............................................. 0.16 0.01 (1.06) 1.39
Earnings (loss) per share after extraordinary item:
Basic................................................ 0.17 0.01 (0.99) 1.55
Diluted.............................................. 0.16 0.01 (0.99) 1.39
Book value per share at end of period.................. 15.23 14.15
MARINE
Earnings (loss) per share:
Basic................................................ $ 0.41 $ 0.83 $(0.11) $1.16
Diluted.............................................. 0.40 0.81 (0.11) 1.15
Book value per share at end of period.................. 8.74 8.30
PRO FORMA COMBINED (UNAUDITED)
Earnings (loss) per share before extraordinary item:
Basic................................................ $ 0.28 $ 0.40 $(0.57) $1.35
Diluted.............................................. 0.26 0.39 (0.57) 1.28
Earnings (loss) per share after extraordinary item:
Basic................................................ 0.28 0.40 (0.54) 1.35
Diluted.............................................. 0.26 0.39 (0.54) 1.28
Book value per share at end of period.................. 12.16 11.27
No cash dividends were paid by Pride or Marine for any of the periods presented.
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RISK FACTORS
In addition to the other information contained in this joint proxy
statement/prospectus and the documents incorporated by reference, you should
carefully consider the following risk factors before you decide how to vote on
the proposed mergers.
RISKS RELATING TO THE MERGERS
We may not achieve the expected benefits of the mergers.
The mergers are intended to achieve certain specific goals. See "The
Mergers -- Pride's Reasons for the Mergers" and "The Mergers -- Marine's Reasons
for the Mergers." The likelihood of achieving those goals represents the
subjective judgment of Pride's and Marine's managements and boards of directors.
Some of those goals may not be achieved or, if achieved, may not be achieved in
the time frame in which they are expected. Whether New Pride will actually
realize these anticipated benefits depends on future events and circumstances
beyond the control of New Pride, including the following:
- A decline in economic conditions in general or in New Pride's industry in
particular could cause New Pride to fail to meet the expectations of
Pride's and Marine's boards of directors for revenue, earnings and cash
flow growth.
- Differing opinions of securities analysts and investors regarding the
prospects for New Pride's business and its future financial condition
could prevent New Pride from enjoying the hoped-for increase in its stock
market valuation multiples relative to the stock market valuation
multiples of its smaller competitors.
- Circumstances could prevent New Pride from reducing its total
indebtedness or improving its net debt position.
- New Pride may be unable to attain and sustain the anticipated improvement
in the credit ratings assigned by credit rating agencies with respect to
New Pride's publicly traded debt, and it may not be able to achieve a
lower cost of borrowing than Pride.
- The other risk factors discussed below may prevent the achievement of the
believed advantages of the mergers.
Because of these and other factors, it is possible that New Pride will not
realize some or all of the benefits of the mergers that formed the basis for the
recommendations of Pride's and Marine's boards of directors that you approve the
merger agreement.
The value of the New Pride common stock to be received in the mergers will
fluctuate.
The merger agreement does not contain any provisions for adjustment of the
exchange ratio and does not provide any right of termination by either party if
there are fluctuations in the market price of either Pride or Marine stock
before the completion of the mergers. Because no adjustment will be made to the
exchange ratio, the value of the consideration to be received by shareholders in
connection with the mergers cannot be determined until the closing and will
depend upon the market price of New Pride common stock upon completion of the
mergers. Variations in the trading prices of Pride and Marine stock may result
from:
- changes in the business or results of operations of Pride or Marine;
- the prospects for the post-merger operations of New Pride;
- the timing of the mergers;
- general stock market and economic conditions; and
- other factors beyond the control of Pride or Marine, including those
described elsewhere in this "Risk Factors" section.
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Shareholders are urged to obtain current market quotations for both Pride
shares and Marine shares.
The price of New Pride common stock may decline as a result of the mergers.
Assuming the mergers are completed, the number of issued and freely
tradable shares of New Pride common stock will increase by nearly 80% when
compared to the current number of shares of Pride common stock. If holders of a
significant number of these new shares elect not to retain their shares, the
market price of New Pride's shares may vary sharply or decline for reasons
unrelated to the financial performance of New Pride.
New Pride may face difficulties in integrating the operations of Pride and
Marine.
Before the mergers, Pride and Marine operated separately. New Pride's
management team will not have had experience with running the combined business.
New Pride may not be able to integrate the operations of Pride and Marine
without a loss of employees, customers or suppliers, a loss of revenues, an
increase in operating or other costs or other difficulties. In addition, New
Pride may not be able to realize the operating efficiencies, synergies, cost
savings or other benefits expected from the mergers. Any unexpected costs or
delays incurred in connection with the integration could have an adverse effect
on New Pride's business, results of operations or financial condition.
New Pride will be subject to anti-takeover provisions.
Delaware law and New Pride's certificate of incorporation and bylaws
contain provisions that could prevent or delay an acquisition of New Pride by
means of a tender offer, a proxy contest or otherwise. These provisions may also
adversely affect prevailing market prices for New Pride's shares. On the whole,
these provisions are more restrictive than those to which Marine is currently
subject and less restrictive than those to which Pride is currently subject.
These provisions, among other things:
- provide that the New Pride board may designate the terms of any new
series of preferred stock;
- provide that any action required or permitted to be taken by the
stockholders must be taken at a duly called annual or special meeting of
stockholders and not by written consent, and that special meetings of the
stockholders may be called only by the board of directors, the chairman
of the board or the president;
- in accordance with Section 203 of the Delaware General Corporation Law,
limit transactions between New Pride and an "interested stockholder,"
which is generally defined as a stockholder that, together with its
affiliates and associates, beneficially, owns 15% or more of New Pride's
outstanding voting shares.
As is currently the case with Pride and Marine, New Pride also will have a
stockholder rights plan that will cause substantial dilution to any person or
group that attempts to acquire New Pride without the approval of its board of
directors. See "Description of Capital Stock of New Pride" beginning on page 70
and "Comparison of Rights of Shareholders" beginning on page 75.
Directors of Marine and Pride have conflicts of interest in recommending that
you vote in favor of approval of the merger agreement.
A number of the officers and directors of Marine and Pride have employment
or severance agreements or benefit arrangements that provide them with interests
in the mergers that are different from, or in addition to, your interests as
shareholders. See "The Mergers -- Interests of Certain Persons in the Mergers."
The receipt of compensation, continued employment, or other benefits in the
mergers, including the vesting of stock options and restricted stock, and the
continuation of indemnification arrangements for current directors of Marine and
Pride following completion of the mergers, should be considered in evaluating
these directors' recommendation that you vote in favor of the approval of the
merger agreement.
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RISK FACTORS RELATING TO NEW PRIDE'S BUSINESS FOLLOWING THE MERGERS
New Pride's business will depend on the level of activity in the oil and gas
industry, which is significantly affected by volatile oil and gas prices.
The profitability of New Pride's operations will depend upon conditions in
the oil and gas industry and, specifically, the level of exploration and
production expenditures of oil and gas company customers. The oil and gas
industry is cyclical. The demand for contract drilling and related services is
directly influenced by many factors beyond New Pride's control, including:
- oil and gas prices and expectations about future prices;
- the cost of producing and delivering oil and gas;
- government regulations;
- local and international political and economic conditions;
- the ability of the Organization of Petroleum Exporting Countries (OPEC)
to set and maintain production levels and prices;
- the level of production by non-OPEC countries; and
- the policies of various governments regarding exploration and development
of their oil and gas reserves.
Depending on the market prices of oil and gas, companies exploring for oil
and gas may cancel or curtail their drilling programs, thereby reducing demand
for drilling services. Such a reduction in demand may erode daily rates and
utilization of our rigs, and adversely affect New Pride's financial results.
Utilization rates and dayrates are also affected by the total supply of
comparable rigs available for service in the geographic markets in which New
Pride will compete. Short-term improvements in demand in a geographic market may
cause New Pride's competitors to respond by moving competing rigs into the
market, thus intensifying price competition. Significant new rig construction
could also intensify price competition. In the past, there have been prolonged
periods of rig oversupply with correspondingly depressed utilization and
dayrates largely due to earlier, speculative construction of new rigs. Recent
improvements in dayrates and expectations of longer-term, sustained improvements
in utilization rates and dayrates for offshore drilling rigs may cause New
Pride's competitors to construct new rigs which could adversely affect its
business.
International events may hurt New Pride's operations.
New Pride will derive a significant portion of its revenues from
international operations. In 2000, on a pro forma basis New Pride would have
derived approximately 47% of its revenues from operations in South America and
approximately 25% of its revenues from operations in other countries outside the
U.S. Operations in these areas are subject to the following risks, among others:
- foreign currency fluctuations and devaluation;
- restrictions on currency repatriation;
- political instability; and
- war and civil disturbances.
Pride limits, and New Pride expects to continue to limit, the risks of
currency fluctuation and restrictions on currency repatriation by obtaining
contracts providing for payment in U.S. dollars or freely convertible foreign
currency. To the extent possible, New Pride expects to limit its exposure to
potentially devaluating currencies by matching the acceptance of local
currencies to New Pride's expense requirements in those currencies. Although
Pride has done this in the past, New Pride may not be able to
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take these actions in the future, thereby exposing it to foreign currency
fluctuations that could have a material adverse effect upon its results of
operations and financial condition. Although foreign exchange in the countries
where Pride operates is currently carried out on a free-market basis, there is
no assurance that local monetary authorities in these countries will not
implement exchange controls in the future.
In addition, from time to time, certain of New Pride's foreign subsidiaries
have conducted operations in Libya and Iran and may do so in the future. These
countries are subject to sanctions and embargoes imposed by the U.S. government.
Although these sanctions and embargoes do not prohibit those subsidiaries from
completing existing contracts or from entering into new contracts to provide
drilling services in such countries, they will prohibit New Pride and its
domestic subsidiaries, as well as employees of New Pride's foreign subsidiaries
who are U.S. citizens, from participating in or approving any aspect of the
business activities in those countries. These constraints on the ability to have
U.S. persons, including New Pride's senior management, provide managerial
oversight and supervision may adversely affect the financial or operating
performance of such business activities.
New Pride's international operations will also be subject to other risks,
including foreign monetary and tax policies, expropriation, nationalization and
nullification or modification of contracts. Additionally, New Pride's ability to
compete in international contract drilling markets may be adversely affected by
foreign governmental regulations that favor or require the awarding of contracts
to local contractors or by regulations requiring foreign contractors to employ
citizens of, or purchase supplies from, a particular jurisdiction. Furthermore,
New Pride's foreign subsidiaries may face governmentally-imposed restrictions
from time to time on their ability to transfer funds to New Pride.
New Pride's customers may seek to cancel or renegotiate some drilling
contracts during periods of depressed market conditions or if New Pride
experiences operational difficulties.
During depressed market conditions, a customer may no longer need a rig
that is currently under contract or may be able to obtain a comparable rig at a
lower daily rate. As a result, customers may seek to renegotiate the terms of
their existing drilling contracts or avoid their obligations under those
contracts. In addition, New Pride's customers may seek to terminate existing
contracts if New Pride experiences operational problems. The deepwater markets
in which New Pride will operate require the use of floating rigs with
sophisticated positioning, subsea and related systems designed for drilling in
deep water. If this equipment fails to function properly, the rig cannot engage
in drilling operations, and customers may have the right to terminate the
drilling contracts. The likelihood that a customer may seek to terminate a
contract for operational difficulties is increased during periods of market
weakness. The cancellation of a number of drilling contracts could adversely
affect New Pride's results of operations.
New Pride may be considered highly leveraged; its significant debt levels and
debt agreement restrictions may limit its flexibility in obtaining additional
financing and in pursuing other business opportunities.
As of March 31, 2001, on a pro forma basis New Pride would have had
approximately $1.8 billion in debt and capital lease obligations. This level of
indebtedness will have several important effects on New Pride's future
operations, including:
- a significant portion of New Pride's cash flow from operations will be
dedicated to the payment of interest and principal on such debt and will
not be available for other purposes;
- covenants contained in Pride's existing debt arrangements will require
New Pride to meet certain financial tests, which may affect New Pride's
flexibility in planning for, and reacting to, changes in its business and
may limit its ability to dispose of assets, withstand current or future
economic or industry downturns and compete with others in its industry
for strategic opportunities; and
- New Pride's ability to obtain additional financing for working capital,
capital expenditures, acquisitions, general corporate and other purposes
may be limited.
Pro forma combined earnings of Pride and Marine were approximately equal to
2.9 times and 1.7 times pro forma combined fixed charges for the three-month
period ended March 31, 2001 and the
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year ended December 31, 2000, respectively. New Pride's ability to meet its debt
service obligations and to reduce its total indebtedness will be dependent upon
its future performance, which will be subject to general economic conditions,
industry cycles and financial, business and other factors affecting its
operations, many of which are beyond its control.
New Pride will be subject to hazards customary in the oilfield service
industry and to those more specific to marine operations. It may not have
insurance to cover all these hazards.
Pride's and Marine's operations are, and New Pride's operations will be,
subject to the many hazards customary in the oilfield services industry.
Contract drilling and well servicing require the use of heavy equipment and
exposure to hazardous conditions, which may subject New Pride to liability
claims by employees, customers and third parties. These hazards can cause
personal injury or loss of life, severe damage to or destruction of property and
equipment, pollution or environmental damage and suspension of operations. New
Pride's offshore fleet will also be subject to hazards inherent in marine
operations, either while on site or during mobilization, such as capsizing,
sinking and damage from severe weather conditions. In certain instances, New
Pride will be required by contract to indemnify customers or others.
Pride and Marine maintain, and New Pride expects to continue to maintain,
insurance for injuries to their employees and other insurance coverage for
normal business risks, including general liability insurance. Although Pride and
Marine believe their current insurance coverages to be adequate and in
accordance with industry practice against normal risks in their operations,
their insurance may not be sufficient or effective under all circumstances or
against all hazards to which they may be subject. The occurrence of a
significant event against which New Pride is not fully insured, or of a number
of lesser events against which it is insured, but subject to substantial
deductibles, could materially and adversely affect its operations and financial
condition. Moreover, New Pride may not be able to maintain adequate insurance in
the future at rates or on terms that it considers reasonable or acceptable.
Failure to retain key personnel could hurt New Pride's operations.
New Pride will require highly skilled personnel to operate and provide
technical services and support for its drilling units. To the extent demand for
drilling services and the size of the worldwide industry fleet increase,
shortages of qualified personnel could arise, creating upward pressure on wages
and difficulty in staffing rigs.
Governmental regulations and environmental liabilities may adversely affect
New Pride's operations.
Many aspects of Pride's and Marine's operations are, and New Pride's are
expected to be, subject to numerous governmental regulations that may relate
directly or indirectly to the contract drilling and well servicing industries,
including those relating to the protection of the environment. Pride and Marine
have spent, and New Pride will spend, material amounts to comply with these
regulations. Laws and regulations protecting the environment have become more
stringent in recent years and may in certain circumstances impose strict
liability, rendering New Pride liable for environmental damage without regard to
negligence or fault on its part. These laws and regulations may expose New Pride
to liability for the conduct of, or conditions caused by, others or for acts
that were in compliance with all applicable laws at the time the acts were
performed. The application of these requirements or the adoption of new
requirements could have a material adverse effect on New Pride. In addition, the
modification of existing laws or regulations or the adoption of new laws or
regulations curtailing exploratory or development drilling for oil and gas could
have a material adverse effect on New Pride's operations by limiting future
contract drilling opportunities.
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FORWARD-LOOKING INFORMATION
This joint proxy statement/prospectus, including the documents incorporated
by reference, includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of historical facts,
included in this joint proxy statement/prospectus or the documents incorporated
by reference that address activities, events or developments that Pride or
Marine expect, project, believe or anticipate will or may occur in the future
are forward-looking statements. These include such matters as:
- benefits, effects or results of the mergers;
- cost reductions, operating efficiencies or synergies and the integration
of operations;
- future stock market valuations;
- timing of the mergers;
- tax and accounting treatment of the mergers;
- future capital expenditures and investments in the construction,
acquisition and refurbishment of rigs (including the amount and nature
thereof and the timing of completion thereof);
- repayment of debt;
- market conditions, expansion and other development trends in the contract
drilling industry;
- business strategies;
- expansion and growth of operations after the mergers;
- utilization rates and contract rates for rigs;
- completion and employment of rigs under construction; and
- future operating results and financial condition after the mergers.
Pride and Marine have based these statements on their assumptions and
analyses in light of their experience and perception of historical trends,
current conditions, expected future developments and other factors they believe
are appropriate in the circumstances. These statements are subject to a number
of assumptions, risks and uncertainties, including:
- general economic and business conditions;
- prices of oil and gas and industry expectations about future prices;
- foreign exchange controls and currency fluctuations;
- political stability in foreign countries in which New Pride will operate;
- the business opportunities (or lack thereof) that may be presented to and
pursued by both companies and by New Pride;
- the ability to integrate the operations of Pride and Marine; and
- changes in laws or regulations.
These factors are in addition to the risks described in the "Risk Factors"
section of this joint proxy statement/prospectus and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
sections of the documents incorporated by reference. Most of these factors are
beyond the control of either company and will be beyond the control of New
Pride. We caution you that forward looking-statements are not guarantees of
future performance and that actual results or developments may differ materially
from those projected in these statements.
Nothing in this joint proxy statement/prospectus is intended to provide
guidance for financial results for future periods for any of Pride, Marine or
New Pride. Any actual or purported guidance given prior to the date of this
joint proxy statement/prospectus, including in any document filed with the SEC
prior to this date by Pride or Marine or by those acting on their behalf, spoke
only as of the date such statement was made and no obligation to update was
undertaken. Any such guidance is no longer valid and should no longer be relied
upon. Any projection or estimate by Pride or Marine that was furnished to their
respective financial advisors, including those statements summarized in this
joint proxy statement/ prospectus, were made as of a date shortly before the
date of the merger agreement and spoke only as of the date furnished and have
not been updated. These estimates and projections were only intended to be used
by such financial advisors for analysis of the mergers and are not intended to
provide guidance as to future results. You should not place undue reliance on
forward-looking statements. Each forward-looking statement speaks only as of the
date of the particular statement, and we undertake no obligation to publicly
update or revise any forward-looking statements.
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THE SPECIAL MEETINGS
JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus is being furnished to you in
connection with the solicitation of proxies by each of Pride's and Marine's
board of directors with respect to the merger agreement.
DATE, TIME AND PLACE OF THE SPECIAL MEETINGS
The special meetings are scheduled to be held as follows:
FOR MARINE SHAREHOLDERS: FOR PRIDE SHAREHOLDERS:
, 2001 , 2001
9:00 a.m., Houston time 9:00 a.m., Houston time
Houston, Texas Houston, Texas
PURPOSE OF THE SPECIAL MEETINGS
At the special meetings, Pride's and Marine's board of directors will ask
shareholders to consider and vote to approve the merger agreement.
If the shareholders of Pride and Marine approve the merger agreement, then
at the closing of the merger agreement:
- each outstanding share of Marine common stock will be converted into one
share of Pride common stock; and then
- each outstanding share of Pride common stock will be converted into one
share of New Pride common stock.
RECORD DATE; VOTING AT THE MEETING; QUORUM
Pride. Pride has fixed the close of business on , 2001 as the
record date for the determination of the Pride shareholders entitled to receive
notice of and to vote at the Pride special meeting. As of the record date, there
were outstanding shares of Pride common stock. Each outstanding share
is entitled to one vote on the matter to be voted on. The presence, in person or
by proxy, of the holders of a majority of the outstanding shares of Pride common
stock is necessary to constitute a quorum at the Pride special meeting.
Marine. Marine has fixed the close of business on , 2001 as the
record date for determination of the Marine shareholders entitled to receive
notice of and vote at the Marine special meeting. As of the record date, there
were outstanding shares of Marine common stock. Each outstanding share
is entitled to one vote on the matter to be voted on. The presence, in person or
by proxy, of the holders of a majority of the outstanding shares of Marine
common stock is necessary to constitute a quorum at the Marine special meeting.
REQUIRED VOTE
Pride. The merger agreement, including the issuance of shares of Pride
common stock in the Marine merger, must be approved by the affirmative vote of
the holders of a majority of the outstanding shares of Pride common stock
present, in person or by proxy, at the Pride special meeting at which a quorum
is present.
The directors and executive officers of Pride have indicated that they
intend to vote their shares in favor of the proposal. On the record date,
directors and executive officers of Pride beneficially owned % of the
outstanding shares of Pride common stock, excluding shares held by funds managed
by First
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Reserve Corporation. In addition, two funds managed by First Reserve
Corporation, of which William E. Macaulay, a director of Pride, is Chairman and
Chief Executive Officer, owned 10,747,735 shares of Pride common stock (or
approximately 15% of the outstanding shares) on the record date and have
indicated that they intend to vote their shares in favor of the proposal. Mr.
Macaulay disclaims beneficial ownership of Pride shares held by funds managed by
First Reserve Corporation.
Marine. The merger agreement must be approved by the affirmative vote of
the holders of a majority of the outstanding shares of Marine common stock.
As of the record date for the special meeting, Marine's directors and
executive officers beneficially owned approximately % of the
outstanding shares of Marine common stock and have indicated that they intend to
vote their shares in favor of the proposal.
EFFECT OF ABSTENTIONS AND NON-VOTES
Pride. Abstentions from voting will be counted as present in determining
whether the quorum requirement is satisfied, will be included in the voting
tally and will have the same effect as a vote against a proposal. Because of the
nature of the matter to be voted on, and because there are no other matters to
be voted on, there will be no broker non-votes (proxies submitted by brokers
that do not indicate a vote for a proposal because they do not have
discretionary voting authority and have not received instructions as to how to
vote on the proposal).
Marine. Abstentions will be counted as present in determining whether the
quorum requirement is satisfied. Because approval of the merger agreement
requires the affirmative vote of the holders of at least a majority of the
shares of Marine common stock outstanding as of the record date, abstentions and
any failures to vote will have the same effect as votes against approval of the
merger agreement.
ACTION TO BE TAKEN UNDER THE PROXY
The enclosed proxy is solicited on behalf of Pride's and Marine's boards of
directors. All properly executed written proxies delivered pursuant to this
solicitation, and not later revoked, will be voted at the special meetings in
accordance with the instructions given in the proxy. When voting regarding the
proposal, shareholders may vote for or against the proposal or may abstain from
voting. Shareholders should vote their shares on the enclosed proxy card. If no
choice is indicated, proxies that are signed and returned will be voted "FOR"
the approval of the merger agreement, including, in the case of Pride, the
issuance of shares of Pride common stock in the Marine merger. Pride and Marine
do not know of any matters, other than as described in their notices of special
meeting, that are to come before the special meetings. If any other matters are
properly presented at the special meetings for action, the persons named in the
enclosed form of proxy and acting thereunder will have discretion to vote on the
matters in accordance with their best judgment. If any other matters are
properly presented at the special meetings for action, including, among other
things, consideration of a motion to adjourn the meetings to another time and/or
place (including, without limitation, for the purpose of soliciting additional
proxies or allowing additional time for the satisfaction of conditions to the
mergers), the persons named in the enclosed form of proxy and acting thereunder
generally will have discretion to vote on those matters in accordance with their
best judgment. The persons named in the proxies will not, however, use their
discretionary authority to use proxies voting against the mergers to vote in
favor of adjournment or postponement of the special meetings.
Any holder of Pride or Marine common stock has the right to revoke his or
her proxy at any time prior to the voting thereof at the special meeting by
- filing a written revocation with the corporate secretary of Pride or
Marine prior to the voting of the proxy;
- giving a duly executed proxy bearing a later date; or
- attending the special meeting and voting in person.
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Attendance by a shareholder at one of the special meetings will not, by itself,
revoke his or her proxy.
PROXY SOLICITATION
Each of Pride and Marine will bear the cost of the solicitation of proxies
from its shareholders. In addition to solicitation by mail, directors, officers
and employees of Pride or Marine may solicit proxies from shareholders by
telephone, facsimile or telegram or in person. Pride and Marine will supply
banks, brokers, dealers and other custodian nominees and fiduciaries with proxy
materials to enable them to send a copy of such material by mail to each
beneficial owner of shares of the Pride or Marine common stock that they hold of
record and will, upon request, reimburse them for their reasonable expenses in
doing so. In addition, Pride and Marine have engaged Georgeson Shareholder
Communications Inc. to assist in the solicitation of proxies for a fee of
$30,000, plus reimbursement of certain out-of-pocket expenses. Marine and Pride
will share the expenses incurred in connection with the printing and mailing of
this joint proxy statement/prospectus.
IF THE MERGER AGREEMENT IS APPROVED AND THE MERGERS ARE COMPLETED, HOLDERS
OF PRIDE COMMON STOCK AND MARINE COMMON STOCK WILL BE SENT INSTRUCTIONS
REGARDING THE SURRENDER OF THEIR STOCK CERTIFICATES. HOLDERS SHOULD NOT SEND
THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THESE INSTRUCTIONS.
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THE MERGERS
This section of the joint proxy statement/prospectus describes the proposed
mergers, including the merger agreement and the reciprocal stock option
agreements. While we believe that this description covers the material terms of
the mergers, this summary may not contain all of the information that is
important to you. You should read carefully this entire joint proxy
statement/prospectus and the documents we refer to for a more complete
understanding of the mergers. In addition, we incorporate important business and
financial information about each of us into this joint proxy
statement/prospectus by reference. 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" that begins on page 91.
BACKGROUND OF THE MERGERS
The proposed mergers are the result of arm's length negotiations between
representatives of Pride and Marine. The following is a summary of the
background of these negotiations, which led to the unanimous approval of the
merger agreement by the boards of directors of both Pride and Marine.
On several occasions prior to 2001, Paul A. Bragg, the president and chief
executive officer of Pride, and Jan Rask, the president and chief executive
officer of Marine, held informal conversations regarding a possible combination
of their two companies. In February 2000, the companies entered into a
confidentiality agreement and exchanged financial data and other relevant
information. Although several meetings were held between the companies' senior
executive officers, at the end of February 2000 Pride concluded that because of
contingencies relating to its deepwater rig construction program, any further
discussions at that time about a possible combination of the two companies would
not be useful.
Between February 2000 and January 2001, there were no discussions or other
communications at any level about a possible combination of Marine and Pride.
In January 2001, Mr. Rask approached representatives of Morgan Stanley to
suggest to Pride the possibility of a combination of Pride and Marine. On
February 14, 2001, the Morgan Stanley representatives and Mr. Rask met with
William E. Macaulay, a director of Pride and the chairman and chief executive
officer of First Reserve Corporation, which manages two investment funds that
own approximately 15% of Pride's outstanding common stock. The purpose of the
meeting was to explore whether Pride would be interested in opening discussions
about a potential merger. Following this meeting, Mr. Macaulay provided Mr.
Bragg a summary of what had transpired, including a report on Marine's interest
in revisiting the subject of a possible business combination.
On March 8, 2001, Morgan Stanley, after advising both parties that it
wished to act only as an intermediary until each side determined that it wanted
to pursue substantive negotiations, made separate presentations to the senior
executive officers of each of Pride and Marine regarding the strategic and
operational advantages of combining the two companies. Following those meetings,
Morgan Stanley was asked to develop a more comprehensive analysis of a possible
combination of Pride and Marine.
On March 28 and 29, 2001, representatives of Morgan Stanley met with senior
executives of Marine to further elaborate Morgan Stanley's views on the benefits
of the possible business combination and to discuss structure and implementation
of the potential transaction. Following the meeting on March 29, 2001,
representatives of Morgan Stanley met with Messrs. Bragg, Macaulay and Rask, as
well as Robert L. Barbanell, chairman of the board of Marine, to discuss certain
key elements of a possible merger of Marine and Pride.
On March 30, 2001, Marine's board of directors met to receive a report from
Mr. Rask and other senior executives of Marine concerning the possible
transaction with Pride. At the meeting, management described Morgan Stanley's
views and their own views concerning the possible combination of Marine and
Pride. The recent meetings with Mr. Bragg and Mr. Macaulay were also reported
and discussed. At the conclusion of the meeting, there was a consensus that
management should continue discussions and proceed with due diligence
investigations of Pride.
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On April 2, 2001, Pride and Marine executed a new confidentiality agreement
to facilitate mutual due diligence investigations concerning the possible
business combination.
On April 6, 2001, at a meeting of Pride's board of directors, Messrs. Bragg
and Macaulay reviewed various financial, strategic and operational
considerations of a business combination of Pride and Marine and discussed an
analytical summary prepared by Morgan Stanley. Following that review and
discussion, Pride's Board authorized Messrs. Bragg and Macaulay to continue
their discussions with Messrs. Rask and Barbanell and further authorized Pride's
senior management to cooperate with Marine's senior management in the conduct of
their respective due diligence investigations.
Throughout the month of April and in early May 2001, representatives of
Pride and Marine met several times to conduct their respective due diligence
investigations and, in consultation with their respective legal counsel and
independent accountants, to discuss the framework for combination of the two
companies. Representatives of Morgan Stanley also participated in some of these
meetings.
On April 19, 2001, the management of Marine and Pride each provided a
management presentation to the other and to Morgan Stanley. On April 26, 2001,
Mr. Rask advised Mr. Bragg that Marine intended to retain Morgan Stanley to act
as Marine's financial advisor in any further discussions about a business
combination of Marine with Pride. On April 27, 2001, Mr. Bragg contacted Salomon
Smith Barney about acting as Pride's financial advisor, and thereafter
representatives of Salomon Smith Barney met on several occasions with senior
executive officers of Pride and conducted financial due diligence investigations
of both Pride and Marine. On May 3, 2001, Pride formally engaged Salomon Smith
Barney.
In a series of meetings in late April and early May 2001 between Messrs.
Bragg and Macaulay on behalf of Pride and Messrs. Barbanell and Rask on behalf
of Marine, the parties reached general agreement on several matters, including
the organization of a new Delaware corporation as the survivor of a business
combination of Marine and Pride, the number of representatives from each of
Marine and Pride that would initially serve on the board of directors of the new
Delaware company and other corporate governance matters, the market focus and
growth strategies for the combined company, and the composition of the new
Delaware company's senior management.
Beginning in early May 2001 and continuing through May 23, 2001,
representatives of Pride and Marine, including their respective legal counsel,
held meetings to discuss and negotiate the terms of the proposed merger
agreement and related reciprocal stock option agreements. In connection with the
negotiation of the proposed merger agreement, the tax treatment and the
financial accounting treatment of the possible transaction was also discussed.
On May 1, 2001, a meeting of Marine's board of directors was held in which
certain of Marine's senior executives and its legal counsel participated to
discuss the possible transaction with Pride. Mr. Rask recapped the earlier
stages of his discussions with Pride and Morgan Stanley and his more recent
discussions. A general discussion was also held regarding the business strategy
of Pride. Marine's management reported on the progress of due diligence
investigations of Pride, including physical inspections of certain of Pride's
rigs, and on planned due diligence inquiries that were yet to be completed. At
the conclusion of the meeting there was a consensus that negotiations should
proceed further with respect to, among other things, the exchange ratios for
Pride's and Marine's common stock, the new Delaware company's strategy, the
identity of the new company's eight member board of directors, its corporate
governance features and the composition of the new company's executive
management.
During the week of May 7, 2001 and continuing through May 14, 2001, Messrs.
Bragg, Macaulay, Barbanell and Rask had several meetings and telephone
conversations, in which representatives of both Morgan Stanley and Salomon Smith
Barney participated, to negotiate mutually acceptable exchange ratios of shares
of the new Delaware company for each Pride share and each Marine share.
On May 14, 2001, the board of directors of Marine met to receive a
presentation from Morgan Stanley of its analysis of the proposed business
combination with Pride. Also in attendance were certain of Marine's senior
executives and legal counsel for Marine. Following Morgan Stanley's presentation
and a question and answer period, representatives of Morgan Stanley were excused
from the meeting and a
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general discussion of various points raised in the presentation was held.
Marine's management also updated the Marine board on the status of due diligence
reviews. Mr. Rask and senior management were then excused from the meeting
following which the outside directors of Marine discussed personnel matters
likely to arise if the proposed transaction were to proceed. Near the conclusion
of the meeting, Mr. Rask and Marine's other senior managers returned and
Marine's board authorized Mr. Barbanell and Mr. Rask to proceed with negotiating
further the terms of a proposed merger, including the exchange ratio for
Marine's shareholders. A board meeting was set for the next day for the purpose
of receiving a report from Messrs. Barbanell and Rask on their further
negotiations.
On May 15, 2001, Messrs. Barbanell and Rask reported to the Marine board of
directors their recent negotiations with Messrs. Bragg and Macaulay of Pride
since the board meeting of the day before, particularly with respect to the
proposed exchange ratio for the transaction and Marine's desire for the new
company not to have a classified board of directors. At the conclusion of the
meeting, Mr. Rask was authorized to propose an exchange ratio of one share of
the new company's common stock for each share of Marine common stock and each
share of Pride common stock.
On May 16, 2001, Messrs. Bragg, Macaulay and Barbanell reached agreement to
recommend to their respective boards of directors an exchange ratio of one share
of New Pride common stock for each share of Marine common stock and each share
of Pride common stock.
On May 17, 2001, Marine's board of directors held a meeting in which
Messrs. Barbanell and Rask reported on their negotiations since the last meeting
of the Marine board. Mr. Barbanell advised the board that the managements of
both Marine and Pride had agreed to recommend to their respective boards
acceptance of a one-for-one exchange ratio for each share of Marine and Pride
with the new company. Mr. Barbanell reported that he had discussed with Mr.
Macaulay a number of issues, including the possibility of accounting for the
transaction as a pooling of interests, provided that a definitive agreement
could be reached and publicly announced by June 30, 2001, after which date it
was believed that transactions would be ineligible for pooling of interests
accounting. With respect to the composition of the new company's board of
directors, Marine's board determined that each director of Marine would nominate
in writing three members from Marine's board, in addition to Mr. Barbanell, to
serve on the board of the combined company, assuming all other aspects of the
merger were satisfactorily resolved. The three Marine directors receiving the
most nominations would then be proposed by Marine for membership on the new
company's eight member board of directors. Mr. Barbanell was authorized to
tabulate and announce the results of the nominations at a later date.
On May 18, 2001, the board of directors of Pride met to discuss the
proposed form of merger agreement, the mergers and related transactions.
Representatives of Salomon Smith Barney and Pride's legal counsel, together with
members of Pride's senior management, also participated in this meeting. Salomon
Smith Barney made a presentation regarding the financial terms of the proposed
merger. After a period of deliberation, which included a review of the terms of
the merger agreement, the tax and accounting objectives expected to be achieved
and related matters, Pride's board adjourned the meeting until May 21, 2001 in
order to provide directors an opportunity to reflect on the proposed mergers.
Pride's board asked Mr. Bragg to nominate at the May 21 meeting four members of
Pride's board to serve on the board of the combined company.
On May 21, 2001, Pride's directors reconvened their adjourned May 18
meeting to give further consideration to the proposed mergers and to provide
directors with an opportunity to ask additional questions of Salomon Smith
Barney, legal counsel and senior management. Following this discussion, Salomon
Smith Barney expressed its oral opinion (which was subsequently confirmed in
writing) to the effect that as of that date the proposed exchange ratio (taking
into account both the Marine merger and the reincorporation merger) was fair,
from a financial point of view, to holders of Pride common stock on the date of
the opinion. See "-- Opinion of Salomon Smith Barney Inc." Following receipt of
that oral opinion, Pride's board of directors unanimously approved the merger
agreement and created a merger committee, comprised of Messrs. Bragg and
Macaulay, to take such further action on behalf of the Pride board as may be
necessary to cause the mergers to be consummated. Mr. Bragg proposed the names
of
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four members of Pride's board to serve on the board of the combined company,
which proposal was unanimously approved.
On May 23, 2001, Marine's board of directors held a meeting in which
Marine's senior executives and legal counsel participated. Morgan Stanley
participated in the first part of the meeting. Prior to the meeting, members of
the Marine board received the proposed form of merger agreement and reciprocal
stock options, copies of the presentation materials to which Morgan Stanley
would refer, and other written materials prepared by management and legal
counsel pertaining to the proposed transaction. At the outset of the meeting,
the Marine board received further presentations from Morgan Stanley concerning
the proposed transaction, assuming an exchange ratio of one share of the new
company for each share of the common stock of Marine and Pride. Following the
Morgan Stanley presentation and questions and answers, the Marine board received
the oral opinion of Morgan Stanley, which was subsequently confirmed in writing,
that the consideration to be received by Marine's shareholders in the merger was
fair to Marine's shareholders from a financial point of view. See "-- Opinion of
Morgan Stanley & Co. Incorporated." The board also received a report from
Marine's legal counsel concerning certain features of the proposed merger
documentation. After a further discussion of various aspects of the merger and
considering Morgan Stanley's fairness opinion, the Marine board of directors
voted unanimously to approve the merger agreement in substantially the form
presented and to recommend that Marine shareholders approve the merger
agreement. Marine's board also authorized Marine's management to finalize the
merger agreement and take such other action as management deemed necessary to
accomplish the transactions contemplated by the merger agreement.
Immediately following the conclusion of the Marine board meeting on May 23,
the merger agreement was finalized and signed by the parties. The following
morning, Pride and Marine issued a joint press release announcing the execution
of the merger agreement.
PRIDE'S REASONS FOR THE MERGERS
Reasons for the Marine Merger
Over the past four years, Pride has experienced substantial growth
resulting from the implementation of its strategy to expand its presence in the
higher margin offshore and international drilling markets. Since February 1997,
Pride has completed significant acquisitions and newbuild projects as well as
conversions, upgrades and refurbishments of its rig fleet. Pride now operates a
global fleet of 305 rigs, including two ultra-deepwater drillships, nine
semisubmersible rigs, 19 jack-up rigs, five tender-assisted rigs, three barge
rigs, 21 offshore platform rigs and 246 land-based drilling and workover rigs.
This period of growth has been accompanied by a substantial increase in Pride's
consolidated long-term indebtedness, which amounted to approximately $1.7
billion at March 31, 2001. The cost of servicing this additional indebtedness
has put constraints on Pride's earnings growth and, consequently, at times the
attractiveness of Pride's common stock in the investment community. Looking
ahead, it is believed that Pride's current debt levels in relation to its equity
market capitalization could impair Pride's ability to continue to grow its
business.
The combination of Pride and Marine presents a unique opportunity for
deleveraging Pride's consolidated balance sheet and, at the same time,
significantly enhances the competitive positions of both Pride and Marine in the
Gulf of Mexico jack-up rig market and elsewhere. In reaching their conclusion to
approve and recommend the Marine Merger, Pride's directors, in consultation with
members of senior management, legal counsel, independent accountants and
representatives of Salomon Smith Barney, considered many factors, including the
following:
- By virtue of the fact that Marine is essentially debt-free and the
mergers will involve the issuance of stock for stock, New Pride's total
indebtedness as a percentage of total capitalization will be
approximately 54%, as compared to 62% for Pride. It is expected that this
will result in improved credit ratings for Pride's outstanding publicly
traded debt and will thereby reduce New Pride's borrowing costs. In this
connection, both Standard & Poor's and Moody's Investor Services have
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announced that they are reviewing Pride's publicly traded debt securities
for possible rating upgrades.
- Following the mergers, New Pride is expected to be in a position to
reduce long-term indebtedness and further deleverage its consolidated
balance sheet from cash flow.
- New Pride will become the second largest operator of jack-up rigs in the
Gulf of Mexico and the third largest in the world, which is expected to
substantially improve the combined companies' competitive position. New
Pride's competitive position in the deepwater market is also expected to
improve with the addition of Marine's two deepwater semisubmersible rigs
to Pride's existing deepwater fleet.
- As a larger company with a substantially larger equity market
capitalization and stronger balance sheet, New Pride is expected to be a
more credible and attractive participant in additional industry
consolidation initiatives than Pride can be on a stand-alone basis.
- The size of New Pride's equity market capitalization resulting from an
all-stock transaction is expected to command a higher valuation in the
stock market than is achievable by Pride alone by providing greater
liquidity to investors, in addition to reduced debt leverage.
- The Pride board of directors considered the effect of the combination
with Marine on cash flow and earnings per share of New Pride as compared
with Pride on a stand-alone basis.
- It is expected that cost savings of at least $10-15 million per year will
be achievable by New Pride through elimination of redundant shore-based
facilities and duplicative overhead, increased marketing synergies and
increased purchasing power.
- The combination with Marine will be tax-free to Pride and its
shareholders.
- The combination with Marine is expected to qualify for treatment as a
pooling of interests under U.S. generally accepted accounting principles.
- Pride's board of directors considered the presentation, advice and
opinion of Salomon Smith Barney delivered at its meeting held on May 18,
2001 and May 21, 2001, with the opinion being subsequently confirmed in
writing on May 23, 2001, to the effect that the exchange ratio (taking
into account both the Marine merger and the reincorporation merger) is
fair, from a financial point of view, to the holders of Pride common
stock on the date of the opinion.
- Pride's board of directors considered the terms and conditions of the
merger agreement, including the fixed exchange ratio of New Pride common
stock for both Pride common stock and Marine common stock, the rights of
the parties to respond to, evaluate and negotiate competing business
combination proposals, the circumstances under which the merger agreement
may be terminated, the size and impact of the termination fees associated
with any termination, and the terms and conditions of the reciprocal
stock option agreements and their impact on the accounting treatment of
possible alternative business combinations.
- Pride's board of directors considered possible opportunities and
alternatives that could be available to Pride if the proposed combination
with Marine were not undertaken, including pursuing other growth
opportunities and strategies, and the risks, uncertainties and expenses
of those alternatives.
Reasons for the Reincorporation Merger
Pride was originally incorporated in Louisiana in 1988 as a wholly owned
subsidiary of another company to continue its parent's business of providing
workover and maintenance services for oil and gas wells located onshore in the
United States. Pride was subsequently spun off as an independent company with a
relatively small equity market capitalization whose stock, while quoted on
Nasdaq, was not actively traded for several years. In recent years, Pride's
revenues have grown, the nature and geographic scope of its business has
materially changed and its stock, which is now listed on the New York Stock
Exchange, has become more actively traded. As a result, Pride has, from time to
time, given consideration to whether
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Delaware would be more suitable than Louisiana as its corporate domicile. The
matter received increased attention during the course of negotiations with
Marine when legal counsel for both sides recommended having a Delaware
corporation as the survivor in a combination of Marine and Pride.
The reincorporation merger of Pride into New Pride is a requirement for
completing the Marine merger. Pride's directors believe the following are
advantages to having New Pride domiciled in Delaware rather than Louisiana:
- Delaware has a well-established body of case law construing the Delaware
General Corporation Law, which provides businesses with a greater measure
of predictability than exists in any other jurisdiction. The certainty
afforded by the well-established principles of corporate governance under
the Delaware General Corporation Law should benefit New Pride and its
stockholders and increase New Pride's ability to attract and retain
outstanding directors and officers.
- The Delaware General Corporation Law is generally acknowledged to be the
most advanced and flexible corporate statute in the United States.
- The Delaware Court of Chancery has an established record of handling
complex corporate issues with a level of experience, speed of decision
and degree of sophistication and understanding unmatched by any other
court in the United States. The Delaware Supreme Court is highly regarded
and currently has among its justices former Vice Chancellors and
corporate practitioners.
- The Delaware legislature each year considers and adopts amendments to the
Delaware General Corporation Law that address the changing needs of
businesses, including those brought about by changing business and
information technologies.
- Franchise taxes and other costs associated with being domiciled in
Delaware are not materially different than those associated with being
domiciled in Louisiana.
Pride's board of directors also considered the following additional matters
relating to the reincorporation merger:
- In order to address shareholder democracy issues raised by Marine and by
certain institutional investor groups, New Pride's corporate charter does
not provide for a classified board with directors serving staggered terms
of three years each (as Pride's charter now provides pursuant to
shareholder approval received on May 18, 2001). Instead, all directors of
New Pride will be elected on an annual basis.
- The provisions in New Pride's charter and bylaws that may be deemed to
have anti-takeover effects are generally less restrictive than those
contained in Pride's charter and bylaws. See "Comparison of Rights of
Shareholders."
- All of Pride's employee benefit plans and programs and its long-term
incentive plan will become plans and programs of New Pride, and
outstanding options to purchase Pride common stock will automatically
become options to purchase the same number of shares of New Pride common
stock.
- After the reincorporation merger, shares of New Pride's common stock will
be traded on the New York Stock Exchange under the Pride symbol ("PDE").
- Pride's rights and obligations under its material contracts with third
parties, including contracts governing its long-term indebtedness, will
continue as rights and obligations of New Pride.
In determining whether the mergers are in the best interests of Pride and
its shareholders, Pride's board of directors considered the factors above as a
whole and did not assign relative weights to those factors. Individual directors
may have weighed each of these factors differently. Moreover, the foregoing
discussion of Pride's reasons for the mergers is not intended to be exhaustive.
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RECOMMENDATION OF PRIDE'S BOARD OF DIRECTORS
Pride's board of directors believes that the mergers are fair to and in the
best interest of Pride's shareholders, and recommends the approval of the merger
agreement.
In considering their recommendation, you should be aware that some of the
directors of Pride have interests in the mergers that are different from, or are
in addition to, the interests of Pride shareholders. Please see the section
entitled "Interests of Certain Persons in the Mergers" that begins on page 39.
MARINE'S REASONS FOR THE MERGER
From Marine's perspective, the fundamental reason for the mergers is that
its board of directors believes New Pride offers better prospects for improving
shareholder value than Marine offers on its own. The principal matters
considered by Marine's board of directors in reaching this overall conclusion,
and in unanimously approving and recommending the merger agreement and the
mergers to Marine shareholders, are summarized below:
- Marine believes that larger companies in its industry enjoy more generous
stock market valuation multiples than those experienced by smaller
competitors. The stock market capitalization of New Pride and its
"float," or the number of shares of its outstanding common stock not held
by its affiliates, will each be significantly greater than Marine's stock
market capitalization and float. These factors are expected to produce
better stock market valuation multiples for New Pride than Marine could
expect if it remained a separate company.
- Marine believes that New Pride's senior management and board of directors
will be committed to further reducing New Pride's net debt position
following the mergers, and believes that New Pride's management will take
reasonable steps to do so. In this regard, the Marine board considers it
important that the addition of Marine's essentially debt-free assets to
Pride's assets will contribute substantial free cash flow to New Pride's
operations that in turn will enable New Pride to further improve its net
debt position.
- The combination of Marine's and Pride's rig fleets should strengthen New
Pride's ability to compete for business in the Gulf of Mexico jack-up rig
market and in the deepwater semisubmersible rig market, both of which
Marine believes offer significant opportunities for revenue growth.
- Marine expects that the merger will be accretive, assuming a continuation
of recent industry trends, to earnings per share and cash flow per share
for Marine shareholders in 2002 and 2003.
- Marine believes that Pride is poised to enjoy the benefits of substantial
operating leverage in its business. Pride has recently made substantial
capital expenditures to add four additional semisubmersible rigs to its
fleet. Assuming the timely deployment of these rigs under market rate
contracts, Marine believes these assets should contribute substantially
to New Pride's operating performance in the near term. Additionally,
Pride's existing South American land rig and E&P services operations are
well-established and are positioned to contribute significantly more to
New Pride's earnings and cash flow if market conditions improve further
in that region.
The Marine board also considered the following information and factors in
reaching its determination to approve the merger agreement and the mergers, to
conclude that the mergers are fair to and in the best interests of Marine
shareholders, and to recommend that shareholders approve the merger agreement:
- The analyses and presentation on the financial aspects of the proposed
merger by and the oral opinion of Morgan Stanley delivered on May 23,
2001, and subsequently confirmed in writing, to the Marine Board that, as
of such date and based upon and subject to the matters stated in the
opinion, the consideration to be received in the mergers by the holders
of Marine common stock was fair from a financial point of view to such
holders. See "-- Opinion of Morgan Stanley & Co. Incorporated."
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- The mergers are expected to be tax-free to Marine shareholders.
- The exchange ratios being used in the mergers and the resulting
continuing 44% ownership interest in New Pride by Marine's shareholders.
- The fact that the board of directors of the combined company after the
transaction will consist of eight directors, four of whom have been
designated by Marine.
- Presentations by members of Marine's senior management regarding the
strategic advantages of combining with Pride, operational aspects of the
transaction, and the results of management's operational and legal due
diligence review.
- Historical information concerning Marine's and Pride's respective
businesses, financial performance and condition, operations, management,
competitive position and stock performance.
- Marine management's view as to the financial condition, results of
operations and businesses of Marine and Pride before and after giving
effect to the mergers based on management's due diligence and publicly
available earnings estimates.
- The strategic fit of Marine and Pride, including the belief that the
mergers have the potential to enhance shareholder value through the
numerous growth opportunities and synergies resulting from combining the
two companies' complementary strengths and assets, including
consolidation savings, financial and operating leverage, and operating
efficiencies.
- The terms and conditions of the merger agreement and reciprocal stock
option agreements, including the fact that the exchange ratios are fixed,
the limitations on the interim business operations of each of Marine and
Pride, the conditions to consummation of the merger, the rights of the
parties to the merger agreement under certain circumstances to respond
to, evaluate and negotiate with respect to other business combination
proposals, the circumstances under which the merger agreement could be
terminated and the size and impact of the termination fees associated
with a termination; the grant of reciprocal options to purchase shares of
common stock by each company, as well as the advice of Marine's financial
and legal advisors that these provisions were reasonable in the context
of the transaction and the impact of the reciprocal stock option
agreements on the accounting treatment of possible alternative business
combinations.
- The interests of the officers and directors of Marine in the mergers,
including the matters described under "-- Interests of Certain Marine
Directors and Executive Officers in the Merger," and the impact of the
mergers on Marine's shareholders and employees.
- The expected treatment of the mergers as a pooling of interests
transaction for financial accounting purposes.
- The benefits of having New Pride domiciled in Delaware as described under
"-- Pride's Reasons for the Mergers."
The foregoing discussion of the factors considered by the Marine board is
not intended to be exhaustive, but includes the material factors considered. The
Marine board did not assign relative weights or rank to the factors described
above. In considering the factors described above, individual members of the
Marine board may have given different weights to different factors. The Marine
board considered all of these factors as a whole, and overall considered them to
be favorable to and to support its determination and recommendation.
RECOMMENDATION OF MARINE'S BOARD OF DIRECTORS
At a special meeting held on May 23, 2001, the Marine board unanimously
resolved that the merger agreement and the merger were advisable and in the best
interests of Marine and its shareholders. At this meeting, the Marine board also
approved the merger agreement and the transactions contemplated by the
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merger agreement. Accordingly, the Marine board unanimously recommends that
Marine's shareholders approve the merger agreement.
In considering their recommendation, you should be aware that some of the
officers and directors of Marine have interests in the mergers that are
different from, or are in addition to, the interests of Marine shareholders.
Please see the section entitled "Interests of Certain Persons in the Mergers"
that begins on page 39.
OPINION OF SALOMON SMITH BARNEY INC.
Salomon Smith Barney was retained to act as financial advisor to Pride in
connection with the proposed mergers. Pursuant to Salomon Smith Barney's
engagement letter with Pride dated May 3, 2001, Salomon Smith Barney rendered an
oral opinion to the Pride board of directors on May 21, 2001, subsequently
confirmed in writing on May 23, 2001, to the effect that, based upon and subject
to the considerations and limitations set forth in the opinion, its work
described below and other factors it deemed relevant, as of that date, the
exchange ratio (taking into account both the Marine merger and the
reincorporation merger) was fair, from a financial point of view, to holders of
Pride common stock on the date of the opinion.
The full text of Salomon Smith Barney's written opinion dated May 23, 2001,
which sets forth the assumptions made, general procedures followed, matters
considered and limits on the review undertaken, is included as Annex B to this
document. The summary of Salomon Smith Barney's opinion set forth below is
qualified in its entirety by reference to the full text of the opinion. PRIDE
SHAREHOLDERS ARE URGED TO READ SALOMON SMITH BARNEY'S OPINION CAREFULLY AND IN
ITS ENTIRETY.
In arriving at its opinion, Salomon Smith Barney reviewed a draft of the
merger agreement dated May 23, 2001, and held discussions with certain senior
officers and other representatives and advisors of each of Pride and Marine
concerning the business, operations and prospects of Pride and Marine. Salomon
Smith Barney examined certain publicly available business and financial
information relating to Pride and Marine as well as certain financial forecasts
and other information and data for Pride and Marine which were provided to or
otherwise discussed with Salomon Smith Barney by the managements of Pride and
Marine, including information relating to certain strategic implications and
operational benefits anticipated to result from the mergers. Salomon Smith
Barney reviewed the financial terms of the mergers as set forth in the merger
agreement in relation to, among other things, current and historical market
prices and trading volumes of Pride common stock and Marine common stock; the
historical and projected earnings and other operating data of Pride and Marine;
and the historical and projected capitalization and financial condition of Pride
and Marine. Salomon Smith Barney considered, to the extent publicly available,
the financial terms of certain other similar transactions recently effected that
Salomon Smith Barney considered relevant in evaluating the exchange ratio and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations
Salomon Smith Barney considered relevant in evaluating those of Pride and
Marine. Salomon Smith Barney also evaluated the pro forma financial impact of
the mergers on New Pride. In addition to the foregoing, Salomon Smith Barney
conducted such other analyses and examinations and considered such other
information and financial, economic and market criteria as Salomon Smith Barney
deemed appropriate in arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with it and further relied upon the assumption that the
managements of Pride and Marine were not aware of any facts that would make any
of such information inaccurate or misleading. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by or
discussed with it, Salomon Smith Barney assumed that the managements of Pride
and Marine believed that such forecasts and other information and data had been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of Pride and Marine as to the future financial
performance of Pride and Marine and the strategic implications
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and operational benefits anticipated to result from the mergers. Salomon Smith
Barney expressed no view with respect to such forecasts and other information
and data or the assumptions on which they were based. Salomon Smith Barney
assumed, with the consent of Pride, that the mergers will be treated as tax-
free reorganizations for United States federal income tax purposes. Salomon
Smith Barney did not make and was not provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of Pride or
Marine, nor did it make any physical inspection of the properties or assets of
Pride or Marine. Pride advised Salomon Smith Barney, and Salomon Smith Barney
assumed, that the final terms of the merger agreement would not vary materially
from those set forth in the drafts reviewed by it. Salomon Smith Barney further
assumed that the mergers would be consummated in accordance with the terms of
the merger agreement without waiver of any of the conditions precedent to the
mergers contained in the merger agreement.
Salomon Smith Barney noted that its opinion with respect to the exchange
ratio, related to the relative values of Pride and Marine and took into account
both the Marine merger and the reincorporation merger. Salomon Smith Barney did
not express any opinion as to what the value of the New Pride common stock
actually will be when issued in the reincorporation merger or the price at which
the New Pride common stock will trade subsequent to the reincorporation merger.
Salomon Smith Barney was not requested to consider, and its opinion did not
address, the relative merits of the mergers as compared to any alternative
business strategies that might exist for Pride or the effect of any other
transaction in which Pride might engage. Salomon Smith Barney further noted that
its opinion related only to the fairness of the exchange ratio to those holders
of Pride common stock as of the date of its opinion. Salomon Smith Barney's
opinion necessarily was based on information available to it and financial,
stock market and other conditions and circumstances existing and disclosed to it
as of the date of its opinion.
Salomon Smith Barney's advisory services and opinion were provided for the
information of the Pride board of directors in its evaluation of the mergers and
did not constitute a recommendation of the mergers to Pride or a recommendation
to any stockholder as to how such stockholder should vote on any matters
relating to the mergers.
In connection with rendering its opinion, Salomon Smith Barney made a
presentation to the Pride board of directors on May 18, 2001, which it updated
on May 21, 2001, with respect to the material analyses performed by Salomon
Smith Barney in evaluating the fairness of the exchange ratio to holders of
Pride common stock as of the date of its opinion. The following is a summary of
those presentations. The summary includes information presented in tabular
format. IN ORDER TO UNDERSTAND FULLY THE FINANCIAL ANALYSES USED BY SALOMON
SMITH BARNEY, THESE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY.
THE TABLES ALONE DO NOT CONSTITUTE A COMPLETE DESCRIPTION OF THE FINANCIAL
ANALYSES. The following quantitative information, to the extent it is based on
market data, is, except as otherwise indicated, based on market data as it
existed at or prior to May 18, 2001, and is not necessarily indicative of
current or future market conditions.
Historical Exchange Ratio Analysis
Salomon Smith Barney derived implied historical exchange ratios by dividing
the closing price per share of Pride common stock by the closing price per share
of Marine common stock for each trading day in the 52-week period ended May 18,
2001. Such derived exchange ratio is referred to below as the historical
exchange ratio, and was used by Salomon Smith Barney as a basis for comparison
with the actual exchange ratio of 1.00x. Salomon Smith Barney calculated that
the implied historical exchange ratio as of May 18, 2001 was 1.02x. Salomon
Smith Barney also calculated the high, low and average implied historical
exchange ratios for certain calendar periods ended May 18, 2001, and based on
these calculations, Salomon Smith Barney derived the implied premium or discount
of the actual exchange ratio
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as compared to the average implied historical exchange ratios and the implied
historical exchange ratio as of May 18, 2001. The following table sets forth the
results of this analysis.
IMPLIED EXCHANGE RATIO IMPLIED
----------------------- PREMIUM/(DISCOUNT)
HIGH LOW AVERAGE TO AVERAGE
----- ---- -------- ------------------
May 18, 2001........................................ N/A N/A 1.02x (2)%
Last One Month...................................... 1.02x 0.84x 0.92x 9%
Last Three Months................................... 1.02x 0.82x 0.89x 12%
Last Six Months..................................... 1.02x 0.76x 0.88x 14%
Last Twelve Months.................................. 1.06x 0.76x 0.91x 10%
Comparable Companies Analysis
Salomon Smith Barney compared financial, operating and stock market
information for each of Pride and Marine, with the same information for selected
publicly traded offshore and land drilling companies. The selected comparable
companies considered by Salomon Smith Barney were:
- Transocean Sedco Forex Inc.;
- Noble Drilling Corporation;
- Global Marine Inc.;
- Diamond Offshore Drilling, Inc.;
- ENSCO International Incorporated;
- Santa Fe International Corporation;
- Rowan Companies, Inc.; and
- Nabors Industries, Inc.
The forecasted financial information used by Salomon Smith Barney in the
course of this analysis was based on equity research reports published by
Salomon Smith Barney analysts. With respect to Marine and the comparable
companies, calculations were made based on the closing price per share of each
company's common stock as of May 18, 2001. With respect to Pride, Salomon Smith
Barney performed two separate calculations -- one based on the closing price per
share of Pride common stock as of May 18, 2001 of $30.05, and the other based on
the implied value of a share of Pride common stock in the Marine merger of
$29.34 (derived by multiplying the closing price per share of Marine common
stock by the exchange ratio in the Marine merger of 1.00x).
For Pride, Marine and each of the selected comparable companies, Salomon
Smith Barney derived and compared, among other things:
- the ratio of each company's firm value to its estimated earnings before
interest expense, taxes, depreciation and amortization (EBITDA) for 2002;
and
- the ratio of the closing price per common share of each company on May
18, 2001 (and, in the case of Pride, the implied value of a Pride common
share in the Marine merger) to (a) its estimated earnings per share (EPS)
for 2002, and (b) its estimated cash flow per share (CFPS), which is
comprised of net income plus depreciation, amortization and deferred
taxes for 2002.
Firm value, as used by Salomon Smith Barney in its analysis, means equity
value (fully-diluted common stock outstanding multiplied by the closing share
price on May 18, 2001, less any proceeds from the exercise of options or
conversion of securities), plus debt and minority interests, less cash and
investments in unconsolidated affiliates.
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The following table sets forth the results of these analyses.
COMPARABLE COMPANIES
EXCHANGE RATIO OF --------------------
PRIDE 1.00X MARINE RANGE MEDIAN
----- ----------------- ------ ----------- ------
Firm Value to Estimated 2002 EBITDA..... 6.0x 5.9x 6.1x 6.0x-10.2x 7.9x
Closing Common Share Price to:
Estimated 2002 EPS.................... 10.1x 9.8x 11.1x 10.1x-17.0x 13.3x
Estimated 2002 CFPS................... 6.3x 6.2x 7.7x 6.3x-12.3x 9.8x
Financial Contribution Analysis
Salomon Smith Barney analyzed the financial contribution of Pride and
Marine to the pro forma merged entity with respect to certain market and
financial data, including:
- estimated EBITDA for 2001 and 2002;
- estimated peak EBITDA and trough EBITDA;
- estimated net income for 2001 and 2002; and
- estimated cash flow for 2001 and 2002.
Salomon Smith Barney performed this analysis using two separate sets of
financial data for Pride and Marine -- one based on equity research published by
Salomon Smith Barney analysts, and the other based on estimates provided by the
managements of Pride and Marine, respectively. Salomon Smith Barney also
performed a separate analysis assuming that Pride and Marine had comparable
debt-to-total capitalization ratios. Estimated peak EBITDA and trough EBITDA
were based on analysts' estimates reviewed by Pride management regarding each
company's potential financial performance at the forecasted peak and trough of
the business cycle.
In each case, Salomon Smith Barney derived the exchange ratio implied by
the contribution of Pride and Marine to the pro forma merged entity with respect
to each forecasted financial statistic. The following table sets forth the
results of Salomon Smith Barney's financial contribution analysis.
EQUITY MANAGEMENT
RESEARCH ESTIMATES
----------- -----------
Unadjusted Range........................................... 0.75x-1.53x 0.63x-1.44x
Adjusted for Leverage Range................................ 0.63x-1.11x 0.50x-0.95x
Salomon Smith Barney compared these implied exchange ratios to the actual
exchange ratio of 1.00x.
Net Asset Value Summary
Salomon Smith Barney calculated and compared the total rig asset value and
the net asset value for each of Pride and Marine. Estimated asset values for
Marine were calculated using financial information contained in equity research
published by Salomon Smith Barney analysts. Estimated asset values for Pride
were calculated using two separate sets of financial information -- one based on
equity research published by Salomon Smith Barney analysts and the other based
on Pride management estimates. Based on these calculations, Salomon Smith Barney
derived the net asset value per share for each of Pride and Marine. Salomon
Smith Barney further derived the implied premium of the closing price per common
share of each company as of May 18, 2001 over the net asset value per share of
such company.
Based on this analysis, Salomon Smith Barney derived the implied exchange
ratios by dividing each of the net asset values per share derived for Pride by
the net asset value per share derived for Marine. The implied exchange ratio
derived using calculations based on equity research published by Salomon Smith
Barney analysts was 0.797x, and the implied exchange ratio derived using
calculations based on Pride management estimates was 1.604x. Salomon Smith
Barney compared these derived exchange ratios to the actual exchange ratio of
1.00x.
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Pro Forma Impacts Analysis
Salomon Smith Barney performed an analysis of the pro forma impact of the
mergers on Pride to derive the implied accretion or dilution to Pride's
estimated EPS and CFPS for 2002 assuming that the mergers will be accounted for
as a pooling-of-interests. Based on this implied accretion or dilution, Salomon
Smith Barney derived the trading multiple of EPS and CFPS required to be
achieved in order to maintain the value per share of Pride common stock as of
May 18, 2001, of $30.05. Such a multiple is referred to below as a breakeven
trading multiple. Salomon Smith Barney compared the breakeven multiples to EPS
and CFPS trading multiples for the selected comparable companies based on the
closing price per common share for each of the comparable companies as of May
18, 2001.
Salomon Smith Barney performed this analysis using two separate sets of
financial data for Pride and Marine -- one based on equity research published by
Salomon Smith Barney analysts, and the other based on estimates provided by the
managements of Pride and Marine, respectively. In each case, Salomon Smith
Barney assumed that pre-tax synergies of $15 million would be realized in the
mergers. The following table sets forth the results of this analysis.
COMPARABLE
ACCRETION/ BREAKEVEN COMPANIES TRADING
(DILUTION) TRADING --------------------
TO PRIDE MULTIPLE RANGE MEDIAN
---------- --------- ----------- ------
Based on Equity Research:
Estimated 2002 EPS................................ (1.9)% 10.4x 10.1x-17.0x 13.3x
Estimated 2002 CFPS............................... (7.0)% 6.9x 6.3x-12.3x 9.8x
Based on Management Estimates:
Estimated 2002 EPS................................ 4.3% 8.5x 10.1x-17.0x 13.3x
Estimated 2002 CFPS............................... (4.9)% 6.0x 6.3x-12.3x 9.8x
Salomon Smith Barney also considered the pro forma capitalization of the
combined company resulting from the mergers. Using balance sheet data as of
March 31, 2001, Salomon Smith Barney derived the following pro forma percentages
and ratios for the combined entity based on this data and derived similar
percentages and ratios for the comparable companies. Net debt, as used by
Salomon Smith Barney in its analysis, means debt less cash. The following table
sets forth the results of this analysis.
COMPARABLE
PRO FORMA COMPANIES
PRIDE AT COMBINED ------------------
MARCH 31, 2001 COMPANY RANGE MEDIAN
-------------- --------- --------- ------
Total debt as a percentage of book
capitalization................................. 61% 53% 6%-61% 33%
Net debt as a percentage of book
capitalization................................. 52% 46% 0%-52% 19%
Total debt to EBITDA for the twelve-month period
ended March 31, 2001........................... 8.2x 5.3x 0.2x-8.2x 3.1x
Net debt to EBITDA for the twelve-month period
ended March 31, 2001........................... 7.0x 4.5x 0.1x-7.0x 1.4x
The preceding discussion is a summary of the material financial analyses
furnished by Salomon Smith Barney to the Pride board of directors, but it does
not purport to be a complete description of the analyses performed by Salomon
Smith Barney or of its presentation to the Pride board of directors. The
preparation of financial analyses and fairness opinions is a complex process
involving subjective judgments and is not necessarily susceptible to partial
analysis or summary description. Salomon Smith Barney made no attempt to assign
specific weights to particular analyses or factors considered, but rather made
qualitative judgments as to the significance and relevance of all the analyses
and factors considered and determined to give its fairness opinion as described
above. Accordingly, Salomon Smith Barney believes that its analyses, and the
summary set forth above, must be considered as a whole, and that selecting
portions of the analyses and of the factors considered by Salomon Smith Barney,
without considering all of the analyses and factors, could create a misleading
or incomplete view of the processes underlying the analyses conducted by Salomon
Smith Barney and its opinion. With regard to the comparable companies analysis
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summarized above, Salomon Smith Barney selected comparable public companies on
the basis of various factors, including size and similarity of the line of
business; however, no company utilized in these analyses is identical to Pride
or Marine. As a result, these analyses are not purely mathematical, but also
take into account differences in financial and operating characteristics of the
subject companies and other factors that could affect the transaction or public
trading value of the subject companies to which Pride and Marine are being
compared. In its analyses, Salomon Smith Barney made numerous assumptions with
respect to Pride, Marine, industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Pride and Marine. Any estimates contained in Salomon Smith Barney's
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by these analyses. Estimates of values of companies do not purport to
be appraisals or necessarily to reflect the prices at which companies may
actually be sold. Because these estimates are inherently subject to uncertainty,
none of Pride, Marine, the Pride board of directors, the Marine board of
directors, Salomon Smith Barney or any other person assumes responsibility if
future results or actual values differ materially from the estimates. Salomon
Smith Barney's analyses were prepared solely as part of Salomon Smith Barney's
analysis of the fairness of the exchange ratio and were provided to the Pride
board of directors in that connection. The opinion of Salomon Smith Barney was
only one of the factors taken into consideration by the Pride board of directors
in making its determination to approve the agreement and the mergers. See
"-- Pride's Reasons for Mergers."
Salomon Smith Barney is an internationally recognized investment banking
firm engaged in, among other things, the valuation of businesses and their
securities in connection with mergers and acquisitions, restructurings,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. Pride selected Salomon
Smith Barney to act as its financial advisor on the basis of Salomon Smith
Barney's international reputation and Salomon Smith Barney's familiarity with
Pride. Salomon Smith Barney and its predecessors and affiliates have previously
provided and currently are providing investment banking services to Pride and
Marine unrelated to the mergers, for which Salomon Smith Barney has received and
may receive compensation. In the ordinary course of its business, Salomon Smith
Barney and its affiliates may actively trade or hold the securities of Pride and
Marine for its own account and for the account of customers and, accordingly,
may at any time hold a long or short position in those securities. Salomon Smith
Barney and its affiliates (including Citigroup Inc. and its affiliates) may
maintain other relationships with Pride, Marine and their respective affiliates.
From time to time Salomon Smith Barney has provided financial advisory and
investment banking services to Marine that were unrelated to the mergers.
Salomon Smith Barney received customary fees for rendering of these services.
This engagement was terminated as of May 22, 2001.
Pursuant to Salomon Smith Barney's engagement letter, Pride agreed to pay
Salomon Smith Barney a fee of up to $7.5 million, all but $1.0 million of which
is contingent upon consummation of the mergers. Pride has also agreed to
reimburse Salomon Smith Barney for its reasonable travel and other out-of-pocket
expenses incurred in connection with its engagement, including the reasonable
fees and expenses of its counsel, and to indemnify Salomon Smith Barney against
specific liabilities and expenses relating to or arising out of its engagement,
including liabilities under the federal securities laws.
OPINION OF MORGAN STANLEY & CO. INCORPORATED
Marine retained Morgan Stanley to provide it with financial advisory
services and a financial fairness opinion in connection with the merger. Morgan
Stanley was selected to act as Marine's financial advisor based on Morgan
Stanley's qualifications, expertise and reputation and its knowledge of the
business and affairs of Marine. At the meeting of the Marine board of directors
on May 23, 2001, Morgan Stanley rendered its oral opinion, which was confirmed
in writing as of such date, that as of that date, and subject to and based on
the various considerations set forth in its opinion, the merger consideration to
be received by holders of Marine common stock pursuant to the merger agreement
was fair from a financial point of view to the Marine common shareholders.
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THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION, DATED AS OF MAY 23,
2001, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS ANNEX C TO
THIS JOINT PROXY STATEMENT/PROSPECTUS. HOLDERS OF MARINE COMMON STOCK ARE URGED
TO, AND SHOULD, READ THIS OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN
STANLEY'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF MARINE, ADDRESSES
ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF MARINE COMMON
STOCK OF THE MERGER CONSIDERATION TO BE RECEIVED BY SUCH SHAREHOLDERS PURSUANT
TO THE MERGER AGREEMENT, AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
CONSTITUTE A RECOMMENDATION TO ANY MARINE SHAREHOLDER AS TO HOW TO VOTE AT THE
SPECIAL MEETING. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of Marine and Pride;
- reviewed certain internal financial statements and other financial and
operating data concerning Marine and Pride prepared by the management of
Marine and Pride, respectively;
- analyzed certain financial projections prepared by the management of
Pride and Marine, respectively;
- discussed the past and current operations and financial condition and the
prospects of Marine and Pride, including information relating to certain
strategic, financial and operational benefits anticipated from the
mergers, with senior executives of Marine and Pride;
- reviewed the pro forma impact of the mergers on New Pride's earnings per
share and cash flow per share;
- reviewed the reported prices and trading activity for the Marine common
stock and the Pride common stock;
- compared the financial performance of Marine and Pride and the prices and
trading activity of the Marine common stock and the Pride common stock
with that of certain other comparable publicly-traded companies and their
securities;
- reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions;
- participated in discussions and negotiations among representatives of
Marine and Pride and their financial and legal advisors;
- reviewed the merger agreement and certain related documents; and
- performed such other analyses and considered such other factors as they
deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
projections, including information relating to certain strategic, financial and
operational benefits anticipated from the mergers, Morgan Stanley assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of Marine and Pride.
In addition, Morgan Stanley assumed that the mergers will be consummated in
accordance with the terms set forth in the merger agreement, including, among
other things, that the mergers will be accounted for as a "pooling-of-interests"
business combination in accordance with U.S. generally accepted accounting
principles and the mergers will be treated as a tax-free reorganization and/or
exchange, each pursuant to the Internal Revenue Code of 1986. Morgan Stanley did
not make any independent valuation or appraisal of the assets or liabilities of
Marine and Pride, nor has it been furnished with any such appraisals. Morgan
Stanley's opinion was necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available to it as of, the
date of its opinion.
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The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion and the
preparation of its written opinion dated May 23, 2001. This summary of Morgan
Stanley's financial analyses includes information presented in tabular format.
In order to fully understand the financial analyses performed by Morgan Stanley,
the tables must be read together with the text of each summary. The tables alone
do not constitute a complete description of the financial analyses.
Comparable Publicly Traded Company Analysis. As part of its analysis,
Morgan Stanley compared certain financial information of Marine and Pride with
that of a group of publicly traded offshore drilling companies that shared some
characteristics with Marine and Pride. This financial information included price
to forecasted 2001 and 2002 earnings per share ("EPS") multiples, price to
forecasted 2001 and 2002 cash flow per share ("CFPS") multiples, firm value to
forecasted 2001 and 2002 EBITDA multiples, equity value to net asset value
("NAV," defined as the estimated current market value of the assets less debt
and preferred stock plus cash divided by the shares outstanding) and equity
value to replacement value of assets ("RVA," defined as the estimated
replacement value of the assets less debt and preferred stock plus cash divided
by the shares outstanding). This analysis was based on a compilation of publicly
available estimates by securities research analysts. The following table
presents, as of May 22, 2001, the range of multiples for the comparable
companies of each of price to projected 2001 and 2002 EPS, price to projected
2001 and 2002 CFPS, firm value to projected 2001 and 2002 EBITDA, equity value
to NAV and equity value to RVA:
PRICE PRICE PRICE PRICE FIRM FIRM EQUITY EQUITY
TO TO TO TO VALUE TO VALUE TO VALUE VALUE
2001 2002 2001 2002 2001 2002 TO TO
COMPARABLE COMPANIES EPS EPS CFPS CFPS EBITDA EBITDA NAV RVA
- -------------------- ----- ----- ----- ----- -------- -------- ------ ------
Transocean Sedco Forex Inc. ... 40.7x 17.9x 16.6x 10.4x 16.1x 10.0x 289.6% 112.2%
Noble Drilling Corporation..... 21.1x 14.0x 14.5x 10.3x 12.3x 8.8x 161.5% 131.0%
Global Marine Inc. ............ 19.5x 12.8x 11.7x 8.8x 9.9x 7.9x 166.7% 118.7%
ENSCO International
Incorporated................. 18.6x 11.7x 12.4x 8.9x 10.9x 7.0x 194.5% 128.3%
Diamond Offshore Drilling,
Inc. ........................ 28.3x 16.9x 16.0x 11.1x 11.9x 7.6x 133.4% 85.9%
Santa Fe International
Corporation.................. 23.1x 13.7x 15.5x 10.5x 14.7x 9.9x 171.9% 119.6%
Rowan Companies, Inc. ......... 17.3x 11.9x 11.7x 8.7x 9.1x 6.4x 150.0% 107.0%
Marine Stand-alone............. 15.2x 11.5x 8.8x 7.5x 7.8x 6.2x 180.8% 122.4%
Pride Stand-alone.............. 22.4x 11.1x 8.3x 5.7x 9.2x 6.1x 192.0% 73.2%
No company utilized in Morgan Stanley's peer group comparison analysis as a
comparable company is identical to Marine or Pride. Accordingly, an analysis of
the above results necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value of
companies to which they are being compared. In evaluating the comparable
companies, Morgan Stanley made judgments and assumptions with regard to industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of Marine or Pride, as well
as the assumed absence of any material adverse change in the financial condition
and prospects of Marine, Pride or the industry or in the financial markets in
general. Mathematical analysis, such as determining the mean or median, is not,
in itself, a meaningful method of using comparable publicly traded company data.
Historical Exchange Ratio Analysis. Morgan Stanley also reviewed the ratio
of the daily closing prices of Pride common stock divided by the corresponding
closing price of Marine common stock over various periods ended May 22, 2001.
Morgan Stanley calculated the average of the historical ratios and computed the
premium represented by the Marine merger consideration, or the common stock
exchange ratio of 1.0 share of Pride common stock for each share of Marine
common stock over the average of the
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historical ratios for various periods. The following table presents the range of
historical ratios over the periods covered compared to the exchange ratio in the
Marine merger.
PERCENTAGE PREMIUM
(DISCOUNT) TO
MARINE SHAREHOLDERS
REPRESENTED BY THE
AVERAGE EXCHANGE RATIO OF
HISTORICAL 1.0 V. THE AVERAGE
TRADING PERIOD ENDED MAY 22, 2001 RATIO HISTORICAL RATIO
- --------------------------------- ---------- -------------------
Last 2 years................................................ 0.871 (14.8)%
Last 1 year................................................. 0.913 (9.5)%
Last 6 months............................................... 0.876 (14.2)%
Last 3 months............................................... 0.891 (12.2)%
Last 1 month................................................ 0.931 (7.4)%
Last 1 week................................................. 1.009 0.9%
As of May 22, 2001.......................................... 1.035 3.4%
Summary of Projections -- EPS. In an effort to assess the impact of this
transaction, Morgan Stanley has reviewed two sets of earnings projections. The
"Street Case" set of projections reflects First Call Estimates, for EPS only,
and Morgan Stanley equity research analyst projections of other financial
metrics for Marine and Pride. The "Conformed Case" set of projections reflects
Marine management projections for Marine and Pride management projections for
Pride, with adjustments based on existing contracts and conformity of spot day
rates and utilization projected by Marine management for similar assets. The
following tables display the EPS and EPS growth used for both the "Conformed
Case" and "Street Case":
CONFORMED CASE
MARINE PRIDE
------ -----
2001E....................................................... $1.96 $1.39
2002E....................................................... $2.55 $3.07
2003E....................................................... $2.84 $3.66
2001E-2003E compound annual growth rate (CAGR).............. 20.4% 62.0%
STREET CASE
MARINE PRIDE
------ -----
2001E....................................................... $1.90 $1.33
2002E....................................................... $2.51 $2.68
Peak........................................................ $3.31 $5.29
2001E-Peak.................................................. 32.0% 99.4%
Summary of Projections -- CFPS. The following table displays the CFPS used
for both the "Conformed Case" and "Street Case":
CONFORMED CASE
MARINE PRIDE
------ -----
2001E....................................................... $3.29 $3.39
2002E....................................................... $3.55 $5.58
2003E....................................................... $3.74 $6.34
2001E-2003E CAGR............................................ 6.6% 36.7%
STREET CASE
MARINE PRIDE
------ -----
2001E....................................................... $3.31 $3.74
2002E....................................................... $3.82 $5.26
Peak........................................................ $4.13 $7.00
2001E-Peak.................................................. 11.6% 36.7%
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Contribution Analysis. Morgan Stanley reviewed certain projected operating
and financial information, including, among other things, earnings and operating
cash flow, for Marine, Pride and the pro forma combined entity resulting from
the mergers, without giving effect to any potential synergies that may result
from the transaction and excluding non-recurring integration related costs or
charges. Morgan Stanley also analyzed and reviewed certain estimates of NAVs and
RVAs. The analysis was performed utilizing information for Marine and Pride
based on estimates from the management of Marine and Pride for the fiscal years
ended 2001 through 2003 and based on various scenarios. The contribution
analysis was performed on the basis of a hypothetical transaction in which
Marine would acquire Pride by the issuance of shares of Marine common stock in
exchange for shares of Pride common stock. This analysis therefore should be
read so that the issuance of fewer shares of Marine common stock for each share
of Pride common stock is more favorable to holders of Marine common stock. Based
on this analysis, the range of implied number of shares of Marine common stock
for each share of Pride common stock ranges from 1.07 to 1.20 based on analyst
price target information. The range based on the contribution analysis was 0.75
to 1.53 based on earnings analysis, 1.10 to 1.67 based on operating cash flow
analysis, 1.03 based on net asset value analysis and 1.66 based on replacement
value analysis. These numbers compare to the effective exchange ratio of 1.00
contained in the merger agreement, or the hypothetical issuance of one share of
Marine common stock for each share of Pride common stock.
Pro Forma Merger Analysis. Morgan Stanley analyzed the pro forma impact of
the mergers on Marine's projected EPS, and CFPS for the fiscal years ended 2001,
2002 and 2003 and peak earnings results, while giving effect to $15 million of
expected pre-tax synergies based on guidance by Marine and Pride management
starting in 2002 and the impact of a reduction in Marine's effective income tax
rate resulting from the merger. The analysis was performed utilizing both the
"Conformed Case" and "Street Case" estimates as described earlier. Based on
these forecasts, the mergers would be expected to be dilutive to Marine's EPS in
2001 and accretive to EPS in 2002, 2003 and accretive to CFPS in 2001, 2002,
2003.
In connection with the review of the mergers by the Marine board, Morgan
Stanley performed a variety of financial and comparative analyses for purposes
of providing its opinion given in connection therewith. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. In arriving at its opinion, Morgan
Stanley considered the results of all of its analyses as a whole and did not
attribute any particular weight to any particular analysis or factor considered
by it. Furthermore, Morgan Stanley believes that selecting any portion of its
analyses or factors considered by it, without considering all analyses and
factors as a whole, would create an incomplete view of the process underlying
its opinion. In addition, Morgan Stanley may have given various analyses and
factors more or less weight than other analyses and factors and may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should therefore not be taken to be Morgan Stanley's view of the actual value of
Marine or Pride.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Marine or Pride. Any
estimates contained in Morgan Stanley's analysis are not necessarily indicative
of future results or actual values, which may be significantly more or less
favorable than those suggested by such estimates. The analyses were prepared
solely as part of Morgan Stanley's analysis of the fairness from a financial
point of view of the merger consideration to be received by holders of Marine
common stock, pursuant to the merger agreement, and were conducted in connection
with the delivery by Morgan Stanley of its opinion dated May 23, 2001 to the
Marine board of directors. The analyses do not purport to be appraisals or to
reflect the prices at which Marine common stock or Pride common stock actually
may be valued or the prices at which their shares may actually trade in the
marketplace. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty.
In addition, as described above, Morgan Stanley's opinion and presentation
to the Marine board of directors was one of many factors taken into
consideration by the Marine board of directors in making its
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decision to approve the merger. Consequently, the Morgan Stanley analyses as
described above should not be viewed as determinative of the opinion of the
Marine board of directors with respect to the value of Marine or of whether the
Marine board of directors would have been willing to agree to different merger
considerations. The merger consideration pursuant to the merger agreement and
other terms of the merger agreement were determined through arm's-length
negotiations between Marine and Pride and were approved by the Marine board of
directors.
Morgan Stanley did not recommend any specific merger consideration to
Marine or that any given merger consideration constituted the only appropriate
merger consideration for Marine in the merger.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition of
Marine or any of its assets, nor did it negotiate with any of the parties, other
than Pride, which expressed interest to it in the possible acquisition of or
merger with Marine or certain of its constituent businesses.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated underwriting,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
ordinary course of Morgan Stanley's trading, brokerage and financing activities,
Morgan Stanley or its affiliates may at any time hold long or short positions,
trade or otherwise effect transactions, for its own account or for the account
of customers, in the equity or debt securities or senior loans of Marine or
Pride.
Morgan Stanley is providing certain investment banking services to Marine
in connection with this transaction, including providing a fairness opinion to
Marine. Morgan Stanley will receive customary fees for those services. In the
past, Morgan Stanley and its affiliates have provided financial advisory and
financing services for Pride and have received fees for rendering these
services.
Pursuant to an engagement letter, dated April 23, 2001 between Morgan
Stanley and Marine, Morgan Stanley provided financial advisory services and a
financial opinion in connection with the merger, and Marine agreed to pay Morgan
Stanley a fee of approximately $11.0 million at the time of the closing of the
merger. Marine has also agreed to reimburse Morgan Stanley for its expenses
incurred in performing its services. In addition, Marine has agreed to indemnify
Morgan Stanley and its affiliates, their respective directors, officers, agents
and employees and each person, if any, controlling Morgan Stanley or any of its
affiliates against certain liabilities and expenses, including certain
liabilities under the federal securities laws, related to or arising out of
Morgan Stanley's engagement and any related transactions.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
Pride
In considering the recommendation of the board of directors of Pride to
vote for the proposal to approve the merger agreement, shareholders of Pride
should be aware that members of the Pride board of directors and Pride's
executive officers may have interests in the mergers that differ from, or are in
addition to, those of Pride shareholders generally. The Pride board of directors
was aware of these interests during its deliberations of the merits of the
mergers and in determining to recommend to the shareholders of Pride that they
vote for the proposal to approve the merger agreement.
Pride Officers and Directors Will Become Officers, Directors and Advisory
Directors of New Pride After the Mergers. Paul A. Bragg, currently the
president and chief executive officer of Pride, James W. Allen, currently the
senior vice president and chief operating officer of Pride, and Earl W. McNiel,
currently the vice president and chief financial officer of Pride, will serve in
those capacities for New Pride upon completion of the mergers. Messrs. Bragg,
Jorge E. Estrada M., William E. Macaulay and Ralph D. McBride, who currently are
directors of Pride, will become directors of New Pride. Messrs. James B.
Clement, Remi Dorval, Christian J. Boon Falleur and James T. Sneed, who are
currently directors of
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Pride, will serve as advisory directors of New Pride for a period of two years
from the time of the mergers and receive annual directors' fees of $30,000 for
such service.
Pride Directors' Stock Option Plan. Pride's directors who are not
employees have been granted options to purchase shares of Pride common stock
under Pride's 1993 Directors' Stock Option Plan. Some of these options are not,
at present, fully exercisable by the directors. The Plan provides for the
acceleration of full exercisability of options upon a "change of control" of
Pride, as defined in the plan. As so defined, approval of the mergers by the
board of directors of Pride has resulted in a "change of control."
Marine
In considering the recommendation of the board of directors of Marine to
approve the merger agreement, the Marine shareholders should be aware that
members of both the Marine's board of directors and certain members of
management may have interests in the mergers that differ from, or are in
addition to, those of the shareholders generally. The board of directors of
Marine was aware of each of these competing interests in the course of its
evaluation of the proposed mergers and its ultimate recommendation to the
shareholders to approve the merger agreement.
Jan Rask Employment Agreement. Jan Rask, who is currently president and
chief executive officer of Marine, will enter into a new two-year employment
agreement with New Pride to serve as managing director for acquisitions and
special products. The agreement will provide for an annual salary equal to his
current salary of $450,000 and guaranteed annual bonuses with respect of 2001 of
140% of base salary (less other amounts paid for 2001 bonus), payable in 2002,
and 100% of base salary for periods thereafter.
Severance Payments to Marine Executives. Sixteen Marine officers and key
employees, including Messrs. Rask and O'Keefe, have change of control provisions
in their employment or severance agreements that will be triggered by the
mergers. Under these agreements, a Marine executive will be entitled to receive
a severance payment of one-half to two (three in the case of Mr. Rask) times his
annual salary and bonus if, within specified periods of up to two years after
the mergers, New Pride terminates the executive's employment or the executive
terminates his employment after a material change in the executive's employment
terms (provided the termination by the executive is on or before the 30th day
after the change in employment terms or, in many cases, the date nine months
after the mergers, if later). Six of the agreements (including those with
Messrs. Rask and O'Keefe) also provide for a gross up for any excise taxes under
Section 280G of the Internal Revenue Code. Messrs. Rask and O'Keefe and one
other executive officer have the right to receive these severance payments if
the executive terminates his employment within two years after the mergers for
any reason. The payment to Mr. Rask under this provision would be $2.7 million
(plus a gross up for any excise taxes).
Marine Options and Restricted Stock. Pursuant to their existing contracts,
upon completion of the mergers, all outstanding shares of Marine restricted
stock and all options to purchase Marine common stock that are held by officers,
directors and employees of Marine will become fully vested, and all of the stock
options will become fully exercisable.
Marine Directors Will Become Directors and Advisory Directors of New
Pride. Under the terms of the merger agreement, Messrs. Robert L. Barbanell,
David A. B. Brown, J. C. Burton, and David B. Robson, who are currently
directors of Marine, will become directors of New Pride. Mr. Barbanell will
serve as chairman of the board of directors of New Pride. Messrs. Howard I. Bull
and Robert C. Thomas, who are currently directors of Marine, will serve as
advisory directors of New Pride for a period of two years from the time of the
mergers and receive annual directors' fees of $30,000 for such service.
Indemnification and Insurance
The merger agreement provides that each person who had been an officer or
director of Pride or Marine before the mergers will be indemnified by New Pride
after the mergers to the fullest extent permitted under applicable law. The
rights of these officers and directors will be in addition to any rights
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they may have under New Pride's certificate of incorporation and bylaws. The
merger agreement further provides that, for six years after the mergers, New
Pride will maintain directors' and officers' liability insurance policies that
provide coverage to those officers and directors of Pride or Marine covered by
an existing policy that are substantially no less advantageous than the existing
policies. New Pride will not, however, be required to pay annual premiums in
excess of 150% of the last annual premium paid by Pride or Marine before the
execution of the merger agreement.
NEW PRIDE AFTER THE MERGERS
The board of directors of New Pride will consist of eight directors, four
of whom are currently directors of Pride and four of whom are currently
directors of Marine. The four directors of New Pride who are currently directors
of Pride will be Paul A. Bragg, Jorge E. Estrada M., William E. Macaulay, and
Ralph D. McBride. The four directors of New Pride who are currently directors of
Marine are Robert L. Barbanell, David A. B. Brown, J. C. Burton, and David B.
Robson. Robert L. Barbanell, who currently serves as the chairman of the board
of Marine, will be the chairman of the board of New Pride. The principal
executive officers of New Pride will be Paul A. Bragg, chief executive officer,
James W. Allen, chief operating officer, John C. G. O'Leary, vice
president -- international marketing, Earl W. McNiel, chief financial officer,
T. Scott O'Keefe, vice president for strategic planning and Robert W. Randall,
vice president -- general counsel and secretary.
Robert L. Barbanell, 71, has been a director of Marine since June 1995. Mr.
Barbanell has served as President of Robert L. Barbanell Associates, Inc., a
financial consulting firm, since July 1994. He is also a director of Cantel
Medical Corp. and Blue Dolphin Energy Company.
Paul A. Bragg, 45, has been chief executive officer and a director of Pride
since March 1999 and president since February 1997 and was chief operating
officer from February 1997 to April 1999. He joined Pride in July 1993 as its
vice president and chief financial officer. From 1988 until he joined Pride, Mr.
Bragg was an independent business consultant and managed private investments. He
previously served as vice president and chief financial officer of Energy
Service Company, Inc. (now ENSCO International, Inc.), an oilfield services
company, from 1983 through 1987.
David A. B. Brown, 57, has been a director of Marine since June 1995. Mr.
Brown has served as president of The Windsor Group, Inc., a strategy consulting
firm, since 1984. Mr. Brown was chairman of the board of the Comstock Group,
Inc. from 1988 to 1990. Mr. Brown is a director of BTU International Inc., EMCOR
Group, Inc., Technical Communications Corporation and NS Group, Inc.
J. C. Burton, 62, has been a director of Marine since May 1998. He served
in various engineering and managerial positions with Amoco Corporation from 1963
until his retirement on March 31, 1998. Most recently, he was group vice
president, International Operations Group for Amoco Exploration and Production
Company.
Jorge E. Estrada M., 53, has been a director of Pride since October 1993.
For more than five years, Mr. Estrada has been president and chief executive
officer of JEMPSA Media and Entertainment, a company specializing in the Spanish
and Latin American entertainment industry. Previously, Mr. Estrada served as
president -- worldwide drilling division of Geosource and vice president of
Geosource Exploration Division -- Latin America.
William E. Macaulay, 55, became a director of Pride in July 1999. Mr.
Macaulay is chairman and chief executive officer of First Reserve Corporation,
which manages two investment funds that own approximately 15% of Pride's common
stock. He is a director of the following publicly held companies: Chicago Bridge
& Iron Company, an international engineering and construction company, National-
Oilwell, Inc., a distributor of oilfield equipment and machinery, Weatherford
International, Inc., an oilfield services company, Superior Energy Services,
Inc., a provider of specialized oilfield services and equipment, Maverick Tube
Corporation, a manufacturer of oilfield tubulars, line pipe and structural
steel, TransMontaigne Inc., a company engaged in transporting, terminalling,
storing and marketing refined
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petroleum products, and Grant Prideco, Inc., a company engaged in drill stem
technology development and drill pipe manufacturing.
Ralph D. McBride, 54, has been a director of Pride since September 1995 and
vice chairman of the board since March 1999. Mr. McBride has been a partner with
the law firm of Bracewell & Patterson, L.L.P. in Houston, Texas, since 1980.
Bracewell & Patterson provides legal services to Pride from time to time. Pride
paid approximately $800,000 to Bracewell & Patterson for services rendered
during 2000.
David B. Robson, 61, has been a director of Marine since May 1998. Mr.
Robson has been serving as chairman of the board of Veritas DGC Inc. since
January 2000. He served as both chairman of the board and chief executive
officer of Veritas DGC Inc. from August 1996 until January 2000. Prior thereto,
he held similar positions with Veritas Energy Services Inc. and its predecessors
since 1974.
James W. Allen, 57, was named senior vice president -- operations of Pride
in February 1996 and Pride's chief operating officer in April 1999. He joined
Pride in January 1993 as its vice president -- international operations. From
1988 through 1992, Mr. Allen was an independent business consultant and managed
private investments. From 1984 to 1988, he was Vice President Latin America for
ENSCO. Mr. Allen has 28 years of oilfield experience with several different
companies.
John C. G. O'Leary was named vice president -- international marketing of
Pride in March 1997 in connection with Pride's acquisition of Forasol-Foramer
N.V. Mr. O'Leary had been manager, marketing and business development of Forasol
since June 1993, with primary responsibility for worldwide business development.
Mr. O'Leary joined Forasol S.A. in August 1985.
Earl W. McNiel, 42, has been vice president and chief financial officer of
Pride since February 1997. He joined Pride in September 1994 as its chief
accounting officer. From 1990 to 1994, Mr. McNiel served as chief financial
officer of several publicly owned waste management companies. From 1987 to 1990,
he was employed by ENSCO as manager, finance.
T. Scott O'Keefe, 45, joined Marine in January 1998 as senior vice
president, chief financial officer and secretary. Prior to joining Marine he was
senior vice president and chief financial officer of Grey Wolf, Inc. since
September 1996. From April 1995 through August 1996, Mr. O'Keefe was a financial
consultant providing services to various companies including Grey Wolf, Inc.
Prior to April 1995, he was with Convest Energy Corporation and its affiliates
for approximately ten years, most recently as vice president and chief financial
officer.
Robert W. Randall has been vice president and general counsel of Pride
since May 1991. He was elected secretary in 1993. Prior to 1991, he was senior
vice president, general counsel and secretary for Tejas Gas Corporation, a
natural gas transmission company.
CONVERSION OF STOCK OPTIONS AND ASSUMPTION OF STOCK PLANS
Pursuant to the merger agreement, each option to acquire Marine common
stock and Pride common stock will remain outstanding and be assumed by New
Pride. Each option to acquire Marine common stock and Pride common stock will be
deemed to constitute an option to acquire the same number of shares of New Pride
common stock and will be subject to the same terms and conditions as under the
applicable Marine or Pride stock option plan and option agreement, except that
options to acquire Marine common stock will become fully vested and exercisable
as a result of the mergers, pursuant to the "change of control" provisions of
the Marine stock option plans.
EMPLOYEE BENEFIT MATTERS
Upon the reincorporation merger, all employees of Marine, Pride and their
subsidiaries will be employed by New Pride or its subsidiaries. New Pride has
agreed not to terminate the employment of ten officers and key employees of
Marine prior to January 1, 2002.
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All Marine and Pride benefit plans in effect at the time of the mergers
will remain in effect, to the extent practicable, until otherwise determined by
New Pride. If any of the benefit plans are not continued, New Pride will for a
period of one year after the mergers maintain benefit plans that are no less
favorable than those provided to such employees immediately prior to the
mergers. However, if it would be unduly burdensome or would materially increase
the cost to New Pride to provide plans which are no less favorable than those
previously provided by Marine or Pride, then New Pride will not be obligated to
continue such benefit plans.
The matters described in this section are summaries of provisions of the
merger agreement that are subject to waiver or amendment by the parties to the
merger agreement. These provisions are not intended to grant third party
beneficiary rights to any person that is not a party to the merger agreement.
EXCHANGE OF MARINE AND PRIDE COMMON STOCK CERTIFICATES FOR NEW PRIDE COMMON
STOCK CERTIFICATES
Each share of Marine common stock outstanding immediately before the
effective time of the Marine merger will be converted into one share of Pride
common stock. Immediately after the Marine merger, each outstanding share of
Pride common stock, including the shares issued in the Marine merger, will, as a
result of the reincorporation merger, be converted into one share of common
stock of New Pride. Following the mergers, New Pride's exchange agent, American
Stock Transfer & Trust Company, will mail to each shareholder of Marine and
Pride a letter of transmittal and instructions for the surrender of Marine and
Pride common stock certificates in exchange for New Pride common stock
certificates. When you deliver your certificates of Marine or Pride common stock
to the exchange agent, along with a properly executed letter of transmittal and
any other required documents, you will receive certificates representing, or
statements indicating book-entry ownership of, the number of shares of New Pride
common stock that you are entitled to receive under the merger agreement. The
surrendered certificates will be canceled.
Neither New Pride nor the exchange agent or any other person will be liable
to any former Marine shareholder for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
YOU SHOULD NOT SUBMIT YOUR STOCK CERTIFICATES UNTIL YOU RECEIVE THE
TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF TRANSMITTAL FROM THE EXCHANGE
AGENT.
DIVIDENDS
Neither Pride nor Marine has paid any cash dividends on its common stock
since becoming a publicly held corporation. New Pride initially intends to
retain all available earnings for use in its business and does not anticipate
paying dividends on its common stock at any time in the foreseeable future. In
addition, the ability of New Pride to pay cash dividends in the future will be
restricted by the covenants related to debt that it will assume from Pride. The
desirability of paying such dividends could also be materially affected by U.S.
and foreign tax considerations.
ACCOUNTING TREATMENT AND CONSIDERATIONS
The mergers are intended to qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting,
the recorded historical carrying amounts of the assets and liabilities of Pride
and Marine will be carried forward to the financial statements of the combined
company at recorded amounts, results of operations of the combined company will
include income of Pride and Marine for the entire fiscal period in which the
combination occurs, and the historical results of operations of the separate
companies for fiscal years prior to the mergers will be combined and reported as
the results of operations of the combined company.
Pride and Marine each will use commercially reasonable best efforts to
obtain a letter from their respective independent accountants in which their
respective independent accountants concur with the conclusions of management
that no condition exists that would preclude a pooling of interests accounting
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treatment. Certain events, including certain transactions with respect to Pride
common stock or Marine common stock by affiliates of Pride or Marine,
respectively, may prevent the mergers from qualifying as a pooling of interests
for accounting and financial reporting purposes. For information concerning
certain restrictions to be imposed on the transferability of New Pride common
stock to be received by affiliates in order, among other things, to ensure the
availability of pooling of interests accounting treatment, see "Federal
Securities Law Consequences; Resale Restrictions."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Scope of Discussion
The following discussion summarizes the material U.S. federal income tax
consequences of the Marine merger and the reincorporation merger to Marine,
Pride, the Marine shareholders and the Pride shareholders. For a description of
the manner in which the mergers will be carried out, see "The Merger Agreement."
This discussion assumes that shareholders hold Pride and Marine shares as
capital assets. Tax consequences that are different from or in addition to those
here described may apply to shareholders who are subject to special treatment
under U.S. tax law, such as:
- tax-exempt organizations;
- financial institutions, insurance companies, and broker-dealers;
- persons who hold their Marine or Pride shares as part of a hedge,
straddle, wash sale, synthetic security, conversion transaction or other
integrated investment comprised of Marine or Pride shares and one or more
other investments;
- persons who acquired their shares in compensatory transactions; or
- shareholders who are not U.S. persons within the meaning of the Internal
Revenue Code (the "Code").
THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE TAX
CONSEQUENCES OF THE MERGERS TO A MARINE OR PRIDE SHAREHOLDER. EACH SHAREHOLDER
SHOULD CONSULT A TAX ADVISER AS TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF
THE TRANSACTION, INCLUDING ANY SUCH CONSEQUENCES ARISING FROM THE PARTICULAR
FACTS AND CIRCUMSTANCES OF THE SHAREHOLDER. SHAREHOLDERS SHOULD ALSO CONSULT A
TAX ADVISOR AS TO ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF
THE TRANSACTION.
This discussion is limited to U.S. federal income tax considerations and
does not address other U.S. federal tax, state, local or foreign tax
considerations or consequences. Furthermore, we have not obtained, nor do we
intend to obtain, a ruling from the Internal Revenue Service (the "Service")
with respect to the U.S. federal income tax consequences of the mergers. This
summary is not binding on the Service or the courts, and the Service or the
courts may disagree with the conclusions expressed herein. If the Service were
able to successfully challenge the tax-free status of the Marine merger, the
shareholders would be required to recognize gain or loss on each share of Marine
common stock exchanged for Pride common stock. In addition, Marine would
recognize gain in a substantial amount on the transfer of its assets in the
merger. Likewise, if the Service were able to successfully challenge the
tax-free status of the reincorporation merger, the shareholders would be
required to recognize gain or loss on each share of Pride common stock exchanged
for New Pride common stock. Pride would also recognize gain in a substantial
amount on the transfer of its assets in the reincorporation merger.
The opinions of counsel described below will be based on representations
made by officers of Marine and Pride, which are contained in officers'
certificates, and upon existing U.S. federal income tax law, including
legislation, regulations, administrative rulings and court decisions that are in
effect on the date of this proxy statement/prospectus. Federal income tax law is
subject to change, and changes may have retroactive effect. In addition, counsel
have relied and will rely upon the accuracy of the information in this joint
proxy statement/prospectus and in other documents filed with the SEC by Marine
and Pride.
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Any change in present law, or the failure of factual assumptions or
representations to be true, correct and complete in all material respects, could
affect the continuing validity of counsel's tax opinions.
Tax Opinions
It is a condition to Marine's obligation to close the mergers that Marine
shall have received from Porter & Hedges, L.L.P. its opinion dated the closing
date to the effect that, for United States federal income tax purposes, (i) the
Marine merger and the reincorporation merger will each qualify as a
reorganization under section 368(a) of the Code, (ii) no gain or loss will be
recognized by the shareholders of Marine who exchange Marine common stock solely
for Pride common stock pursuant to the Marine merger, and who then exchange such
Pride common stock solely for New Pride common stock pursuant to the
reincorporation merger, and (iii) no gain or loss will be recognized by Marine
or Pride on the transfer of its respective assets in the mergers.
It is a condition to Pride's obligation to close the mergers that Pride
shall have received from Baker Botts L.L.P. its opinion dated the closing date
to the effect that, for United States federal income tax purposes, (i) the
Marine merger and the reincorporation merger will each qualify as a
reorganization under section 368(a) of the Code, (ii) no gain or loss will be
recognized by the shareholders of Pride, including the shareholders of Marine
who received Pride common stock in the Marine merger, who exchange Pride common
stock solely for New Pride common stock pursuant to the reincorporation merger,
and (iii) no gain or loss will be recognized by Marine or Pride on the transfer
of its respective assets in the mergers.
Treatment of the Marine Shareholders as a Result of the Mergers
Subject to the qualifications and limitations set forth in "Scope of
Discussion" above and assuming that the Marine merger and the reincorporation
merger each qualify as a reorganization under section 368(a) of the Code, in the
opinion of Porter & Hedges, L.L.P., the material United States federal income
tax consequences of the Marine merger and the reincorporation merger to the
shareholders of Marine are as follows:
- No gain or loss will be recognized by the holders of Marine common stock
upon the receipt of Pride common stock in exchange therefor, or upon the
exchange of that Pride common stock for New Pride common stock.
- The aggregate tax basis of the Pride common stock received in the Marine
merger will be the same as the aggregate tax basis of the Marine common
stock surrendered in the exchange. Likewise, the aggregate tax basis of
the New Pride common stock received in the reincorporation merger will be
the same as the aggregate tax basis of the Pride common stock surrendered
in the exchange.
- The holding period of the Pride common stock received by each holder of
Marine common stock in the Marine merger will include the period for
which the Marine common stock surrendered in the exchange was held,
provided the Marine common stock surrendered was held as a capital asset
at the time of the merger. Likewise, the holding period of the New Pride
common stock received in the reincorporation merger in exchange for Pride
common stock will include the period for which that Pride common stock
was held (including any extended holding period described in the
immediately preceding sentence), provided the Pride common stock
surrendered was held as a capital asset at the time of the
reincorporation merger.
Treatment of the Pride Shareholders, Including the Former Marine Shareholders,
as a Result of the Reincorporation Merger
Subject to the qualifications and limitations set forth in "Scope of
Discussion" above and assuming that the reincorporation merger qualifies as a
reorganization under section 368(a) of the Code, in the opinion of Baker Botts
L.L.P., the material United States federal income tax consequences of the
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reincorporation merger to the shareholders of Pride, including the former Marine
shareholders, are as follows:
- No gain or loss will be recognized by the Pride shareholders, including
the former Marine shareholders, upon the receipt of New Pride common
stock in exchange for Pride common stock.
- The aggregate tax basis of the New Pride common stock received in the
merger will be the same as the aggregate tax basis of the Pride common
stock surrendered in the exchange.
- The holding period of the New Pride common stock received in the
reincorporation merger by each holder of Pride common stock, including
the shareholders of Marine who received Pride common stock in the Marine
merger, will include the period for which the Pride common stock
surrendered in the exchange was held, provided the Pride common stock
surrendered was held as a capital asset at the time of the
reincorporation merger.
Treatment of Pride and Marine on the Transfer of Their Respective Assets in
the Mergers
Subject to the qualifications and limitations set forth in "Scope of
Discussion" above and assuming that the Marine merger and the reincorporation
merger qualify as reorganizations under section 368(a) of the Code, in the
opinion of Porter & Hedges, L.L.P. and Baker Botts L.L.P., the material United
States federal income tax consequences of the Marine merger and the
reincorporation merger to Pride and Marine are as follows:
- No gain or loss will be recognized by Marine upon the transfer of its
assets in the Marine merger to AM Merger, Inc.
- No gain or loss will be recognized by Pride upon the transfer of its
assets in the reincorporation merger to New Pride.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the parties
cannot complete the Marine merger until they have notified and furnished
information to the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice and a specified waiting period expires or is
terminated. Pride and Marine made their filings under the Hart-Scott-Rodino Act
on June 13, 2001 and the waiting period expired on , 2001; however,
this clearance process does not have the effect of conferring antitrust
immunity. Certain other countries in which Pride and Marine have operations also
may review the mergers under their antitrust laws. At any time before the
completion of the mergers, any relevant governmental authority or a private
person or entity could seek under antitrust laws, among other things, to enjoin
the mergers or to cause Pride or Marine to divest assets or businesses as a
condition to completing the mergers. Furthermore, any of the relevant
governmental authorities or a private person or entity could seek, under
antitrust laws, to take action against Pride or Marine after the completion of
the mergers. Pride and Marine are unable to predict whether any action will be
taken or what the outcome of any action may be.
While no assurances can be given that the mergers will not be challenged
or, if challenged, Pride and Marine will prevail, based on the respective
positions of Pride, Marine and their competitors in the offshore contract
drilling industry, Pride and Marine believe that consummation of the mergers in
accordance with the terms of the merger agreement will not violate any antitrust
or other laws.
The parties' obligation to complete the mergers is subject to the condition
that no statute, rule, regulation, executive order, decree, ruling or cease and
desist order shall have been entered which prohibits the completion of the
mergers and that no party to the merger agreement shall be subject to any
decree, order or injunction of a court of competent jurisdiction that prohibits
the completion of the mergers. The parties have agreed, however, that before
invoking these conditions, they will use commercially reasonable best efforts to
have the decree, order or injunction lifted or vacated.
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FEDERAL SECURITIES LAWS CONSEQUENCES; RESALE RESTRICTIONS
All shares of New Pride common stock received by shareholders of Marine
upon consummation of the mergers will be freely transferable by those holders
who are not deemed to be "affiliates" (as defined under the Securities Act but
generally including executive officers, directors and significant holders of
Marine common stock).
Pursuant to the merger agreement, Marine and Pride has each agreed to use
its commercially reasonable best efforts to cause each person identified as an
affiliate for purposes of Rule 145 of the Securities Act and for purposes of
qualifying the mergers for pooling of interests accounting treatment (the "Rule
145 Affiliates") to deliver to Pride a written agreement that such person will
not sell, pledge, transfer or otherwise dispose of any shares of New Pride
common stock issued to such Rule 145 Affiliates in the mergers, except pursuant
to an effective registration statement or in compliance with Rule 145 or an
exemption from the registration requirements of the Securities Act. Marine and
Pride has each also agreed to use their commercially reasonable best efforts to
cause each person identified as a Rule 145 Affiliate of either Marine or Pride
to sign a written agreement that such Rule 145 Affiliate will not sell or in any
other way reduce such party's risk relative to shares of New Pride, Pride or
Marine common stock for the period of time commencing on the 30th day prior to
the effective time of the mergers and ending at such time as financial results
covering at least 30 days of post-merger operations of New Pride have been
published, except as permitted by applicable SEC Accounting Bulletins. New Pride
will be entitled to place restrictive legends on any shares of New Pride common
stock received by Rule 145 Affiliates.
This joint proxy statement/prospectus does not cover any resales of the New
Pride common stock to be received by Marine's and Pride's shareholders in the
mergers, and no person is authorized to make any use of this joint proxy
statement/prospectus in connection with any resale.
RIGHTS OF DISSENTING SHAREHOLDERS
Marine Shareholders
Marine shareholders will not be entitled to any appraisal rights under the
Texas Business Corporation Act or any other applicable law in connection with
the mergers.
Pride Shareholders
Pride shareholders will not be entitled to any appraisal rights under the
Louisiana Business Corporation Law or any other applicable law in connection
with the mergers.
NEW YORK STOCK EXCHANGE LISTING
New Pride has applied to list the shares of New Pride common stock on the
New York Stock Exchange under the symbol "PDE." The completion of the mergers is
conditioned upon the NYSE's approval of New Pride's listing application.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement, a
copy of which is attached as Annex A to this joint proxy statement/prospectus
and is incorporated in this joint proxy statement/prospectus by reference. This
summary is qualified in its entirety by reference to the merger agreement. You
should read the entire merger agreement because it, and not this summary, is the
legal document that governs the merger.
The merger agreement sets forth the terms of the two mergers, the Marine
merger and the reincorporation merger.
MARINE MERGER
At the effective time of the Marine merger, Marine will merge with and into
AM Merger, Inc., a subsidiary of Pride formed for purposes of the merger
agreement. AM Merger, Inc., which will be renamed Pride Marine, Inc., will be
the surviving corporation of the Marine merger, and the separate corporate
existence of Marine will cease to exist. The Marine merger will take place
promptly after all of the conditions described in "-- Conditions to the Mergers"
are satisfied or waived. The Marine merger will be effective at the time Pride
and Marine file a certificate of merger with the Secretary of State of the State
of Delaware and articles of merger with the Secretary of the State of Texas or
at a later time as they agree and specify in the certificate and articles of
merger.
In the Marine merger, each share of Marine common stock will be converted
into one share of Pride common stock.
The Marine merger has the effect of converting Marine into a subsidiary of
Pride, and converting Marine shares into Pride shares.
REINCORPORATION MERGER
Following the effective time of the Marine merger and at the effective time
of the reincorporation merger, Pride will merge with and into New Pride, a
Delaware corporation. New Pride will be the surviving corporation and the
separate corporate existence of Pride will cease to exist. The reincorporation
merger will take place promptly after the effective time of the Marine merger.
The reincorporation merger will be effective at the time Pride and New Pride
file certificates of merger with the Secretary of State of the State of Delaware
and with the Secretary of the State of Louisiana or at a later time as they
agree and specify in the Delaware certificate of merger.
In the reincorporation merger, each holder of Pride common stock (including
holders of the shares issued to the former Marine shareholders) will receive,
for each Pride share of common stock held, one share of common stock of New
Pride.
The reincorporation merger has the effect of changing the state of
incorporation of the combined company from Louisiana to Delaware, and converting
Pride shares into New Pride shares.
COVENANTS
Interim Operations
Pride and Marine agreed to take or refrain from taking the actions
described below from the date of the merger agreement, May 23, 2001, until the
mergers are completed or the merger agreement is terminated. Compliance with
these covenants may be modified to allow the transactions contemplated by the
merger agreement or by the written consent of Pride and Marine.
Except as disclosed in the schedules to the merger agreement, each of Pride
and Marine will use its commercially reasonable best efforts to:
- conduct its operations according to their usual, regular and ordinary
course;
- preserve its business organization and goodwill;
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- keep available the services of its officers and employees;
- maintain satisfactory business relationships;
- not amend its charter documents;
- promptly notify the other party of any material change in its condition
or business, any termination, cancellation, repudiation or material
breach of material contracts or any material litigation or material
governmental complaints, investigations or hearings, or the material
breach of any of its representations and warranties in the merger
agreement;
- promptly deliver to the other party any SEC filings it makes;
- not change any material accounting principle or practice except as
required by a change in generally accepted accounting principles;
- not issue any shares of its capital stock, effect any stock split or
otherwise change its capitalization, except upon exercise of options,
warrants and other rights that exist on the date of the merger agreement
or that the merger agreement permits to be issued;
- not grant any new options, warrants or other rights to acquire shares of
its capital stock;
- not amend or modify any options, warrants or other rights to acquire
shares of its capital stock existing on the date of the merger agreement;
- not increase any compensation or benefits or enter into, amend or extend
any employment or consulting agreement with any former, present or future
employees, except in the ordinary course of business consistent with past
practice;
- not increase any compensation or benefits or enter into, amend or extend
any employment agreement with any former, present or future officer or
director;
- not adopt any new employee benefit plan or agreement (including any stock
option, stock benefit or stock purchase plan) or amend (except as
required by law) any existing employee benefit plan in any material
respect, except for changes that are less favorable to the plan
participants;
- not terminate any executive officer without cause or give any executive
officer a right to terminate employment if the termination would require
enhanced separation payments at the time of the merger, except as
permitted by the merger agreement and except as approved by good faith
action of its board of directors after the other party has received
advance written notice of the proposed action and the party has consulted
in advance with the other party regarding the action;
- not permit any holder of a stock option to have shares withheld upon
exercise, for tax purposes, in excess of the minimum number needed to
satisfy federal and state tax withholding requirements;
- not declare, set aside or pay any dividend or make other distribution or
payment with respect to any shares of its capital stock and not redeem,
purchase or otherwise acquire any shares of its capital stock;
- not sell, lease or otherwise dispose of any material assets, except sales
of surplus equipment or sales of other assets in the ordinary course of
business;
- not acquire or agree to acquire in any manner any business entity or
assets for an aggregate consideration in excess of $1 million or where a
filing under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any non-U.S. competition, antitrust or premerger notification law
is required, except pursuant to contractual commitments in effect as of
the date of the merger agreement or as disclosed prior to the effective
time of the merger;
- maintain insurance in such amounts and against such risks and losses as
is customary for it;
- not make or rescind any material tax election;
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- not settle or compromise any material tax claim or controversy;
- not materially change any of its methods of reporting relating to taxes,
except as may be required by applicable law;
- not incur or guarantee any indebtedness for borrowed money;
- not issue or sell any debt securities or warrants or rights to acquire
any debt securities, or guarantee any debt securities of others;
- not enter into any material lease or create any material encumbrance on
any of its property in connection with any indebtedness, except in the
ordinary course of business;
- not make capital expenditures in excess of $1 million per month over its
previously disclosed capital expenditure forecast, except for specified
capital expenditures covered by insurance;
- not purchase or acquire any capital stock of the other party;
- not take any action reasonably likely to delay materially or adversely
affect the ability of any of the parties to obtain required consents,
authorizations, orders or approvals of governmental or other regulatory
authorities or the expiration of any applicable waiting period required
to consummate the transactions contemplated by the merger agreement;
- not engage in any business activities, or liquidate, merge or consolidate
with any other corporation or permit any other corporation to merger into
or consolidate with it, unless allowed by the merger agreement;
- not agree in writing or otherwise to take any action inconsistent with
the foregoing or with the covenants described below applicable to it; and
- not terminate, amend, modify or waive any provision of any agreement with
a standstill covenant to which it is a party and enforce, to the fullest
extent permitted under applicable law, the provisions of these
agreements, including obtaining injunctions to prevent any breaches of
the agreements and enforcing specifically the terms and provisions of the
agreements, unless the board of directors consults with outside legal
counsel and concludes in good faith that doing so would be inconsistent
with the board's fiduciary duties.
Additional Agreements
Pursuant to the merger agreement, Pride and Marine also agreed that:
- the parties will promptly make their respective filings and make any
other required submissions under the U.S. Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and any applicable non-U.S. competition,
antitrust or premerger notification laws with respect to the mergers;
- the parties will use their commercially reasonable best efforts to
cooperate with one another in:
- determining which filings the parties must make before the effective
time of the mergers with, and which consents, approvals, permits or
authorizations the parties must obtain before the effective time of the
mergers from, governmental or regulatory authorities of the United
States and other jurisdictions in connection with the mergers and the
related transactions; and
- making all such filings and seeking all such consents, approvals,
permits or authorizations in a timely manner without causing a material
adverse effect on either party;
- the parties will promptly notify each other of any communication from any
governmental authority concerning the merger agreement or related
transactions and permit the other party to review in advance any proposed
communication to any governmental entity;
- the parties will not agree to participate in any meeting or discussion
with any governmental entity regarding any filing, investigation or other
inquiry about the merger agreement or related
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transactions unless the other party is consulted in advance and given the
opportunity to attend and participate;
- the parties will furnish each other copies of all correspondence, filings
and communications with any governmental or regulatory authorities on the
one hand, and their affiliates and representatives on the other hand,
about the merger agreement and related transactions;
- the parties will furnish each other with such necessary information and
reasonable assistance that the other parties reasonably request in
connection with their preparation of necessary filings, registrations or
submissions of information to any governmental or regulatory authorities;
- the parties will use their commercially reasonable best efforts to avoid
the entry of, or have vacated, terminated or modified, any decree, order
or judgment that would prevent or delay the closing of the mergers;
- the parties will use their commercially reasonable best efforts to take
any and all steps necessary to obtain any consents or eliminate any
impediments to the mergers;
- each party agrees that nothing in the merger agreement requires it to:
- dispose of any its assets or limit its freedom of action with respect to
any of its businesses;
- consent to any disposition of its assets or limits on its freedom of
action with respect to any of its businesses;
- commit, agree or consent to dispose of any of its assets or limit its
freedom of action with respect to any of its businesses;
- obtain any consents, approvals, permits or authorizations or to remove
any impediments to the mergers relating to antitrust laws; or
- avoid the entry of, or to effect the dissolution of, any injunction,
restraining order or other order in any suit or proceeding relating to
antitrust laws;
other than matters that do not and are not reasonably likely to,
individually or in the aggregate, have a material adverse effect on either
party or on New Pride;
- the parties will use commercially reasonable best efforts to cause the
mergers to qualify as a reorganization within the meaning of Section
368(a) Internal Revenue Code of 1986 and will not take actions, cause
actions to be taken, or fail to take actions to prevent either of the
mergers from qualifying as a reorganization within the meaning of Section
368(a) or cause the Marine shareholders who exchange Marine common stock
solely for Pride common stock to recognize taxable gain under Section
368(a);
- the parties will provide to each other access to their respective
properties, records, files and other information as the other parties may
reasonably request;
- the parties will consult with one another and mutually agree upon any
press releases and other public announcements regarding the mergers;
- Pride will cause New Pride to prepare and submit to the New York Stock
Exchange a listing application covering New Pride's common stock issuable
in the reincorporation merger and will use commercially reasonable
efforts to obtain, before the effective time of the reincorporation
merger, the NYSE's approval for the listing of those share;
- Pride will promptly prepare and submit to the New York Stock Exchange a
listing application covering the shares of Pride common stock covered by
the registration statement of which this joint proxy statement/prospectus
is a part and shall use commercially reasonable best efforts to obtain,
before the effective time of the merger, the NYSE's approval for the
listing of those shares;
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- the parties will use their commercially reasonable best efforts to have
timely delivered to the other party a "comfort" letter from their
independent public accountants;
- each party will provide each other party, at least five business days
prior to the effective time of the Marine merger, a list of persons who
may be its Rule 145 affiliates, and each party will use commercially
reasonable best efforts to obtain from their respective Rule 145
affiliates an undertaking not to transfer Pride or New Pride common stock
issued to such person pursuant to the mergers except (1) pursuant to an
effective registration statement, (2) in compliance with Rule 145 or (3)
pursuant to an exemption from the registration requirements under the
Securities Act;
- each party will pay all costs and expenses incurred by it in connection
with the mergers, regardless of whether the mergers become effective,
other than costs that are specified to be shared or reimbursed under the
merger agreement;
- neither of the parties will take any action to terminate their respective
shareholder rights plans, redeem any of the rights issued thereunder,
amend their respective rights agreements in a manner adverse to the other
party or cause any person to trigger the issuance of rights, except for
actions taken to enter into an agreement that is superior to the mergers;
- the parties will take all necessary action to convene meetings of their
respective shareholders as promptly as practicable to consider and vote
on the merger agreement and the approval of the mergers, and to use their
best efforts to hold their respective shareholder meetings on the same
day;
- the parties will not take any action or fail to take any action which
would prevent or likely prevent the mergers from qualifying for pooling
of interest accounting treatment;
- each person who had been an officer or director of Pride or Marine before
the mergers will be indemnified by New Pride after the mergers to the
fullest extent permitted under applicable law. The rights of these
officers and directors will be in addition to any rights they may have
under New Pride's certificate of incorporation and bylaws. The merger
agreement further provides that, for six years after the merger, New
Pride will maintain officers' and directors' liability insurance policies
that provide coverage to the existing Pride and Marine officers and
directors covered by an existing policy that are substantially no less
advantageous to the indemnified parties than the existing policies. New
Pride will not, however, be required to pay annual premiums in excess of
150% of the sum of the last annual premium paid by each of Pride or
Marine before the execution of the merger agreement;
- Pride will assume all of Marine's employee stock options, incentives,
awards and benefits plans identified in the merger agreement on the same
terms and conditions as were applicable before execution of the merger
agreement. Pride will take all necessary action to reserve for issuance a
sufficient number of shares of Pride common stock to do so;
- New Pride will assume all of Pride's employee stock options, incentives,
awards and benefits plans identified in the merger agreement (including
all of the Marine stock options, incentives, awards and benefits plans
assumed by Pride) on the same terms and conditions as were applicable
before the closing of the mergers. New Pride will take all necessary
action to reserve for issuance a sufficient number of shares of New Pride
common stock to do so;
- the parties agree that all employees of Marine and Pride before the
mergers will be employed by New Pride after the mergers. However, New
Pride does not have any obligations to continue employing such employees
for any length of time thereafter. Until otherwise determined, benefit
plans of both Pride and Marine will remain effective after the mergers If
such a plan is not continued, New Pride will continue the plan for a
period of one year after the mergers if it is not less favorable in the
aggregate, to the employees covered, except to the extent compliance with
this would be unduly burdensome;
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- New Pride will file with the SEC a registration statement on an
appropriate form regarding New Pride common stock subject to options or
other equity-based awards of Pride and Marine;
- Pride and all of its subsidiaries will use all commercially reasonable
best efforts to prevent a change of control of Pride or any other event
which constitutes a default under any Pride indebtedness prior to the
closing of the Marine merger;
- Marine will use its commercially reasonable best efforts to obtain and
deliver to Pride a letter from KPMG LLP in which KPMG LLP concurs with
the conclusion of Marine's management that no condition exists that would
preclude a pooling of interests accounting treatment; and
- Pride will use its commercially reasonable best efforts to obtain and
deliver to Marine a letter from PricewaterhouseCoopers LLP in which
PricewaterhouseCoopers LLP concurs with conclusion of Pride's management
that no condition exists that would preclude a pooling of interests
accounting treatment.
No Solicitation
Neither Pride nor Marine will permit any of its officers, directors,
employees, agents or representatives, directly or indirectly, to solicit,
initiate or encourage any inquiry, proposal or offer to merge, consolidate,
purchase or otherwise acquire:
- 15% or more of the consolidated assets, net revenues or net income of the
respective party; or
- 15% or more of any class of capital stock of the respective party.
Any such proposal, offer or transaction may be referred to in this joint
proxy statement/prospectus, respectively, as a "Pride acquisition proposal" or a
"Marine acquisition proposal."
Each party agreed not to cooperate with, assist, participate or engage in
any discussions or negotiations concerning an acquisition proposal with respect
to that party by a third party. Both parties agreed to cease immediately and
terminate any existing negotiations with any parties with respect to any of the
foregoing. However, nothing contained in the merger agreement prevents either
party from:
- complying with Rule 14e-2 promulgated under the Securities Exchange Act
of 1934 with regard to a Pride or a Marine acquisition proposal; or
- before the party's shareholders approve the mergers, providing
information to or engaging in any negotiations with any person who has
made an unsolicited bona fide written acquisition proposal with respect
to all the outstanding shares of the party's common stock or all or
substantially all the assets of the party that, in the good faith
judgment of the board of directors of the party, taking into account the
likelihood of financing, and based on the advice of a financial adviser
of recognized national reputation, a written summary of which is promptly
provided to the other party, is superior to the merger, if the party's
board of directors, after consultation with its outside legal counsel,
determines that the failure to do so would be inconsistent with its
fiduciary obligations. Any information so provided is required to be
provided pursuant to a confidentiality and standstill agreement at least
as favorable to the party as the confidentiality and standstill agreement
entered into in connection with the mergers and that does not contain
terms that prevent the party from complying with its no-solicitation
obligations under the merger agreement.
If either party intends to participate in any discussions or negotiations
or to provide any information to any third party, that party is required to:
- give prompt prior oral and written notice to the other party of each such
action;
- immediately notify the other party orally and in writing of any requests
for information or the receipt of any acquisition proposal or inquiry
with respect to or that could lead to an acquisition proposal, including
the identity of the person or group (1) engaging in such discussions or
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negotiations, (2) requesting such information or (3) making such
acquisition proposal, and the material terms and conditions of any
acquisition proposal;
- keep the other party fully informed on a timely basis of the status and
details, including any changes or proposed changes to such status or
details, of any such requests, acquisition proposals or inquiries; and
- provide to the other party as soon as practicable after receipt or
delivery thereof, copies of all correspondence and other written material
sent or provided from any third party, or sent or provided to any third
party, in connection with any acquisition proposal.
REPRESENTATIONS AND WARRANTIES
Marine, on the one hand, and Pride, on the other hand, have made various
representations and warranties in the merger agreement which are substantially
reciprocal. Those representations and warranties pertain to:
- the organization, good standing and foreign qualification of the parties
and their significant subsidiaries;
- the authorization, execution, delivery and enforceability of the merger
agreement and related matters;
- capitalization;
- compliance with laws and possession of permits;
- whether the party's execution and delivery of the merger agreement or
consummation of the transactions contemplated thereby causes any conflict
with charter documents, a violation of any applicable law or a default or
change of control under any material agreement or any contract regarding
officers or directors benefits;
- documents and reports filed with the SEC;
- litigation;
- whether certain events, changes or effects have occurred from December
31, 2000 to the date of the merger agreement;
- taxes;
- retirement and other employee plans and matters relating to the Employee
Retirement Income Security Act of 1974;
- labor matters;
- environmental matters;
- intellectual property matters;
- material court orders and decrees;
- maintenance of insurance;
- brokerage and similar fees;
- receipt of fairness opinions from financial advisors;
- the shareholder votes required in connection with the merger agreement;
- Pride's and Marine's ownership of their respective drilling rigs and
Pride's drillships;
- liabilities not disclosed in the materials related to the mergers;
- non-compete agreements and material contracts;
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- capital expenditure programs;
- improper payments;
- amendments and actions taken under Pride's and Marine's respective rights
agreement; and
- pooling of interests.
In addition, Pride makes representations and warranties regarding change of
control provisions under its indentures. Pride also makes representations and
warranties about the ownership and activities of New Pride and AM Merger, Inc.
None of these representations and warranties survive the effectiveness of
the mergers.
CONDITIONS TO THE COMPLETION OF THE MERGERS
Conditions to Each Party's Obligations
Marine, Pride, New Pride and AM Merger, Inc. will be obligated to effect
the mergers only if the following conditions are satisfied or waived at or
before the closing date.
Shareholder Approval. Both Pride and Marine must have received the
necessary shareholder approval of the merger agreement.
Governmental Prohibition on the Consummation of the Mergers. No statute,
rule, regulation, executive order, decree, ruling or cease and desist order
shall have been enacted, entered, promulgated or enforced by any federal, state
or foreign governmental authority which prohibits the consummation of the
mergers substantially on the terms contained in the merger agreement. However,
the party seeking to rely on this condition must have complied with the
covenants in the merger agreement which generally relate to antitrust, tax and
other governmental filings and approvals and as to other matters used its
commercially reasonable best efforts to have any such regulation, statute or
other action lifted or vacated.
No Injunctions or Restraints. None of the parties to the merger agreement
shall be subject to any decree, order or injunction of a United States federal
or state or foreign court of competent jurisdiction which prohibits the mergers.
However, the party seeking to rely on this condition must have complied with the
covenants in the merger agreement which generally relate to antitrust, tax and
other governmental filings and approvals and as to other matters used its
commercially reasonable best efforts to have any such decree, order or
injunction lifted or vacated.
Registration Statement. No stop order concerning the registration
statement of which this joint proxy statement/prospectus forms a part shall be
in effect.
NYSE Listing. The New York Stock Exchange shall have authorized for
listing the New Pride common stock to be issued in connection with the mergers.
Additional Conditions to Obligations of Marine to Effect the Mergers
Marine is not obligated to effect the mergers unless the following
additional conditions are satisfied or waived at or before the closing date.
Covenants, Representations and Warranties. Pride, New Pride and AM Merger,
Inc. shall have performed in all material respects the covenants and agreements
that the merger agreement requires them to perform on or before the closing
date. The representations and warranties of Pride, New Pride and AM Merger, Inc.
contained in the merger agreement that are qualified as to materiality or
material adverse effect on Pride shall be true and correct in all respects as of
the closing date. The representations and warranties of Pride, New Pride and AM
Merger, Inc. contained in the merger agreement that are not qualified as to
materiality or material adverse effect on Pride shall be true and correct in all
respects as of the closing date, except for breaches of representations and
inaccuracies in warranties that do not and are not reasonably likely to have a
material adverse effect on Pride. However, representations and warranties
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made as of a specified date need only be so true and correct as of the specified
date. Marine is entitled to receive a certificate of Pride, executed by
president or one of its vice presidents, certifying to the foregoing effect.
Tax Opinion. Porter & Hedges, L.L.P., counsel to Marine, shall have
delivered to Marine an opinion, in form and substance reasonably satisfactory to
Marine, dated the closing date, stating that, for U.S. federal income tax
purposes, the mergers will each qualify as a reorganization under Section 368(a)
of the U.S. Internal Revenue Code and (i) no gain or loss will be recognized by
the Marine shareholders who exchange shares of Marine common stock solely for
Pride common stock pursuant to the Marine merger, and who then exchange such
Pride common stock solely for New Pride common stock pursuant to the
reincorporation merger and (ii) no gain or loss will be recognized by Pride or
Marine on the transfer of its respective assets in the mergers. In rendering
this opinion, Porter & Hedges, L.L.P. will be entitled to receive and rely upon
representations of officers of Pride, Marine, New Pride and AM Merger, Inc. as
of the closing date.
No Material Adverse Effect. At any time after the date of the merger
agreement, no event or occurrence shall have occurred that has had or is likely
to have a material adverse effect on Pride.
Additional Conditions to Obligations of Pride to Effect the Mergers
Pride is not obligated to effect the mergers unless the following
additional conditions are satisfied or waived at or before the closing date.
Covenants, Representations and Warranties. Marine shall have performed in
all material respects the covenants and agreements that the merger agreement
requires them to perform on or before the closing date. The representations and
warranties of Marine contained in the merger agreement that are qualified as to
materiality or material adverse effect on Marine shall be true and correct in
all respects as of the closing date. The representations and warranties of
Marine contained in the merger agreement that are not qualified as to
materiality or material adverse effect for Marine shall be true and correct as
of the closing date, except for breaches of representations and inaccuracies in
warranties that do not and are not reasonably likely to have a material adverse
effect on Marine. Pride is entitled to receive a certificate of Marine, executed
by its president or any of its vice presidents certifying to the foregoing
effect.
Tax Opinion. Baker Botts L.L.P., counsel to Pride, shall have delivered to
Pride an opinion, in form and substance reasonably satisfactory to Pride, dated
the closing date, stating that, for U.S. federal income tax purposes, the
mergers will each qualify as a reorganization under Section 368(a) of the U.S.
Internal Revenue Code and (i) no gain or loss will be recognized by the
shareholders of Pride, including the shareholders of Marine who received Pride
common stock in the Marine merger, who exchange Pride common stock solely for
New Pride common stock pursuant to the reincorporation merger and (ii) no gain
or loss will be recognized by Pride or Marine on the transfer of its respective
assets in the mergers. In rendering this opinion, Baker Botts L.L.P. will be
entitled to receive and rely upon representations of officers of Pride and
Marine, as of the closing date.
No Material Adverse Effect. At any time after the date of the merger
agreement, no event or occurrence shall have occurred that has had or is likely
to have a material adverse effect on Marine.
TERMINATION OF THE MERGER AGREEMENT
Marine and Pride may terminate the merger agreement by mutual written
consent.
Either the board of directors of Marine or Pride may terminate the merger
agreement if:
- the parties have not completed the mergers by December 31, 2001, and 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 caused the
merger not to occur on or before that date;
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- at a meeting of the shareholders of Marine or of Pride, the shareholders
do not approve the merger agreement; or
- a U.S. federal or state or non-U.S. court of competent jurisdiction or
federal or state or non-U.S. governmental, regulatory or administrative
agency or commission has issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting
the mergers, and this order, decree, ruling or other action has become
final and unappealable. However, the party seeking to terminate the
merger agreement for this reason must have complied with the covenants in
the merger agreement which generally relate to antitrust, tax and other
governmental filings and approvals and as to other matters used its
commercially reasonable best efforts to remove this injunction, decree or
order.
Either Pride or Marine may terminate the merger agreement if:
- the non-terminating party has breached any representation, warranty,
covenant or agreement in the merger agreement, or any representation or
warranty of the non-terminating party has become untrue, in either case
such that a condition to the merger would not be met, and such breach is
not curable or, if curable, is not cured within 30 days after the
terminating party gives written notice of the breach to the
non-terminating party, and the terminating party is not, at that time, in
material breach of any representation, warranty, covenant or agreement in
the merger agreement; or
- the board of directors of the non-terminating party has withdrawn or
materially modified, in a manner adverse to the terminating party, its
approval or recommendation of the merger agreement, or recommended a
competing acquisition proposal for the non-terminating party, or resolved
to do so.
In addition, either Pride or Marine may terminate the merger agreement if,
before its shareholders approve the merger agreement, the terminating party
concurrently enters into a binding definitive written agreement concerning a
transaction that constitutes a superior proposal for the terminating party after
the board of directors of the terminating party determines that:
- proceeding with the mergers would be inconsistent with its fiduciary
obligations by reason of the superior proposal; and
- there is a substantial likelihood that the approval by the terminating
party's shareholders of the merger agreement with the non-terminating
party will not be obtained by reason of the existence of the superior
proposal for the terminating party.
However, neither Pride nor Marine may effect that termination:
- unless the terminating party has complied in all material respects with
the non-solicitation provisions of the merger agreement;
- if the non-terminating party is entitled to terminate the merger
agreement because the terminating party has breached any representation,
warranty, covenant or agreement in the merger agreement, or any
representation or warranty of the terminating party shall have become
materially untrue;
- unless and until the non-terminating party receives at least 10 business
days' prior written notice from the terminating party of its intention to
effect that termination;
- during that 10-business day period, the terminating party considers, and
causes its respective financial and legal advisors to consider, any
adjustment in the terms and conditions of the merger agreement that the
non-terminating party may propose; and
- until the terminating party has paid to the non-terminating party the $50
million termination fee described under "-- Expenses and Termination
Fees."
No party may terminate the merger agreement after the effectiveness of the
mergers.
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TERMINATION FEES AND EXPENSE REIMBURSEMENT
Whether or not the mergers are completed, all costs and expenses incurred
in connection with the merger agreement and the transactions contemplated by the
merger agreement will be paid by the party incurring those expenses, except as
expressly provided in the merger agreement.
Marine is required to pay Pride a cash termination fee of $50 million at
the time of the termination if the merger agreement is terminated as follows:
- by Marine or Pride because Marine's shareholders do not approve the
merger agreement after the public announcement of a competing acquisition
proposal for Marine, whether or not that proposal is still pending or has
been consummated;
- by Pride because the board of directors of Marine has withdrawn or
materially modified, in a manner adverse to Pride, its approval or
recommendation of the merger agreement, or recommended a competing
acquisition proposal for Marine, or resolved to do so; or
- by Marine because the board of directors of Marine determines that
proceeding with the mergers would be inconsistent with its fiduciary
duties and concurrently enters into a binding definitive agreement
concerning a transaction that constitutes a superior proposal for Marine.
Pride is required to pay Marine a cash termination fee of $50 million at
the time of the termination if the merger agreement is terminated as follows:
- by Marine or Pride because Pride's shareholders do not approve the merger
agreement after the public announcement of a competing acquisition
proposal for Pride, whether or not that proposal is still pending or has
been consummated;
- by Marine because the board of directors of Pride has withdrawn or
materially modified, in a manner adverse to Marine, its approval or
recommendation of the merger agreement, or recommended a competing
acquisition proposal for Marine, or resolved to do so; or
- by Pride because the board of directors of Pride determines that
proceeding with the mergers would be inconsistent with its fiduciary
duties and concurrently enters into a binding definitive agreement
concerning a transaction that constitutes a superior proposal for Pride.
If the merger agreement is terminated because the shareholders of Marine do
not approve the mergers and there was no public announcement of a competing
acquisition proposal for Marine before the shareholders' vote, then Marine is
required to pay Pride a fee of $5 million to reimburse it for its costs and
expenses incurred in connection with the mergers and related transactions.
If the merger agreement is terminated because the shareholders of Pride do
not approve the mergers and there was no public announcement of a competing
acquisition proposal for Pride before the shareholders' vote, then Pride is
required to pay Marine a fee of $5 million to reimburse it for its costs and
expenses incurred in connection with the mergers and related transactions.
AMENDMENT
The parties may amend the merger agreement, by action taken or authorized
by their boards of directors, at any time before or after approval by the
shareholders of the parties of the matters presented in connection with the
mergers. After any shareholder approval, the parties may not amend the merger
agreement if further approval by those shareholders is required by law, unless
such further approval is obtained.
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RECIPROCAL STOCK OPTION AGREEMENTS
General. As a condition and inducement to each party's willingness to
enter into the merger agreement, each party requested, and the other party
agreed, to grant the requesting party an irrevocable option to purchase up to
19.9% of the granting party's issued and outstanding common stock. The terms of
the option granted by Pride with respect to its common stock (the "Pride Stock
Option Agreement") are virtually identical to the terms of the option granted by
Marine with respect to its common stock (the "Marine Stock Option Agreement").
Both agreements are dated as of May 23, 2001 and are attached as Annex F and G
to this joint proxy statement/prospectus.
Number of Shares and Exercise Price. The number of shares subject to each
option agreement adjusts to equal 19.9% of the number of issued and outstanding
shares of Pride or Marine common stock in the event that any additional shares
of Pride or Marine common stock are issued or otherwise become outstanding after
May 23, 2001, or any shares of Pride or Marine common stock are redeemed,
repurchased, retired or otherwise cease to be outstanding after May 23, 2001.
The number of Marine shares subject to the Pride Stock Option Agreement is
initially established at 11,680,759. The number of Pride shares subject to the
Marine Stock Option Agreement is initially established at 14,645,693. The per
share price (the "exercise price") of the Marine shares for which the option
granted in the Pride Stock Option Agreement is exercisable is $27.72, and the
exercise price of the Pride shares for which the option granted in the Marine
Stock Option Agreement is exercisable is $32.65. Each exercise price was
determined based upon the closing price of Pride and Marine common stock on the
New York Stock Exchange on the dates the option agreements were signed.
Adjustments. The exercise price and the type and number of shares or
securities subject to the stock option agreements will be adjusted appropriately
for any stock dividend, split-up, merger, recapitalization, combination,
conversion, exchange of shares, spin-off or similar transactions in respect of
the Marine or Pride common stock.
Exercisability. Each of the stock options is exercisable, in whole or in
part, at any time and from time to time following the occurrence of an exercise
date (as defined below) and shall remain in full force and effect until the
earliest to occur of:
(1) the effective time (as defined in the merger agreement),
(2) twelve months after the first receipt by the grantee of written
notice from the grantor of the occurrence of an exercise date; or
(3) the date of termination of the merger agreement, unless the
grantor is obligated to pay a $50 million fee pursuant to the merger
agreement in connection with such termination (see "The Merger
Agreement -- Effect of Termination").
An "exercise date" is the date on which any of the events giving rise to
the obligation of Marine or Pride to pay the other party the $50 million fee
pursuant to the termination fee provisions of the merger agreement. These events
include the termination by Pride or Marine, as the case may be, of the merger
agreement following the failure of the other party's shareholders to vote in
favor of approval of the merger agreement or the withdrawal or modification of
the other party's board of directors' recommendation to the other party's
shareholders in favor of approval of the merger agreement in connection with a
competing proposal for a combination between the other party and a third party,
and in certain other circumstances.
Put Right. Pursuant to the terms of the reciprocal stock option
agreements, the grantee of the option may require the grantor to purchase from
the grantee that portion of the option relating to all or any part of the
unexercised option shares (or as to which portion the option has been exercised
but the option closing has not yet occurred) and all or any portion of the
shares of the grantor's common stock purchased by the grantee pursuant to the
option and with respect to which the grantee then has ownership. The put right
may be exercised by the grantee at any time and from time to time after the
occurrence of an exercise event and before 120 days after the expiration of the
relevant option.
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Registration Rights. The grantee will have rights to require the
registration under the securities laws of any shares purchased pursuant to the
option, which would allow those shares to be resold by the grantee.
Profit Limitation. The stock option agreements limits the total profit
that the grantee may receive to $50 million. Each grantee's total profit is
equal to the aggregate amount (before taxes) of:
(1) all amounts received by the grantee pursuant to the grantor's
repurchase obligation (i.e., the put right), less amounts paid by the
grantee for shares being repurchased pursuant to the put right;
(2) the amounts received by or being paid to the grantee pursuant to
the arm's length sale of all or part of the option shares, less the
grantee's purchase price for such option shares; and
(3) all amounts received by or being paid to the grantee pursuant to
the termination fee provisions of the merger agreement.
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BUSINESS OF PRIDE
Pride is a leading international provider of contract drilling and related
services, operating both offshore and on land. In recent years, Pride has
focused its growth strategy on the higher margin offshore and international
drilling markets. Pride currently operates a global fleet of 305 rigs, including
two ultra-deepwater drillships, nine semisubmersible rigs, 19 jackup rigs, five
tender-assisted rigs, three barge rigs, 21 offshore platform rigs and 246
land-based drilling and workover rigs. Pride operates in more than 20 countries
and marine provinces. The significant diversity of Pride's rig fleet and areas
of operation enables it to provide a broad range of services and to take
advantage of market upturns while reducing its exposure to sharp downturns in
any particular market sector or geographic region.
Pride's executive offices are located at 5847 San Felipe, Suite 3300,
Houston, Texas 77057. Its telephone number at that address is (713) 789-1400.
For a more detailed description of the business of Pride, see the
description set forth in Pride's 2000 Annual Report on Form 10-K and quarterly
reports on Form 10-Q, which are incorporated by reference herein. See "Where You
Can Find More Information."
BUSINESS OF MARINE
Marine's primary business is providing offshore contract drilling services
to independent and major oil and gas companies. Marine presently operates
offshore domestically in the U.S. Gulf of Mexico and internationally in
Southeast Asia, the North Sea and India.
Marine owns and operates a fleet of 17 offshore drilling rigs consisting of
five independent leg jack-up units, four of which have a cantilever feature, ten
mat supported jack-up units, five of which have a cantilever feature, and two
semi-submersible units. Additionally, Marine owns one independent leg jack-up
rig configured as an accommodation unit. Currently, fifteen of Marine's rigs are
located in the U.S. Gulf of Mexico, and the three remaining rigs are in
Southeast Asia, the North Sea and India.
Marine's executive offices are located at One Sugar Creek Center Boulevard,
Suite 600, Sugar Land, Texas 77489. Its telephone number at that address is
(281) 243-3000.
For a more detailed description of the business of Marine, see the
description set forth in Marine's 2000 Annual Report of Form 10-K and quarterly
reports on Form 10-Q which are incorporated by reference herein. See "Where You
Can Find More Information."
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MARKET PRICE AND DIVIDEND INFORMATION
The following table shows the high and low sales prices for Pride common
stock and Marine common stock for the periods shown in the table. No cash
dividends were declared on either stock during the periods presented in the
table.
The Pride common stock is listed on the New York Stock Exchange under the
symbol "PDE." The Marine common stock is listed on the New York Stock Exchange
under the symbol "MRL." As of , 2001, the record date for
determining holders of Pride common stock and Marine common stock entitled to
vote at the special meetings, there were holders of record of Pride
common stock and holders of record of Marine common stock.
PRIDE MARINE
--------------- ---------------
CALENDAR YEAR HIGH LOW HIGH LOW
- ------------- ------ ------ ------ ------
1999
First quarter............................................ $ 9.75 $ 4.81 $11.75 $ 5.94
Second quarter........................................... 12.25 7.06 17.75 9.69
Third quarter............................................ 18.31 9.94 18.69 12.62
Fourth quarter........................................... 16.69 11.50 22.50 12.62
2000
First quarter............................................ 22.94 13.25 27.44 17.75
Second quarter........................................... 26.75 19.69 31.13 21.94
Third quarter............................................ 29.63 19.06 31.87 21.50
Fourth quarter........................................... 28.88 18.06 28.94 19.87
2001
First quarter............................................ 29.30 19.25 32.51 24.44
Second quarter........................................... 32.66 18.56 30.73 18.55
Third quarter (through ).......................
On May 23, 2001, the last full trading day before Pride and Marine
announced the execution of the merger agreement, Pride common stock closed at
$32.65 per share and Marine common stock closed at $27.72 per share. The market
price of the two stocks will fluctuate before the mergers, but the exchange
ratio is fixed at one-for-one. SHAREHOLDERS ARE ENCOURAGED TO OBTAIN RECENT
STOCK QUOTES FOR PRIDE COMMON STOCK AND MARINE COMMON STOCK.
An application has been filed with the New York Stock Exchange to list the
New Pride common stock that holders of Marine common stock and Pride common
stock will receive in the mergers under the symbol "PDE."
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UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited condensed pro forma combined balance sheet as of
March 31, 2001 and the unaudited condensed pro forma combined statements of
operations for the three-month period ended March 31, 2001 and for each of the
years in the three-year period ended December 31, 2000, illustrate the effect of
the mergers under the pooling of interests method of accounting.
The historical balance sheet and results of operations information for
Pride has been derived from Pride's audited and unaudited consolidated financial
statements for the periods presented incorporated by reference in this joint
proxy statement/prospectus. The historical balance sheet and results of
operations information for Marine has been derived from Marine's audited and
unaudited consolidated financial statements for the periods presented
incorporated by reference in this joint proxy statement/prospectus. The
unaudited condensed pro forma combined balance sheet has been prepared assuming
the mergers were consummated on March 31, 2001. The unaudited condensed pro
forma combined statements of operations have been prepared assuming that the
mergers were consummated on January 1, 1998.
The pro forma adjustments and the resulting unaudited condensed pro forma
financial statements are based upon available information and certain
assumptions and estimates described in the notes to unaudited condensed pro
forma combined financial statements. In preparing these pro forma financial
statements, Pride's management has reviewed the accounting practices followed by
Marine, and Marine's management has reviewed the accounting practices followed
by Pride, to determine whether any pro forma adjustments were required for the
combining companies to conform to the same accounting practices. No significant
differences in accounting practices were identified by Pride's management or by
Marine's management and hence no pro forma adjustments were made in this
respect.
The condensed pro forma combined financial statements do not purport to
represent what the financial position or results of operations of New Pride
actually would have been had the mergers occurred on the dates indicated or to
project New Pride's financial position or results of operations for any future
date or period. Furthermore, the unaudited condensed pro forma combined
financial statements do not reflect any cost savings or other synergies which
may result from the mergers or any other changes which may occur as the result
of post-combination activities and other matters. In addition, the unaudited
condensed pro forma combined statements of operations exclude non-recurring
charges directly attributable to the mergers that will be charged to operations
in the quarter in which the mergers are actually consummated.
The unaudited condensed pro forma combined financial statements and the
notes thereto should be read in conjunction with the historical consolidated
financial statements of Pride, including the notes thereto, and the historical
consolidated financial statements of Marine, including the notes thereto, all of
which are incorporated by reference in this joint proxy statement/prospectus.
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PRIDE INTERNATIONAL, INC.
UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 2001
(IN THOUSANDS)
HISTORICAL PRO FORMA
--------------------- --------------------------
PRIDE MARINE ADJUSTMENTS COMBINED
---------- -------- ----------- ----------
Cash and cash equivalents (includes
restricted cash of $47,811)................ $ 274,910 $ 5,754 $ -- $ 280,664
Accounts receivable, net..................... 255,539 49,299 -- 304,838
Other current assets......................... 125,904 2,531 -- 128,435
---------- -------- -------- ----------
Total current assets............... 656,353 57,584 -- 713,937
---------- -------- -------- ----------
Property and equipment, net.................. 2,596,725 592,396 -- 3,189,121
Other assets, net............................ 162,327 1,040 -- 163,367
---------- -------- -------- ----------
Total assets....................... $3,415,405 $651,020 $ -- $4,066,425
========== ======== ======== ==========
Current liabilities.......................... $ 463,553 $ 24,556 $ 21,000(a) $ 509,109
Long-term debt and lease obligations......... 1,659,839 32,000 -- 1,691,839
Other long-term liabilities.................. 92,428 1,292 -- 93,720
Deferred income taxes........................ 43,754 80,022 -- 123,776
Minority interest............................ 54,655 -- -- 54,655
Shareholders' equity
Common stock and paid-in capital............. 900,634 291,426 -- 1,192,060
Treasury and restricted stock................ (191) (427) -- (618)
Retained earnings............................ 200,733 222,151 (21,000)(a) 401,884
---------- -------- -------- ----------
Total shareholders' equity......... 1,101,176 513,150 (21,000) 1,593,326
---------- -------- -------- ----------
Total liabilities and shareholders'
equity........................... $3,415,405 $651,020 $ -- $4,066,425
========== ======== ======== ==========
The accompanying notes are an integral part of the
unaudited condensed pro forma combined financial statements.
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PRIDE INTERNATIONAL, INC.
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL PRO FORMA
------------------ ----------------------
PRIDE MARINE ADJUSTMENTS COMBINED
-------- ------- ----------- --------
Revenues......................................... $270,354 $84,874 $ -- $355,228
Operating costs.................................. 173,689 31,703 -- 205,392
-------- ------- ------ --------
Gross margin........................... 96,665 53,171 -- 149,836
Depreciation and amortization.................... 36,582 11,708 -- 48,290
Selling, general and administrative.............. 21,589 3,734 -- 25,323
-------- ------- ------ --------
Earnings from operations............... 38,494 37,729 -- 76,223
-------- ------- ------ --------
Other income (expense)
Other income, net.............................. 1,475 330 -- 1,805
Interest income................................ 3,782 111 -- 3,893
Interest expense............................... (23,223) (1,168) -- (24,391)
-------- ------- ------ --------
Total other income (expense), net...... (17,966) (727) -- (18,693)
-------- ------- ------ --------
Earnings before income taxes and minority
interest....................................... 20,528 37,002 -- 57,530
Income tax provision............................. 4,510 13,043 -- 17,553
Minority interest................................ 4,056 -- -- 4,056
-------- ------- ------ --------
Net earnings..................................... $ 11,962 $23,959 $ -- $ 35,921
======== ======= ====== ========
Net earnings per share
Basic.......................................... $ 0.17 $ 0.41 $ -- $ 0.28
Diluted........................................ $ 0.16 $ 0.40 $ -- $ 0.26
Weighted average shares outstanding
Basic.......................................... 70,046 58,627 -- 128,673
Diluted........................................ 80,644 59,552 7,017(b) 147,213
The accompanying notes are an integral part of the unaudited condensed
pro forma combined financial statements.
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PRIDE INTERNATIONAL, INC.
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL PRO FORMA
------------------- ------------------------
PRIDE MARINE ADJUSTMENTS COMBINED
-------- -------- ----------- ----------
Revenues........................................ $909,007 $264,031 $ -- $1,173,038
Operating costs................................. 604,580 117,723 -- 722,303
-------- -------- ---- ----------
Gross margin.......................... 304,427 146,308 -- 450,735
Depreciation and amortization................... 130,255 44,315 -- 174,570
Selling, general and administrative............. 80,496 15,032 -- 95,528
-------- -------- ---- ----------
Earnings from operations.............. 93,676 86,961 -- 180,637
-------- -------- ---- ----------
Other income (expense)
Other income, net............................. 1,808 1,847 -- 3,655
Interest income............................... 12,169 513 -- 12,682
Interest expense.............................. (90,764) (11,469) -- (102,233)
-------- -------- ---- ----------
Total other income (expense), net..... (76,787) (9,109) -- (85,896)
-------- -------- ---- ----------
Earnings before income taxes and minority
interest...................................... 16,889 77,852 -- 94,741
Income tax provision............................ 5,341 29,587 -- 34,928
Minority interest............................... 10,812 -- -- 10,812
-------- -------- ---- ----------
Net earnings.................................... $ 736 $ 48,265 $ -- $ 49,001
======== ======== ==== ==========
Net earnings per share
Basic......................................... $ 0.01 $ 0.83 $ -- $ 0.40
Diluted....................................... $ 0.01 $ 0.81 $ -- $ 0.39
Weighted average shares outstanding
Basic......................................... 64,634 58,404 -- 123,038
Diluted....................................... 67,418 59,246 -- 126,664
The accompanying notes are an integral part of the unaudited condensed pro forma
combined financial statements.
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PRIDE INTERNATIONAL, INC.
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL PRO FORMA
------------------- ----------------------
PRIDE MARINE ADJUSTMENTS COMBINED
-------- -------- ----------- --------
Revenues.......................................... $619,385 $115,406 $ -- $734,791
Operating costs................................... 441,903 77,591 -- 519,494
Restructuring charges............................. 12,817 -- -- 12,817
-------- -------- ------ --------
Gross margin................................. 164,665 37,815 -- 202,480
Depreciation and amortization..................... 95,723 29,569 -- 125,292
Selling, general and administrative............... 78,825 12,575 -- 91,400
Restructuring charges............................. 23,831 -- -- 23,831
-------- -------- ------ --------
Loss from operations......................... (33,714) (4,329) -- (38,043)
-------- -------- ------ --------
Other income (expense)
Other income, net............................... 11,125 1,145 -- 12,270
Interest income................................. 8,552 886 -- 9,438
Interest expense................................ (60,992) (6,184) -- (67,176)
-------- -------- ------ --------
Total other income (expense), net....... (41,315) (4,153) -- (45,468)
-------- -------- ------ --------
Loss before income taxes and minority interest.... (75,029) (8,482) -- (83,511)
Income tax benefit................................ (23,258) (2,352) -- (25,610)
Minority interest................................. 3,996 -- -- 3,996
-------- -------- ------ --------
Net loss before extraordinary item................ (55,767) (6,130) -- (61,897)
Extraordinary item, net........................... 3,884 -- -- 3,884
-------- -------- ------ --------
Net loss.......................................... $(51,883) $ (6,130) $ -- $(58,013)
======== ======== ====== ========
Net loss per share before extraordinary item
Basic........................................... $ (1.06) $ (0.11) $ -- $ (0.57)
Diluted......................................... $ (1.06) $ (0.11) $ -- $ (0.57)
Net loss per share after extraordinary item
Basic........................................... $ (0.99) $ (0.11) $ -- $ (0.54)
Diluted......................................... $ (0.99) $ (0.11) $ -- $ (0.54)
Weighted average shares outstanding
Basic........................................... 52,526 55,275 -- 107,801
Diluted......................................... 52,526 55,275 -- 107,801
The accompanying notes are an integral part of the unaudited condensed
pro forma combined financial statements.
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PRIDE INTERNATIONAL, INC.
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL PRO FORMA
------------------- ------------------------
PRIDE MARINE ADJUSTMENTS COMBINED
-------- -------- ----------- ----------
Revenues........................................ $835,563 $228,015 $ -- $1,063,578
Operating costs................................. 524,344 102,166 -- 626,510
Restructuring charges........................... 5,500 -- -- 5,500
-------- -------- ------ ----------
Gross margin.......................... 305,719 125,849 -- 431,568
Depreciation and amortization................... 79,931 20,191 -- 100,122
Selling, general and administrative............. 84,825 12,287 -- 97,112
-------- -------- ------ ----------
Earnings from operations.............. 140,963 93,371 -- 234,334
-------- -------- ------ ----------
Other income (expense)
Other income, net............................. 1,146 968 -- 2,114
Interest income............................... 5,850 1,683 -- 7,533
Interest expense.............................. (45,776) (481) -- (46,257)
-------- -------- ------ ----------
Total other income (expense), net..... (38,780) 2,170 -- (36,610)
-------- -------- ------ ----------
Earnings before income taxes and minority
interest...................................... 102,183 95,541 -- 197,724
Income tax provision............................ 24,726 34,720 -- 59,446
Minority interest............................... (60) -- -- (60)
-------- -------- ------ ----------
Net earnings.................................... $ 77,517 $ 60,821 $ -- $ 138,338
======== ======== ====== ==========
Net earnings per share
Basic......................................... $ 1.55 $ 1.16 $ -- $ 1.35
Diluted....................................... $ 1.39 $ 1.15 $ -- $ 1.28
Weighted average shares outstanding
Basic......................................... 50,135 52,217 -- 102,352
Diluted....................................... 60,851 52,726 -- 113,577
The accompanying notes are an integral part of the unaudited condensed
pro forma combined financial statements.
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NOTES TO UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BACKGROUND
In May 2001, Pride and Marine entered into a definitive agreement to
combine in a tax-free, stock-for-stock transaction. Pursuant to the agreement,
shareholders of each company will receive one share in a newly formed Delaware
company for each share of Pride or Marine common stock that they currently own.
The combined company will be named Pride International, Inc.
2. BASIS OF PRESENTATION
The unaudited condensed pro forma combined balance sheet gives effect to
the proposed mergers by combining the respective balance sheets of Pride and
Marine at March 31, 2001 on a pooling of interests basis. The unaudited
condensed pro forma combined statements of operations have been prepared
assuming that the proposed mergers were consummated on January 1, 1998.
3. MANAGEMENT ASSUMPTIONS
The unaudited pro forma financial statements reflect the following pro
forma adjustments to effect the mergers on a pooling of interests basis.
(a) Current Liabilities -- Represents estimated direct costs
associated with the mergers, including financial advisor, attorney,
accountant and filing fees and other expenses, which approximate $25
million ($21 million net of income taxes assuming 50% are deductible for
tax purposes). These non-recurring costs, which are subject to change, will
be charged to earnings in the quarter in which the mergers are consummated.
It is expected that substantially all of the direct costs associated with
the transaction will be paid within one year after the mergers are
consummated.
(b) Diluted Weighted Average Shares Outstanding -- Represents the
adjustment to include in pro forma diluted weighted average shares
outstanding, shares issuable by Pride pursuant to convertible debt
securities that were excluded from Pride's historical diluted weighted
average shares outstanding as their effect was antidilutive.
4. EARNINGS PER SHARE
Basic net earnings per share has been computed based on the weighted
average number of shares of common stock of Pride and Marine outstanding during
each period. Diluted net earnings per share has been computed based on the
weighted average number of shares of common stock and common stock equivalents
of Pride and Marine outstanding during each period, as if stock options,
convertible debentures and other convertible debt were converted into common
stock, after giving retroactive effect to the elimination of interest expense,
net of income tax, applicable to the convertible subordinated debentures and
other convertible debt.
The calculation of diluted weighted average shares outstanding excludes 0.8
million, 7.8 million and 15.9 million common shares issuable pursuant to
outstanding options, warrants, convertible notes, convertible debentures and
other convertible debt for the three months ended March 31, 2001 and the years
ended December 31, 2000 and 1999, respectively, because their effect was
antidilutive. There were 0.6 million, 1.3 million and 2.4 million stock options
outstanding at March 31, 2001, December 31, 2000 and December 31, 1998,
respectively, which were not included in the computation of diluted weighted
average shares outstanding because the exercise price of the options was greater
than the average market price of the common shares during those periods.
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DESCRIPTION OF CAPITAL STOCK OF NEW PRIDE
The following description of New Pride's common stock, preferred stock,
certificate of incorporation and bylaws to be in effect upon completion of the
mergers is a summary only and is subject to the complete text of New Pride's
certificate of incorporation and bylaws, which are attached to this joint proxy
statement/prospectus as Annexes D and E, respectively, and New Pride's rights
agreement, the form of which is filed as an exhibit to the registration
statement of which this joint proxy statement/prospectus is a part. You are
encouraged to read those documents carefully.
New Pride's authorized capital stock consists of 400,000,000 shares of
common stock, par value $.01 per share, and 50,000,000 shares of preferred
stock, par value $.01 per share.
COMMON STOCK
The holders of New Pride common stock are entitled to one vote per share on
all matters to be voted on by stockholders generally, including the election of
directors. There are no cumulative voting rights, meaning that the holders of a
majority of the shares voting for the election of directors can elect all of the
directors standing for election.
New Pride common stock carries no preemptive or other subscription rights
to purchase shares of its stock and is not convertible, redeemable or assessable
or entitled to the benefits of any sinking fund. Holders of New Pride common
stock will be entitled to dividends in the amounts and at the times declared by
its board of directors out of funds legally available for the payment of
dividends.
If New Pride is liquidated, dissolved or wound up, the holders of its
common stock will share pro rata in its assets after satisfaction of all of its
liabilities and the prior rights of any outstanding class of its preferred
stock.
PREFERRED STOCK
New Pride's board of directors has the authority, without stockholder
approval, to issue shares of preferred stock in one or more series and to fix
the number of shares and terms of each series. The board may determine the
designation and other terms of each series, including, among others:
- dividend rights;
- voting powers;
- preemptive rights;
- conversion rights;
- redemption rights; and
- liquidation preferences.
The issuance of preferred stock, while providing desired flexibility in
connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power of holders of common stock. It also could
affect the likelihood that holders of common stock will receive dividend
payments and payments upon liquidation.
For purposes of the rights plan described below, New Pride's board of
directors has designated 4,000,000 shares of preferred stock to constitute the
Series A Junior Participating Preferred Stock. For a description of the rights
plan, see "-- Stockholder Rights Plan."
ANTI-TAKEOVER PROVISIONS OF NEW PRIDE'S CERTIFICATE OF INCORPORATION AND BYLAWS
New Pride's certificate of incorporation and bylaws contain provisions that
could delay or make more difficult the acquisition of control of New Pride
through a hostile tender offer, open market purchases, proxy contest, merger or
other takeover attempt that a stockholder might consider in his or her best
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interest, including those attempts that might result in a premium over the
market price of New Pride's common stock.
Authorized but Unissued Stock
New Pride has 400,000,000 authorized shares of common stock and 50,000,000
authorized shares of preferred stock as compared with a total of 400,000
authorized shares of common stock and 70,000,000 shares of preferred stock of
Pride and Marine on a combined basis. One of the consequences of New Pride's
authorized but unissued common stock and undesignated preferred stock may be to
enable New Pride's board of directors to make more difficult or to discourage an
attempt to obtain control of New Pride. If, in the exercise of its fiduciary
obligations, New Pride's board of directors determined that a takeover proposal
was not in New Pride's best interest, the board could authorize the issuance of
those shares without stockholder approval. The shares could be issued in one or
more transactions that might prevent or make the completion of the change of
control transaction more difficult or costly by:
- diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group;
- creating a substantial voting block in institutional or other hands that
might undertake to support the position of the incumbent board; or
- effecting an acquisition that might complicate or preclude the takeover.
In this regard, New Pride's certificate of incorporation grants its board
of directors broad power to establish the rights and preferences of the
authorized and unissued preferred stock. New Pride's board could establish one
or more series of preferred stock that entitle holders to:
- vote separately as a class on any proposed merger or consolidation;
- cast a proportionately larger vote together with the common stock on any
transaction or for all purposes;
- elect directors having terms of office or voting rights greater than
those of other directors;
- convert preferred stock into a greater number of shares of common stock
or other securities;
- demand redemption at a specified price under prescribed circumstances
related to a change of control of New Pride; or
- exercise other rights designed to impede a takeover.
Stockholder Action by Written Consent; Special Meetings of Stockholders
New Pride's certificate of incorporation provides that no action that is
required or permitted to be taken by New Pride's stockholders at any annual or
special meeting may be taken by written consent of stockholders in lieu of a
meeting, and that special meetings of stockholders may be called only by the
board of directors, the chairman of the board or the president. These provisions
of the certificate of incorporation may only be amended or repealed by a vote of
80% of the voting power of New Pride's outstanding common stock.
Amendment of the Bylaws
Under Delaware law, the power to adopt, amend or repeal bylaws is conferred
upon the stockholders. A corporation may, however, in its certificate of
incorporation also confer upon the board of directors the power to adopt, amend
or repeal its bylaws. New Pride's certificate of incorporation and bylaws grant
its board of directors the power to adopt, amend and repeal its bylaws at any
regular or special meeting of the board on the affirmative vote of a majority of
the directors then in office. New Pride's stockholders may also adopt, amend or
repeal New Pride's bylaws by a vote of a majority of the voting power of New
Pride's outstanding voting stock.
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Removal of Directors
Directors may be removed with or without cause by a vote of a majority of
the voting power of New Pride's outstanding voting stock. A vacancy on the board
of directors of New Pride may be filled by a vote of a majority of the directors
in office or by the stockholders, and a director elected to fill a vacancy
serves until the next annual meeting of stockholders.
Advance Notice Procedure for Director Nominations and Stockholder Proposals
New Pride's bylaws provide that advance notice must be given to nominate
candidates for election as directors or to make proposals for consideration at
annual meetings of stockholders. Notice of a stockholder's intent to nominate a
director or to make proposals must be delivered to or mailed and received at New
Pride's principal executive offices not later than 120 days prior to the
scheduled annual meeting date. If that date is more than 30 days after the
anniversary date of the preceding year's annual meeting and if less than 100
days' prior notice or public disclosure of the scheduled meeting date is made,
the notice must be received not later than 10 days following the earlier of the
day on which notice of the meeting was mailed to stockholders or the day on
which the public disclosure was made.
These procedures may limit the ability of stockholders to bring business
before a stockholders meeting, including the nomination of directors and the
consideration of any transaction that could result in a change in control and
that may result in a premium to New Pride's stockholders.
STOCKHOLDER RIGHTS PLAN
New Pride has adopted a preferred share purchase rights plan that will be
effective upon completion of the reincorporation merger. Under the plan, each
share of New Pride common stock will include one right to purchase preferred
stock. The rights will separate from the common stock and become exercisable (1)
ten days after public announcement that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire, beneficial
ownership of 15% of the outstanding common stock or (2) ten business days
following the start of a tender offer or exchange offer that would result in a
person's acquiring beneficial ownership of 15% of the outstanding common stock.
A 15% beneficial owner is referred to as an "acquiring person" under the plan.
New Pride's board of directors can elect to delay the separation of the
rights from the common stock beyond the ten-day periods referred to above. The
plan also confers on the New Pride board the discretion to increase or decrease
the level of ownership that causes a person to become an acquiring person. Until
the rights are separately distributed, the rights will be evidenced by the
common stock certificates and will be transferred with and only with the common
stock certificates.
After the rights are separately distributed, each right will entitle the
holder to purchase from New Pride one one-hundredth of a share of Series A
Junior Participating Preferred Stock for a purchase price of $ . The rights
will expire at the close of business on September 30, 2011, unless New Pride
redeems or exchanges them earlier as described below.
If a person becomes an acquiring person, the rights will become rights to
purchase shares of New Pride's common stock for one-half the current market
price, as defined in the rights agreement, of the common stock. This occurrence
is referred to as a "flip-in event" under the plan. After any flip-in event, all
rights that are beneficially owned by an acquiring person, or by certain related
parties, will be null and void. New Pride's board of directors has the power to
decide that a particular tender or exchange offer for all outstanding shares of
New Pride's common stock is fair to and otherwise in the best interests of its
stockholders. If the board makes this determination, the purchase of shares
under the offer will not be a flip-in event.
If, after there is an acquiring person, New Pride is acquired in a merger
or other business combination transaction or 50% or more of New Pride's assets,
earning power or cash flow are sold or transferred, each holder of a right will
have the right to purchase shares of common stock of the acquiring company at a
price of one-half the current market price of that stock. This occurrence is
referred to as a
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"flip-over event" under the plan. An acquiring person will not be entitled to
exercise its rights, which will have become void.
Until ten days after the announcement that a person has become an acquiring
person, New Pride's board of directors may decide to redeem the rights at a
price of $.01 per right, payable in cash, shares of common stock or other
consideration. The rights will not be exercisable after a flip-in event until
the rights are no longer redeemable.
At any time after a flip-in event and prior to either a person's becoming
the beneficial owner of 50% or more of the shares of common stock or a flip-over
event, New Pride's board of directors may decide to exchange the rights for
shares of common stock on a one-for-one basis. Rights owned by an acquiring
person, which will have become void, will not be exchanged.
Other than provisions relating to the redemption price of the rights, the
rights agreement may be amended by New Pride's board of directors at any time
that the rights are redeemable. Thereafter, the provisions of the rights
agreement other than the redemption price may be amended by the board of
directors to cure any ambiguity, defect or inconsistency, to make changes that
do not materially adversely affect the interests of holders of rights (excluding
the interests of any acquiring person), or to shorten or lengthen any time
period under the rights agreement. No amendment to lengthen the time period for
redemption may be made if the rights are not redeemable at that time.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire New Pride
without the approval of its board of directors. As a result, the overall effect
of the rights may be to render more difficult or discourage any attempt to
acquire New Pride even if the acquisition may be favorable to the interests of
New Pride's stockholders. Because the board of directors can redeem the rights
or approve a tender or exchange offer, the rights should not interfere with a
merger or other business combination approved by the board.
LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS
New Pride's directors will not be personally liable to New Pride or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except, if required by Delaware law, for liability:
- for any breach of the duty of loyalty to New Pride or its stockholders;
- for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
- for unlawful payment of a dividend or unlawful stock purchases or
redemptions; and
- for any transaction from which the director derived an improper personal
benefit.
As a result, neither New Pride nor its stockholders have the right, through
stockholders' derivative suits on behalf of New Pride, to recover monetary
damages against a director for breach of fiduciary duty as a director, including
breaches resulting from grossly negligent behavior, except in the situations
described above.
DELAWARE ANTI-TAKEOVER LAW
New Pride is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law, which regulates corporate acquisitions.
Section 203 prevents an "interested stockholder," which is defined generally as
a person owning 15% or more of a corporation's voting stock, or any affiliate or
associate of that person, from engaging in a broad range of "business
combinations" with the corporation for three years after becoming an interested
stockholder unless:
- the board of directors of the corporation had previously approved either
the business combination or the transaction that resulted in the
stockholder's becoming an interested stockholder;
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- upon completion of the transaction that resulted in the stockholder's
becoming an interested stockholder, that person owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers and shares owned in employee stock plans in which participants
do not have the right to determine whether shares held subject to the
plan will be tendered; or
- following the transaction in which that person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and holders of at least two-thirds of the
outstanding voting stock not owned by the interested stockholder.
Under Section 203, the restrictions described above also do not apply to
specific business combinations proposed by an interested stockholder following
the announcement or notification of designated extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors, if
such extraordinary transaction is approved or not opposed by a majority of the
directors who were directors prior to any person becoming an interested
stockholder during the previous three years or were recommended for election or
elected to succeed such directors by a majority of such directors.
Section 203 may make it more difficult for a person who would be an
interested stockholder to effect various business combinations with a
corporation for a three-year period.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company will be the transfer agent and
registrar for New Pride's common stock.
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COMPARISON OF RIGHTS OF SHAREHOLDERS
As a result of the mergers, Pride and Marine shareholders will become
holders of New Pride common stock. New Pride is a Delaware corporation, Pride is
a Louisiana corporation and Marine is a Texas corporation. The rights of Pride
shareholders are currently governed by the Pride articles of incorporation, the
Pride bylaws and the laws of Louisiana. The rights of Marine shareholders are
currently governed by the Marine articles of incorporation, the Marine bylaws
and the laws of Texas. Following the mergers, the rights of all former holders
of shares of Pride and Marine common stock will be governed by the New Pride
certificate of incorporation, the New Pride bylaws and the laws of Delaware.
The following is a summary explanation of some of the material differences
between the rights of holders of New Pride, Pride and Marine common stock. These
differences arise in part from the differences between Delaware, Louisiana and
Texas law. Additional differences arise from the differences between charter
documents of the three companies. This summary is qualified by reference to the
charter documents of the three companies. New Pride's charter documents are
attached as Annex D and E. For information on how to obtain a copy of the
charter documents of Pride and Marine, see "Where You Can Find More Information"
beginning on page 91. In addition, the description of the differences between
Delaware, Louisiana and Texas law is a summary only, is not a complete
description of the differences between Delaware, Louisiana and Texas law and is
qualified by reference to Delaware, Louisiana and Texas law.
AUTHORIZED CAPITAL
NEW PRIDE PRIDE MARINE
450,000,000 shares, consisting 205,000,000 shares, consisting 220,000,000 shares, consisting
of 400,000,000 shares of of 200,000,000 shares of of 200,000,000 shares of
common stock, par value $0.01 common stock, no par value, common stock, par value $0.01
per share, and 50,000,000 and 5,000,000 shares of per share, and 20,000,000
shares of preferred stock, par preferred stock, no par value. shares of preferred shares,
value $0.01 per share. For a par value $0.01 per share.
further description of the
authorized capital stock of
New Pride, see "Description of
Capital Stock of New Pride."
Shares of preferred stock may Similar "blank check" Similar "blank check"
be issued from time to time in preferred stock provisions to preferred stock provisions to
one or more series by the New Pride. New Pride.
board of directors. The board
can fix the preferences,
limitations and relative
rights of the shares of the
preferred and common stock.
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NUMBER OF DIRECTORS; CLASSIFIED BOARD; REMOVAL; VACANCIES;
CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS
NEW PRIDE PRIDE MARINE
Number of Number of Directors. Seven Number of Directors. Seven
Directors. Initially, eight directors; the number can be directors; the number can be
directors; the number can be changed by a two-thirds vote changed by amendment of the
changed by the board, but no of the board. by-laws.
director's term may be
shortened by a reduction in
the size of the board.
Classified Board. No. Classified Board. Yes. Classified Board. No.
Approximately one-third of the
directors are elected each
year to staggered three year
terms.
Removal. Directors may be re- Removal. Directors may only Removal. Directors may be re-
moved with or without cause by be removed for cause and by a moved with or without cause by
a majority of the voting power vote of 80% of the voting a majority of the voting power
of New Pride's outstanding power of the shareholders. of the shareholders.
common stock.
Vacancies. Vacancies on the Vacancies. The remaining Vacancies. The remaining
board may be filled by the re- directors may fill vacancies directors may fill vacancies
maining directors, even if on the board by a two-thirds on the board, even if such
such remaining directors vote, even if such remaining remaining directors constitute
constitute less than a quorum, directors constitute less than less than a quorum, or they
or by the stockholders. a quorum, or they may be may be filled at a special
filled at a special meeting of meeting of shareholders.
shareholders called for that
purpose prior to such action
by the board.
Cumulative Voting. New Pride Cumulative Voting. Pride Cumulative Voting. Marine
stockholders do not have shareholders do not have shareholders do not have
cumulative voting in the cumulative voting in the cumulative voting in the
election of directors. election of directors. election of directors.
AMENDMENTS TO CERTIFICATE/ARTICLES OF INCORPORATION
NEW PRIDE PRIDE MARINE
An amendment to the Under Louisiana law, the The board and shareholders may
certificate of incorporation shareholders may amend the amend the articles of
requires (1) the approval of articles by a vote of at least incorporation if:
the board of directors and (2) two-thirds of the voting power -- the board sets forth the
the approval of the holders of present, or by such larger or proposed amendment in a
a majority of the outstand- smaller vote (not less than a resolution and directs that
ing stock entitled to vote majority) of the voting power it be submitted to a vote
upon the proposed amendment, present or of the total voting at a meeting of
unless the amendment is to a power as the articles may shareholders, and
provision of the certificate require, at an annual or -- the holders of a majority
that sets forth an 80% vote special meeting of the of the outstanding shares
requirement, in which case a shareholders. entitled to vote on the
vote of 80% of the outstanding amendment approve it by
stock entitled to vote on the Pride's articles generally affirmative vote, unless
amendment is required. The provide that if either a the charter otherwise
provisions of the certificate majority of the directors, at requires the vote of a
setting forth an 80% vote a time when there is no different number of shares.
require- acquiring entity, or a
majority
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NEW PRIDE PRIDE MARINE
ment are those prohibiting of the continuing directors,
action by written consent and at a time when there is an
those respecting the calling acquiring entity, recommends
of special stockholder an amendment to the articles,
meetings. the holders of a majority of
the total voting power present
at a shareholder meeting are
required to amend the
articles. Otherwise, the hold-
ers of 80% of the total voting
power are required. Exceptions
relate generally to:
-- the authority of the board
of directors to issue
preferred stock, where no
shareholder vote is
required, and
-- supermajority voting provi-
sions for business combina-
tions and limitations on
director liability, where
approval of holders of 80%
of the total voting power
is required, regardless of
whether there is an
acquiring entity.
AMENDMENTS TO THE BYLAWS
NEW PRIDE PRIDE MARINE
The directors may amend the Pride's articles state that The Marine bylaws may be
bylaws without any action by Pride's bylaws may be amended amended or repealed by the
the stockholders. The or repealed by: vote of the holders of a
stockholders may adopt, amend -- a majority of the entire majority of the outstanding
or repeal the bylaws by a board of directors at any time common stock or the vote or
majority of the voting power when there is no acquiring consent of all the directors
of the outstanding common entity, then in office.
stock. -- both a majority of the
entire board of directors and
a majority of the
continuing directors at any
time when there is an
acquiring entity, or
-- the affirmative vote of the
shareholders of at least
80% of the total voting
power.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
NEW PRIDE PRIDE MARINE
New Pride's bylaws provide the Pride's articles provide that Neither the Marine articles
manner in which stockholders only persons nominated by or nor the Marine bylaws contain
may give notice of business to at the direction of the board any provisions regarding
be brought before an annual or by a shareholder who has advance notice of nominations
meeting. In order for an item given timely notice to the of persons for election to the
to be properly Secretary prior to Marine board or
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NEW PRIDE PRIDE MARINE
brought before the meeting by the meeting in which directors submission of other business
a stockholder, the stockholder are to be elected are eligible to be considered at a meeting
must be a holder of record at for election as directors. To of the Marine shareholders.
the time of the giving of be timely, the board must
notice and must be entitled to receive notice between 45 and
vote at the annual meeting. 90 days before the meeting. If
The item to be brought before less than 55 days' notice or
the meeting must be a proper prior public disclosure of the
subject for stockholder ac- meeting date is given or made
tion, and the stockholder must to shareholders, the board
have given timely advance must receive the notice not
written notice of the item. later than the tenth day after
For notice to be timely, it the day on which the notice
must be delivered to, or was mailed or the disclosure
mailed and received at, the was made. The notice from a
principal office of New Pride shareholder nominating a
not less than 120 days prior person for election as a
to the scheduled annual director must give specified
meeting date (regardless of information about the person.
any postponements of the
annual meeting to a later
date), provided that if the
month and day of the scheduled
annual meeting date differs by
more than 30 days than the
month and day of the previous
year's annual meeting, and if
New Pride gives less than 100
days' prior notice or public
disclosure of the scheduled
annual meeting date, then
notice of an item to be
brought before the annual
meeting may be timely if it is
delivered or received not
later than the close of
business on the 10th day
following the earlier of
notice to the stockholder or
public disclosure of the
scheduled annual meeting date.
The notice must set forth, as
to each item to be brought
before the annual meeting, a
description of the proposal
and the reasons for conducting
such business at the annual
meeting, the name and address,
as they appear on New Pride's
books, of the stockholder
proposing the item and any
other stockholders known by
the stockholder to be in favor
of the proposal, the number of
shares of each class or series
of capital stock beneficially
owned by the stockholder as of
the date of the notice, and
any material interest of the
stockholder in the proposal.
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84
SPECIAL MEETINGS OF STOCKHOLDERS
NEW PRIDE PRIDE MARINE
Special meetings of the stock- Louisiana law provides that Special meetings of the share-
holders may be called by the special meetings of holders may be called for
chairman of the board, the shareholders may be called at proper purposes by the
president, or the board of any time by the president or Chairman of the Board, the
directors. the board of directors, or in President, the Board of
any manner provided for in the Directors, or the holders of
articles or bylaws. issued and outstanding shares
representing at least five
Pride's articles and bylaws percent of all the votes
provide that shareholders may entitled to be cast at the
call special meetings only if proposed special meeting. Only
the meeting is called by business within the purposes
shareholders holding 80% of described in the notice may be
the total voting power. The conducted at the special
bylaws provide that the only meeting.
business that can be conducted
at a shareholders meeting is
the business set forth in the
notice of meeting.
STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
NEW PRIDE PRIDE MARINE
The New Pride certificate of Under Louisiana law, Marine's charter provides that
incorporation prohibits shareholders may take any shareholders may take action
stockholder action by written action without a meeting, by a consent signed by the
consent. without prior notice and holders of outstanding stock
without a vote if all having not less than the
shareholders entitled to vote minimum number of votes that
on the matter consent to the would be necessary to
action in writing. authorize or take this action
at a meeting.
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85
REQUIRED VOTE FOR MERGERS AND DISPOSITIONS OF ASSETS
NEW PRIDE PRIDE MARINE
Required Vote for Mergers. Required Vote for Mergers. Required Vote for Mergers. A
Under Delaware law, a merger Under Louisiana law, a merger merger requires a majority
involving a Delaware requires a two-thirds vote of vote of the outstanding shares
corporation must be approved the shareholders entitled to entitled to vote on the
by a majority of the vote who are present at the merger.
outstanding stock of the meeting, unless the articles
corporation entitled to vote otherwise requires the vote of
on the merger. a different number of shares.
In addition, if the merger
agreement expressly prescribes
a change in the articles of
the surviving business
corporation which, if
contained in a proposed
amendment to such
corporation's articles, would
entitle any class or series of
shares of such corporation to
vote as a class, the merger
agreement must also be
approved by such affirmative
vote of the holders of the
shares of such class or series
as would be required for the
adoption of such amendment to
the articles.
The Pride articles state that
the affirmative vote of the
holders of a majority of the
voting power present at a
shareholders' meeting shall be
necessary to approve a merger.
Absence of Required Vote for Absence of Required Vote for Absence of Required Vote for
Some Mergers. Delaware law Some Mergers. Unless a corpo- Some Mergers. Texas law does
does not require a vote of the ration's articles require not require a vote of the
stockholders of the surviving otherwise, Louisiana law does shareholders of the surviving
corporation of a merger in not require a vote of the corporation of a merger in
limited circumstances, shareholders if: limited circumstances,
including a merger where the -- the agreement of merger including a merger where the
number of shares issued by a does not amend the articles of voting power of the number of
corporation in the merger does the corporation; voting shares outstanding
not exceed 20% of the shares -- each share of stock immediately after the merger,
outstanding immediately before outstanding immediately prior plus the voting power of the
the merger. to the effective date of number of voting shares of the
the merger is to be an corporation that will be
identical outstanding or issued in the merger, if any,
treasury share of stock of does not exceed by more than
the surviving corporation 20% the voting power of the
after the effective date of total number of voting shares
the merger; or outstanding immediately before
-- either no common shares of the merger.
the surviving corporation
and no shares convertible
into such shares are to be
issued
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NEW PRIDE PRIDE MARINE
under the agreement, or the
authorized unissued common
shares or the treasury com-
mon shares of the surviving
corporation to be issued
under the agreement plus
those initially issuable
upon conversion of any
other shares to be issued
do not exceed 15% of the
common shares of the
corporation outstanding
immediately prior to the
effective date of the
merger.
Required Vote for Disposition Required Vote for Disposition Required Vote for Disposition
of Assets. Under Delaware of Assets. Under Louisiana of Assets. Under Texas law, a
law, a corporation may sell, law, a corporation may sell, sale, lease, exchange or other
lease or exchange all, or lease or exchange all, or disposition of all, or
substantially all, of its substantially all, of its substantially all, the
property and assets if au- property and assets if au- property and assets of a
thorized by the holders of a thorized by the holders of at corporation does not require a
majority of the outstanding least two-thirds of the voting shareholder vote when the
stock entitled to vote on the power present (or by such disposition is made in the
disposition. greater or lesser proportion, usual and regular course of
not less than the majority, of business. If this disposi-
the voting power present or of tion is not made in the usual
the total voting power, as the and regular course of
articles may provide). business, then a vote of a
majority of the outstanding
Pride's articles provide that shares of the corporation
changing the vote required for entitled to vote on the
dispositions of property and disposition is required. Under
assets to a majority of the Texas law, a disposition is
voting power present. made in the usual and regular
course of business if the
corporation continues to en-
gage in one or more businesses
following the disposition or
applies a portion of the
consideration received in the
disposition to the conduct of
business following the
disposition.
STATE TAKEOVER LEGISLATION
NEW PRIDE PRIDE MARINE
Delaware law prohibits a Louisiana law requires that Texas law generally prevents
corporation from engaging in a certain transactions, such as an "affiliated shareholder" or
"business combination" with an mergers, consolidations or its affiliates or associates
interested stockholder who, share exchanges, with a from entering into or engaging
together with his associates shareholder beneficially in a "business combination"
and affiliates, owns, or if owning 10% or more of the with a corporation during the
the person is an affiliate of voting power of the three-year period im-
the corporation and did own corporation (an interested mediately following the
within the last three years, shareholder) or its affili- affiliated shareholder's
15% or more of the outstanding ates be recommended by the acquisition of shares unless
voting stock of the board of directors and specific conditions are sat-
corporation, for a approved by the affirmative isfied. The three-year
vote of (i) 80% restriction
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NEW PRIDE PRIDE MARINE
period of three years of the votes entitled to be does not apply if either:
following the time that the cast by outstanding shares of -- before the date a person
person became an interested the corporation's voting stock became an affiliated
stockholder, unless: and (ii) two- thirds of the shareholder, the board of
- -- prior to the time the votes entitled to be cast by directors of the
stockholder became an holders of voting stock other corporation approves the
interested stockholder, the than the interested share- business combination or the
board of directors of the holder and its affiliates. acquisition of shares made
corporation approved the These voting requirements do by the affiliated
business combination or the not apply to such transactions stockholder on that date,
transaction which resulted if the transaction (i) does or
in the stockholder's not alter the contract rights -- not less than six months
becoming an interested of the stock or change or after the date a person became
stockholder, convert, in whole or in part, an affiliated shareholder,
- -- upon completion of the the outstanding shares of the the business combination is
transaction that resulted corporation or (ii) satisfies approved by the affirmative
in the stockholder's certain requirements with vote of holders of at least
becoming an interested regard to the consideration to two-thirds of the
stockholder, the inter- be received by shareholders corporation's outstanding
ested stockholder owned at and certain procedural voting shares not benefi-
least 85% of the voting requirements. cially owned by the
stock of the corporation, affiliated shareholder or
outstanding at the time the Pride's articles provide that its affiliates or
transaction commenced, no business combination shall associates.
subject to specified be effected unless it is
adjustments, or approved at the shareholders' An "affiliated shareholder" is
- -- on or after the date of the meeting called for that defined generally as a person
business combination, the purpose by the affirmative that is or was within the
board of directors and the vote of 80% of the total preceding three-year period
holders of at least 66 2/3% voting power of the holders of the beneficial owner of 20% or
of the outstanding voting voting securities or other more of a corporation's
stock not owned by the obligations with voting power outstanding voting shares.
interested stockholder (excluding such securities and
approve the business obligations owned by an The "business combinations"
combination. acquiring entity and its subject to the restriction
affiliates). In addition to generally include:
Delaware law defines a the voting requirements, no -- mergers or share exchanges,
"business combination" business combination may be -- dispositions of assets
generally as: effected without first having an aggregate value
- -- a merger or consolidation satisfying "fair price" equal to 10% or more of the
with the interested substantive conditions with market value of the assets
stockholder or with any regard to: (i) the or of the outstanding
other corporation or other consideration to be received common shares or
entity if the merger or by shareholders; (ii) certain representing 10% or more of
consolidation is caused by restrictions prohibiting the the market value of the
the interested stockholder, acquiring entity from purchas- assets or of the
- -- a sale or other disposition ing voting securities or outstanding common shares
to or with the interested obligations with voting power or representing 10% or more
stockholder of assets with subsequent to becoming an of the earning power or net
an aggregate market value acquiring entity but prior to income of the corporation,
equal to 10% or more of any business combination; -- specified stock issuances
either the aggregate market (iii) the dividends paid on or transactions by the
value of all assets of the the outstanding Pride stock corporation that would
corporation or the (iv) certain restrictions increase the affiliated
aggregate market value of prohibiting the acquiring shareholder's proportion-
all of the outstanding entity from receiving the ate interest in the
stock of the corporation, benefit of any Pride financial corporation,
- -- with some exceptions, any assistance or making any major -- specified liquidations or
transaction resulting in change in Pride's business or dissolutions, and
the is- equity capital structure
without
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NEW PRIDE PRIDE MARINE
suance or transfer by the unanimous approval of the -- the receipt of tax,
corporation or any directors; and guarantee, loan or other
majority-owned subsidiary (v) the distribution of a financial benefits by an
of any stock of the proxy statement containing any affiliated shareholder
corporation or subsidiary recommendations by the other than proportionately
to the interested stock- directors and the opinion of a as a stockholder of the
holder, reputable investment banking corporation. Texas law does
- -- any transaction involving firm as to the fairness of the not apply to a business
the corporation or a terms of the business combination with an
majority-owned subsidiary combination. affiliated shareholder that
that has the effect of was the beneficial owner of
increasing the pro- These requirements will not 20% or more of the
portionate share of the apply to a business outstanding voting shares
stock of the corporation or combination that (i) is of the corporation on
subsidiary owned by the approved by a majority of [December 31, 1996], and
interested stockholder, or directors unaffiliated with has continued to own those
- -- any receipt by the the acquiring entity who were voting shares until the an-
interested stockholder of directors prior to an nouncement date of the
the benefit of any loans or acquiring entity's becoming business combination.
other financial benefits such (or certain succes-
provided by the cor- sors), if there are at least In discharging the duties of a
poration or any majority- three continuing directors or director under Texas law, a
owned subsidiary. (ii) involves solely either director, in considering the
(A) transfer of assets to a best interests of Marine, may
Because the New Pride subsidiary wholly owned by consider the long-term as well
certificate of incorporation Pride or (B) a merger or as the short- term interests
will not include any provision consolidation with or into a of Marine and Marine's
to "opt-out" of the Delaware successor corporation, as long shareholders, including the
business combination statute, as the percentages of share- possibility that those
the statute will apply to holder ownership remain the interests may be best served
business combinations same and successor by Marine's continued
involving New Pride. Delaware corporation's articles of independence.
law applies to business incorporation contain the same
combinations involving New provisions as the articles.
Pride.
A "business combination" is
defined in Pride's articles
as: (i) any merger or
consolidation of Pride with or
into any entity unrelated to
Pride that is the beneficial
owner of securities rep-
resenting 30% or more of the
voting power of Company
securities or other
obligations of Pride granting
voting rights or any affil-
iate thereof; (ii) any sale or
other disposition of all or
substantially all of Pride's
assets to an acquiring entity
or any affiliate thereof;
(iii) any sale or other
disposition to Pride or any
subsidiary thereof of any
assets in exchange for which
an acquiring entity or any
affiliate thereof becomes the
beneficial owner of either (A)
Pride or any subsidiaries
voting securi-
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NEW PRIDE PRIDE MARINE
ties or (B) other obligations
of Pride granting voting
rights; (iv) any transaction
designed to decrease the
number of holders of the
Pride's voting securities re-
maining after an acquiring
entity has become an acquiring
entity; or (v) the adoption of
any plan or proposal for the
liquidation or dissolution of
Pride in which anything other
than cash will be received by
an acquiring entity or any
affiliates thereof.
As permitted by Louisiana law,
Pride's articles of
incorporation expressly
authorize the board of
directors, when considering a
tender offer, exchange offer,
merger or consolidation, to
consider, among other factors,
the social and economic
effects of the proposals on
Pride, its subsidiaries and
its employees, customers,
creditors and communities.
STOCKHOLDER RIGHTS PLANS
NEW PRIDE PRIDE MARINE
New Pride has adopted a pre- Pride has adopted a preferred Marine has adopted a preferred
ferred share purchase rights share purchase rights plan share purchase rights plan
plan that will be effective that is generally similar to that is generally similar to
upon completion of the the New Pride plan. the New Pride plan.
reincorporation merger. The
rights have certain
anti-takeover effects. The
rights will cause substantial
dilution to any person or
group that attempts to acquire
New Pride without the approval
of its board of directors. As
a result, the overall effect
of the rights may be to render
more difficult or discourage
any attempt to acquire New
Pride even if the acquisition
may be favorable to the
interests of New Pride's
stockholders. Because the
board of directors can redeem
the rights or approve a tender
or exchange offer, the rights
should not interfere with a
merger or other business
combination approved by the
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NEW PRIDE PRIDE MARINE
board. See "Description of
Capital Stock of New
Pride -- Stockholder Rights
Plan."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
NEW PRIDE PRIDE MARINE
Scope. Under Delaware law, a Scope. Louisiana law permits Scope. Texas law permits a
corporation is permitted to a corporation to provide corporation to provide
provide indemnification or indemnification or advancement indemnification or advancement
advancement of expenses of expenses, against of expenses, against
against judgments, fines, judgments, penalties, fines, judgments, penalties, fines,
expenses and amounts paid in settlements and reasonable settlements and reasonable
settlement actually and expenses actually incurred by expenses actually incurred by
reasonably incurred by the the person in connection with the person in connection with
person in connection with a the proceeding if: the proceeding if:
proceeding if he acted in good -- the person conducted -- the person conducted
faith and in a manner he himself or herself in good himself or herself in good
reasonably believed to be in faith, faith,
or not opposed to the best -- the person acted in a -- in the case of conduct in
interest of the corporation manner he reasonably believed his or her official capacity,
and, with respect to any was in, or not opposed to, the person reasonably
criminal action or proceeding, the corporation's best believed that his or her
if he had no reasonable cause interest, and conduct was in the
to believe his conduct was -- with respect to a criminal corporation's best
unlawful. However, no proceeding, had no interest,
indemnification is permitted reasonable cause to believe -- in all other cases,
if the person is adjudged to his or her conduct was reasonably believed that his
be liable to the corpo- unlawful. However, in the or her conduct was not
ration, unless the Court of case of actions by or in opposed to the
Chancery determines that the the right of the corpora- corporation's best
person is entitled to tion, the indemnity shall interests, and
indemnity. The New Pride be limited to expenses, -- in the case of a criminal
certificate of incorporation actually and reasonably proceeding, the person had
provides that New Pride will incurred in connection with no reasonable cause to
indemnify directors and the defense or settlement believe his or her conduct
officers of New Pride to the of such action, and no was unlawful.
full extent permitted by indemnification shall be
Delaware law. made in respect of any However, if the person is
claim in which a court has found liable to the
adjudged the person to be corporation, or if the person
liable for willful or is found liable on the basis
intentional misconduct in that he received an improper
the performance of his duty personal benefit,
to the corporation. indemnification under Texas
law is limited to the
The Pride bylaws require that reimbursement of reasonable
Pride will provide expenses actually incurred by
indemnification and the person in connection to
advancement of expenses to the the proceeding. No
fullest extent allowed by Lou- indemnification will be
isiana law. available if the person is
found liable for willful or
intentional misconduct. The
Marine bylaws require that
Marine will provide
indemnification and
advancement of expenses to the
fullest extent allowed by
Texas law.
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NEW PRIDE PRIDE MARINE
Determinations. Delaware law Determinations. Louisiana law Determinations. Texas law
provides that any of the provides that any of the provides that any of the
following can determine that following can determine that following can determine that
indemnification is appropriate indemnification is appropriate indemnification is appropriate
under Delaware law: under Louisiana law: under Texas law:
- -- a majority vote of -- by a majority vote of a -- a majority vote of a quorum
directors who are not party quorum consisting of directors consisting of directors who
to the proceeding, or a who were not parties to the are not party to the
committee of those action; proceeding,
directors designated by a -- if such a quorum is not ob- -- if a quorum cannot be ob-
majority vote of those tainable, and the board of tained, a special committee
directors, even though, in directors so directs, by of the board of directors
both cases, less than a independent legal counsel, consisting of at least two
quorum, or directors not party to the
- -- if there are no directors -- by the shareholders. proceeding,
who are not a party to the -- special legal counsel, or
proceeding, or if those -- a shareholder vote
directors so direct, excluding shares held by
independent legal counsel, directors party to the
or proceeding.
- -- a stockholder vote
New Pride's bylaws provide
that if there has not been a
change of control of New Pride
at the time the request for
indemnification is submitted,
then the indemnitee's
entitlement to indemnification
is governed by the Delaware
General Corporate Laws. If
there has been a change of
control of New Pride at the
time the request for
indemnification is submitted,
then the indemnitee's
entitlement to indemnification
shall be determined in a
written opinion by independent
counsel selected by the
indemnitee.
Mandatory Indemnification. Mandatory Indemnification. Mandatory Indemnification.
Delaware law requires Under Louisiana law, Under Texas law,
indemnification with respect indemnification by the indemnification by the
to any claim, issue or matter corporation is mandatory if corporation is mandatory only
on which the director is the director is successful on if the director is wholly
successful on the merits or the merits or otherwise, in successful on the merits or
otherwise, in the defense of the defense of the proceeding. otherwise, in the defense of
the proceeding. the proceeding.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND OFFICERS
NEW PRIDE PRIDE MARINE
Delaware law provides that a Under Louisiana law, Under Texas law, a
corporation's charter may corporations are authorized to corporation's charter may
include a provision limiting limit or eliminate the eliminate all monetary
the personal liability of a personal liability of officers liability of each director to
director to the corpora- and directors to corpora- the corporation or its
shareholders
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NEW PRIDE PRIDE MARINE
tion or its stockholders for tions and their shareholders for conduct in the performance
monetary damages for breach of for monetary damages for of the director's duties.
a fiduciary duty as a breach of officers' and However, Texas law does not
director. However, Delaware directors' fiduciary duties, permit any limitation of
law does not have any except for: liability of a director for:
limitation of liability of a -- any breach of the officer's -- breaching the duty of
director for: or director's duty of loyalty loyalty to the corporation or
- -- any breach of the to the corporation or its its shareholders,
director's duty of loyalty shareholders, -- failing to act in good
to the corporation or its -- acts or omissions not in faith,
stockholders, good faith or which involve -- engaging in intentional
- -- acts or omissions not in intentional misconduct or a misconduct or a known
good faith or that involve knowing violation of law, violation of law,
intentional misconduct or a -- unlawful payments of divi- -- obtaining an improper per-
knowing violation of the dends or unlawful stock sonal benefit from the
law, repurchases or redemptions corporation, or
- -- paying a dividend or as provided in Section 92D -- violating applicable
approving a stock of the Louisiana Business statutes that expressly
repurchase that was illegal Corporation Law, or provide for the liability
under applicable law, or -- any transaction from which of a director.
- -- any transaction from which the officer or director
the director derived an im- derived an improper The Marine articles eliminate
proper personal benefit. personal benefit. the monetary liability of
Marine's directors to the
The New Pride certificate of Pride's articles limit the fullest extent permitted by
incorporation eliminates the liability of Pride's officers law.
monetary liability of and directors to Pride and its
directors to the fullest shareholders to the fullest
extent permitted by law. extent permitted by Louisi-
ana law.
APPRAISAL RIGHTS
NEW PRIDE PRIDE MARINE
Delaware law generally Generally, under Louisiana Generally, under Texas law, a
provides stockholders of a law, a shareholder has the stockholder has the right to
corporation involved in a right to dissent from and dissent from and receive the
merger the right to demand and receive the appraised value of appraised value of his shares
receive payment of the fair his shares in connection with in connection with any plan of
value of their shares as any plan of merger or exchange merger or exchange or
determined by the Delaware or disposition of all or disposition of all or
Chancery Court. Appraisal substantially all of the substantially all of the
rights are not available, corporation's assets if a vote corporation's assets if Texas
however, to holders of shares: of the corporation's law requires a shareholder
- -- listed on a national shareholders approved the vote. However, a shareholder
securities exchange; action, unless such action was does not have the right to
- -- designated as a national approved by at least 80% of dissent from any plan of
market system security on the total voting power. merger in which there is a
an interdealer quotation single surviving or new
system operated by the However, a stockholder does domestic or foreign
National Association of not have the right to dissent corporation, or from any plan
Securities Dealers, Inc.; from any plan of merger in of exchange, if:
or which there is a single -- the shares held by the
- -- held of record by more than surviving or new domestic or shareholder are listed on a
2,000 shareholders; foreign corporation, or from national securities
any plan of exchange, if: exchange, listed on the
Nasdaq Stock Market,
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NEW PRIDE PRIDE MARINE
unless the holders are -- the shares held by the designated a national
required to accept in the stockholder are listed on a market security by the NASD
merger anything other than any national securities or held of record by not
combination of: exchange, listed on the less than 2,000 holders,
- -- shares or depositary Nasdaq Stock Market, -- the shareholder is not
receipts of the surviving designated a national required by the terms of the
corporation in the merger; market security by the NASD plan of merger or exchange
- -- shares or depositary or held of record by not to accept for his shares
receipts of another less than 2,000 holders, any consideration that is
corporation that, at the -- the stockholder is not different than the
effective date of the required by the terms of the consideration to be
merger, will be plan of merger or exchange provided to any other
(1) listed on a national to accept for his holder of shares of the
securities exchange, shares any considera- same class or series,
(2) designated as a tion that is different and
national market system than the consideration -- the shareholder is not
security on an to be provided to any required by the terms of the
interdealer quotation other holder of shares of plan of merger or exchange
system operated by the the same class or series, to accept for his shares
National Association of and any consideration other
Securities Dealers, Inc., -- the stockholder is not than (1) shares of the
or required by the terms of the corporation that, immedi-
(3) held of record by more plan of merger or exchange ately after the
than 2,000 holders; or to accept for his effective date of the
- -- cash instead of fractional shares any considera- merger, will be listed
shares or depositary tion other than (1) shares or authorized for
receipts received. of the corporation that, listing upon official
immediately after the notice of issuance, on a
effective date of the national securities
merger, will be listed or exchange, approved for
authorized for listing upon quotation as a national
official notice of market security by the NASD
issuance, on a national held of record by not less
securities exchange, than 2,000 holders or (2)
approved for quotation as a cash in lieu of fractional
national market security by shares that the shareholder
the NASD held of record by is otherwise entitled to
not less than 2,000 holders receive.
or (2) cash in lieu of
fractional shares that the
stockholder is otherwise
entitled to receive.
PREEMPTIVE RIGHTS
NEW PRIDE PRIDE MARINE
Under Delaware law, a stock- Under Louisiana law, a share- Under Texas law, a shareholder
holder does not have holder has preemptive rights has preemptive rights, unless
preemptive rights unless the if they are granted such the charter limits those
corporation's charter rights in their articles. The rights. The Marine articles
specifically grants those Pride articles do not grant expressly deny any preemptive
rights. The New Pride the shareholders preemptive rights.
certificate of incorporation rights.
does not grant stockholder
preemptive rights.
88
94
LIQUIDATION RIGHTS
NEW PRIDE PRIDE MARINE
Under Delaware law, a Under Louisiana law, a Under Texas law, a corporation
dissolved corporation or corporation liquidating its liquidating its assets must
successor entity must pay assets must satisfy all its satisfy all its debts and
claims against the cor- debts and liabilities followed liabilities followed by
poration, followed by unpaid by distributions to its distributions to its
dividends to the holders of shareholders, according to shareholders, according to
preferred stock, before their respective rights and their respective rights and
distributions to the holders interests. interests.
of common stock.
PAYMENT OF DIVIDENDS; REPURCHASES AND REDEMPTIONS
NEW PRIDE PRIDE MARINE
Under Delaware law, a board of Under Louisiana law, a board Under Texas law, a board of
directors may authorize a of directors may authorize a directors may authorize a
corporation to make corporation to make corporation to make
distributions to its distributions to its distributions to its
stockholders, subject to any shareholders out of its shareholders (which includes a
restrictions in its charter, surplus, subject to any repurchase of shares of the
either out of surplus or, if restrictions in its articles. Texas corporation) out of its
there is no surplus, out of Louisiana law does not permit surplus, subject to any
net profits for the fiscal distributions when the cor- restriction in its charter.
year in which the board poration is insolvent, when Texas law does not permit
declares the dividend and/or such distributions would make distributions if the amount of
the preceding fiscal year. the corporation insolvent or the distribution exceeds the
Delaware law does not permit when such distributions are surplus of the corporation or
distributions out of net contrary to any restrictions would render the corporation
profits, however, if, in the articles. The Pride insolvent. The Marine articles
following the distribution, articles and bylaws do not and bylaws do not further
the corporation's capital is further restrict the ability restrict the ability of the
less than the aggregate amount of the Pride board to declare Marine board to declare
of capital represented by the dividends. dividends to repurchase or re-
issued and outstanding stock deem shares.
of all classes having a Under Louisiana law, a
preference upon the dis- corporation has the power to
tribution of assets. The New repurchase or redeem its
Pride certificate of shares, except when the
incorporation does not further corporation would be insol-
restrict the ability of the vent, or at a price, in the
New Pride board to declare case of shares subject to
dividends. Under Delaware law, redemption, exceeding the
a corporation has the power to redemption price thereof, or
repurchase or redeem its own when its net assets are less
stock, except when the capi- than, or such purchase or
tal of the corporation is redemption would reduce its
impaired or would become net assets below, the
impaired. aggregate amount payable on
liquidation upon any issued
shares, which have a
preferential right to par-
ticipate in the assets in
event of liquidation,
remaining after the purchase
or redemption and can-
cellation of any shares in
connection therewith. The
Pride articles and bylaws do
not further restrict the
ability of Pride to repurchase
or redeem shares.
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95
INSPECTION OF BOOKS AND RECORDS
NEW PRIDE PRIDE MARINE
Under Delaware law, any stock- Under Louisiana law, any Under Texas law, any
holder of a Delaware stockholder who holds at least stockholder who holds at least
corporation making a written 5% of all of the outstanding 5% of all of the outstanding
demand under oath stating the shares of a corporation or shares of a corporation or
purpose of the inspection may that has held his shares for that has held his shares for
examine the list of at least six months at least six months immedi-
stockholders and may inspect immediately preceding his de- ately preceding his demand
any other corporate books and mand will have the right to will have the right to examine
records for any purpose examine at any reasonable at any reasonable time, for
reasonably related to the time, for any proper purpose, any proper purpose, the
stockholder's interest as a the relevant books and records relevant books and records of
stockholder. Any stockholder of account, minutes and share account, minutes and share
may also make copies or records of account, minutes records of account, minutes
extracts of those materials and share transfer records of and share transfer records of
during normal business hours. the corporation. the corporation.
EXPERTS
The consolidated balance sheet of Pride and its subsidiaries as of December
31, 2000 and 1999, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2000, incorporated by reference in this joint proxy
statement/prospectus, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
such firm as experts in auditing and accounting.
The consolidated balance sheet of Marine and its subsidiaries as of
December 31, 2000, and 1999 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in the
period ended December 31, 2000, incorporated by reference in this joint proxy
statement/prospectus and elsewhere in this registration statement, have been
audited by KPMG LLP, independent certified public accountants, as set forth in
their report incorporated herein, and are incorporated herein in reliance upon
such report given on the authority of such firm as experts in auditing and
accounting.
INDEPENDENT ACCOUNTANTS
With respect to the unaudited interim consolidated financial information of
Pride and Marine for the three-month periods ended March 31, 2001 and 2000,
PricewaterhouseCoopers LLP and KPMG LLP, respectively, reported that they have
each applied limited procedures in accordance with professional standards for a
review of such information. However, their separate reports thereon incorporated
by reference state that they did not audit and they do not express an opinion on
that unaudited consolidated financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. PricewaterhouseCoopers LLP
and KPMG LLP are not subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their reports on the unaudited interim consolidated
financial information because neither of those reports is a "report" or a "part"
of the registration statement prepared or certified by PricewaterhouseCoopers
LLP or KPMG LLP within the meaning of Sections 7 and 11 of the Securities Act of
1933.
90
96
LEGAL MATTERS
The validity of the Pride common stock to be issued in the Marine merger
will be passed upon for Pride by Sher Garner Cahill Richter Klein McAlister &
Hilbert, L.L.C., New Orleans, Louisiana.
Porter & Hedges, L.L.P., Houston, Texas, will pass upon certain U.S.
federal income tax consequences of the mergers for Marine and its shareholders.
Baker Botts L.L.P., Houston, Texas, will pass upon certain U.S. federal income
tax consequences of the mergers for Pride and its shareholders.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires Pride and Marine to file information with
the Securities and Exchange Commission concerning their respective business and
operations. Accordingly, Pride and Marine file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any document Pride and Marine file at the SEC's public reference rooms
located at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. These SEC filings are also available to the public on the SEC's
web site at: http://www.sec.gov. Copies of these reports, proxy statements and
other information can also be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
Pride has filed with the SEC a registration statement on Form S-4. This
joint proxy statement/ prospectus is a part of the registration statement. As
allowed by the SEC rules, this joint proxy statement/ prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement. For further information with respect to
Pride, Marine, New Pride, the New Pride common stock and related matters, you
should consult the registration statement and its exhibits. Statements contained
in this joint proxy statement/prospectus concerning the provisions of any
documents are summaries of those documents, and we refer you to the document
filed with the SEC for additional information. The registration statement and
any of its amendments, including exhibits filed as a part of the registration
statement or an amendment to the registration statement, are available for
inspection and copying as described above.
SEC rules and regulations permit the information Pride and Marine files
with the SEC to be "incorporated by reference." This means that Pride and Marine
can disclose important information to you by referring you to the other
information Pride and Marine have filed with the SEC. The information that has
been incorporated by reference is considered to be part of this joint proxy
statement/prospectus. Information that Pride and Marine file later with the SEC
will automatically update and supersede this information.
The documents listed below and any filings Pride or Marine will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 following the date of this document, but prior to the date of their
respective shareholder meeting are incorporated by reference:
For Pride:
- Annual Report on Form 10-K for the fiscal year ended December 31, 2000;
- Quarterly Report on Form 10-Q for the period ended March 31, 2001;
- Proxy Statement on Schedule 14A filed with the SEC on April 20, 2001; and
- Current Reports on Form 8-K filed with the SEC on January 12, 2001, March
15, 2001 and May 25, 2001.
91
97
For Marine:
- Annual Report on Form 10-K for the fiscal year ended December 31, 2000;
- Quarterly Report on Form 10-Q for the period ended March 31, 2001;
- Proxy Statement on Schedule 14A as filed with the SEC on April 4, 2001;
and
- Current Reports on Form 8-K filed with the SEC on March 5, 2001, April
17, 2001 and May 25, 2001.
You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this joint proxy
statement/prospectus by writing or calling:
For Pride:
Pride International, Inc.
5847 San Felipe, Suite 3300
Houston, TX 77057
Attention: Investor Relations
Telephone requests may be directed to (713) 789-1400.
For Marine:
Marine Drilling Companies, Inc.
One Sugar Creek Center Boulevard, Suite 600
Sugar Land, Texas 77478
Attention: Investor Relations
Telephone requests may be directed to (281) 243-3000.
In order to ensure timely delivery of these documents, you should make such
request by , 2001.
Neither Pride nor Marine has authorized anyone (including any salesman or
broker) to give any information or make any representation about the mergers or
about the respective companies that differs from or adds to the information in
this joint proxy statement/prospectus or in the documents that Pride and Marine
file publicly with the SEC. Therefore, you should not rely upon any information
that differs from or is in addition to the information contained in this joint
proxy statement/prospectus or in the documents that Pride and Marine file
publicly with the SEC.
If you live in a jurisdiction where it is unlawful to offer to exchange or
sell, to ask for offers to exchange or buy, or to ask for proxies regarding the
securities offered by this joint proxy statement/ prospectus, or if you are a
person to whom it is unlawful to direct such activities, the offer presented by
this joint proxy statement/prospectus is not extended to you.
The information contained in this joint proxy statement/prospectus speaks
only as of the date on the cover, unless the information specifically indicates
that another date applies.
92
98
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
PRIDE INTERNATIONAL, INC.,
PM MERGER, INC.,
MARINE DRILLING COMPANIES, INC.,
AND
AM MERGER, INC.
DATED AS OF MAY 23, 2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
99
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 THE MERGERS................................................. A-1
Section 1.1 The Marine Merger........................................... A-1
Section 1.2 The Pride Merger............................................ A-2
Section 1.3 The Closing................................................. A-2
Section 1.4 Marine Merger Effective Time................................ A-2
Section 1.5 Pride Merger Effective Time................................. A-2
Section 1.6 Effects of the Mergers...................................... A-3
ARTICLE 2 ORGANIZATIONAL DOCUMENTS OF SURVIVING ENTITIES.............. A-3
Section 2.1 Certificate of Incorporation of the Pride Merger Surviving
Entity...................................................... A-3
Section 2.2 Bylaws of the Pride Merger Surviving Entity................. A-3
Section 2.3 Certificate of Incorporation of the Marine Merger Surviving
Entity...................................................... A-3
Section 2.4 Bylaws of the Marine Merger Surviving Entity................ A-3
Section 2.5 Adoption of Stockholder Rights Plan......................... A-3
ARTICLE 3 DIRECTORS AND OFFICERS OF THE SURVIVING ENTITIES............ A-3
Section 3.1 Directors of Merger Sub..................................... A-3
Section 3.2 Officers of Merger Sub...................................... A-3
Section 3.3 Directors of the Company.................................... A-3
Section 3.4 Officers of the Company..................................... A-4
ARTICLE 4 EFFECT OF THE MERGERS ON THE STOCK OF THE COMPANY, MARINE,
PRIDE AND MERGER SUB; EXCHANGE OF CERTIFICATES.............. A-4
Section 4.1 Effect on Marine Stock...................................... A-4
Section 4.2 Effect on the Stock of Merger Sub........................... A-4
Section 4.3 Effect on the Stock of the Company.......................... A-4
Section 4.4 Effect on Pride Stock....................................... A-4
Section 4.5 Exchange of Certificates.................................... A-5
Section 4.6 Rule 16b-3 Approval......................................... A-7
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF MARINE.................... A-7
Section 5.1 Existence; Good Standing; Corporate Authority............... A-7
Section 5.2 Authorization, Validity and Effect of Agreements............ A-7
Section 5.3 Capitalization.............................................. A-7
Section 5.4 Significant Subsidiaries.................................... A-8
Section 5.5 Compliance with Laws; Permits............................... A-8
Section 5.6 No Conflict................................................. A-9
Section 5.7 SEC Documents............................................... A-9
Section 5.8 Litigation.................................................. A-10
Section 5.9 Absence of Certain Changes.................................. A-10
Section 5.10 Taxes....................................................... A-10
Section 5.11 Employee Benefit Plans...................................... A-12
A-i
100
PAGE
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Section 5.12 Labor Matters............................................... A-14
Section 5.13 Environmental Matters....................................... A-14
Section 5.14 Intellectual Property....................................... A-15
Section 5.15 Decrees, Etc................................................ A-15
Section 5.16 Insurance................................................... A-15
Section 5.17 No Brokers.................................................. A-16
Section 5.18 Opinion of Financial Advisor................................ A-16
Section 5.19 Vote Required............................................... A-16
Section 5.20 Ownership of Drilling Rigs.................................. A-16
Section 5.21 Undisclosed Liabilities..................................... A-16
Section 5.22 Certain Contracts........................................... A-16
Section 5.23 Capital Expenditure Program................................. A-17
Section 5.24 Improper Payments........................................... A-17
Section 5.25 Amendment to Marine Rights Agreement........................ A-17
Section 5.26 Pooling of Interests........................................ A-18
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PRIDE..................... A-18
Section 6.1 Existence; Good Standing; Corporate Authority............... A-18
Section 6.2 Authorization, Validity and Effect of Agreements............ A-18
Section 6.3 Capitalization.............................................. A-18
Section 6.4 Significant Subsidiaries.................................... A-19
Section 6.5 Compliance with Laws; Permits............................... A-19
Section 6.6 No Conflict................................................. A-20
Section 6.7 SEC Documents............................................... A-20
Section 6.8 Litigation.................................................. A-21
Section 6.9 Absence of Certain Changes.................................. A-21
Section 6.10 Taxes....................................................... A-21
Section 6.11 Employee Benefit Plans...................................... A-23
Section 6.12 Labor Matters............................................... A-24
Section 6.13 Environmental Matters....................................... A-25
Section 6.14 Intellectual Property....................................... A-25
Section 6.15 Decrees, Etc................................................ A-26
Section 6.16 Insurance................................................... A-26
Section 6.17 No Brokers.................................................. A-26
Section 6.18 Opinion of Financial Advisor................................ A-26
Section 6.19 Vote Required............................................... A-26
Section 6.20 Ownership of Drilling Rigs and Drillships................... A-26
Section 6.21 Undisclosed Liabilities..................................... A-27
Section 6.22 Certain Contracts........................................... A-27
Section 6.23 Capital Expenditure Program................................. A-27
Section 6.24 Improper Payments........................................... A-28
A-ii
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PAGE
----
Section 6.25 Amendment to Pride Rights Agreement......................... A-28
Section 6.26 Pooling of Interests........................................ A-28
Section 6.27 Representations and Warranties Relating to the Company and
Merger Sub.................................................. A-28
ARTICLE 7 COVENANTS AND AGREEMENTS.................................... A-29
Section 7.1 Conduct of Marine's Business................................ A-29
Section 7.2 Conduct of Pride's Business................................. A-31
Section 7.3 No Solicitation by Marine................................... A-34
Section 7.4 No Solicitation by Pride.................................... A-35
Section 7.5 Rights Agreements........................................... A-36
Section 7.6 Meetings of Shareholders.................................... A-36
Section 7.7 Filings; Commercially Reasonable Best Efforts, Etc. ........ A-37
Section 7.8 Inspection.................................................. A-39
Section 7.9 Publicity................................................... A-39
Section 7.10 Registration Statement on Form S-4.......................... A-39
Section 7.11 Listing Applications........................................ A-40
Section 7.12 "Comfort" Letters of Accountants............................ A-40
Section 7.13 Agreements of Affiliates.................................... A-41
Section 7.14 Expenses.................................................... A-41
Section 7.15 Indemnification and Insurance............................... A-41
Section 7.16 Marine Employee Stock Options, Incentives and Benefit
Plans....................................................... A-42
Section 7.17 Pride Employee Stock Options, Incentives and Benefit
Plans....................................................... A-43
Section 7.18 Company Covenants Concerning Incentive Compensation and
Benefits.................................................... A-43
Section 7.19 Company Assumption of Indenture Indebtedness................ A-44
Section 7.20 Pooling Letters............................................. A-44
ARTICLE 8 CONDITIONS.................................................. A-44
Section 8.1 Conditions to Each Party's Obligation to Effect the
Mergers..................................................... A-44
Section 8.2 Conditions to Obligation of Marine to Effect the Marine
Merger...................................................... A-45
Section 8.3 Conditions to Obligation of Pride to Effect the Pride
Merger...................................................... A-45
ARTICLE 9 TERMINATION................................................. A-46
Section 9.1 Termination by Mutual Consent............................... A-46
Section 9.2 Termination by Marine or Pride.............................. A-46
Section 9.3 Termination by Marine....................................... A-47
Section 9.4 Termination by Pride........................................ A-47
Section 9.5 Effect of Termination....................................... A-48
Section 9.6 Extension; Waiver........................................... A-49
ARTICLE 10 GENERAL PROVISIONS.......................................... A-49
Section 10.1 Nonsurvival of Representations, Warranties and Agreements... A-49
Section 10.2 Notices..................................................... A-49
Section 10.3 Assignment; Binding Effect; Benefit......................... A-50
Section 10.4 Entire Agreement............................................ A-50
A-iii
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PAGE
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Section 10.5 Amendments.................................................. A-50
Section 10.6 Governing Law............................................... A-50
Section 10.7 Counterparts................................................ A-50
Section 10.8 Headings.................................................... A-50
Section 10.9 Interpretation.............................................. A-51
Section 10.10 Waivers..................................................... A-51
Section 10.11 Incorporation of Exhibits................................... A-51
Section 10.12 Severability................................................ A-51
Section 10.13 Enforcement of Agreement.................................... A-51
A-iv
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GLOSSARY OF DEFINED TERMS
DEFINED TERMS WHERE DEFINED
- ------------- ----------------------
Action...................................................... Section 7.15(a)
Affiliate................................................... Section 5.10(q)
Affiliated Group............................................ Section 5.10(q)
Agreement................................................... Preamble
Assumed Indebtedness........................................ Section 7.20
Certificates................................................ Section 4.5(b)
Closing..................................................... Section 1.3
Closing Date................................................ Section 1.3
Code........................................................ Recitals(c)
Company..................................................... Preamble
Company Certificates........................................ Section 4.4(b)
Company Common Stock........................................ Section 4.3
Confidentiality Agreement................................... Section 7.3(a)
Cutoff Date................................................. Section 7.3(d), 7.4(d)
Deferred Intercompany Transaction........................... Section 5.10(q)
DGCL........................................................ Section 1.1
Effective Time.............................................. Section 1.5(c)
Environmental Laws.......................................... Section 5.13(a)
ERISA....................................................... Section 5.11(a)
Exchange Act................................................ Section 4.6
Exchange Agent.............................................. Section 4.5(a)
Exchange Fund............................................... Section 4.5(a)
Form S-4.................................................... Section 7.10(a)
Hazardous Materials......................................... Section 5.13(b)
HSR Act..................................................... Section 5.6(c)
Indemnified Party........................................... Section 7.15(a)
Indemnified Parties......................................... Section 7.15(a)
Junior Preferred Stock...................................... Section 5.3
LBCL........................................................ Section 1.2
Liens....................................................... Section 5.4
Louisiana Certificate of Merger............................. Section 1.5(c)
Marine...................................................... Preamble
Marine Acquisition Proposal................................. Section 7.3(a)
Marine Applicable Laws...................................... Section 5.5(a)
Marine Awards............................................... Section 7.16
Marine Benefit Plans........................................ Section 5.11(a)
Marine Certificates......................................... Section 4.1(b)
Marine Certificate of Merger................................ Section 1.4(a)
Marine Common Stock......................................... Section 4.1(a)
Marine Disclosure Letter.................................... Article 5 Preface
Marine ERISA Affiliate...................................... Section 5.11(b)(10)
Marine Material Adverse Effect.............................. Section 10.9(c)
Marine Material Contracts................................... Section 5.22(a)
Marine Meeting.............................................. Section 7.6(a)
Marine Merger............................................... Section 1.1
Marine Merger Consideration................................. Section 4.1(b)
Marine Merger Effective Time................................ Section 1.4(c)
Marine Merger Surviving Entities............................ Section 1.1
Marine Permits.............................................. Section 5.5(b)
A-v
104
DEFINED TERMS WHERE DEFINED
- ------------- ----------------------
Marine Permitted Liens...................................... Section 5.20
Marine Real Property........................................ Section 5.5(d)
Marine Regulatory Filings................................... Section 5.6(c)
Marine Reports.............................................. Section 5.7
Marine Right................................................ Section 5.3
Marine Rights Agreement..................................... Section 5.3
Marine Stock Option......................................... Section 7.16
Marine Stock Option Agreement............................... Recitals
Marine Stock Option Plans................................... Section 7.16
Marine Superior Proposal.................................... Section 7.3(a)
Material Adverse Effect..................................... Section 10.9(c)
Meetings.................................................... Section 7.6(a)
Mergers..................................................... Section 1.2
Merger Sub.................................................. Recitals
NYSE........................................................ Section 7.11
Pride....................................................... Preamble
Pride Acquisition Proposal.................................. Section 7.4(a)
Pride Applicable Laws....................................... Section 6.5(a)
Pride Awards................................................ Section 7.17
Pride Benefit Plans......................................... Section 6.11(a)
Pride Certificates.......................................... Section 4.4(b)
Pride Certificate of Merger................................. Section 1.5(c)
Pride Common Stock.......................................... Section 4.4(a)
Pride Disclosure Letter..................................... Article 6 Preface
Pride ERISA Affiliate....................................... Section 6.11(b)(10)
Pride Exchange Ratio........................................ Section 4.4(b)
Pride Issuance.............................................. Section 6.19
Pride Material Adverse Effect............................... Section 10.9(c)
Pride Material Contracts.................................... Section 6.22(a)
Pride Meeting............................................... Section 7.6(a)
Pride Merger................................................ Section 1.2
Pride Merger Consideration.................................. Section 4.4(b)
Pride Merger Effective Time................................. Section 1.5(c)
Pride Merger Surviving Entity............................... Section 1.2
Pride Permits............................................... Section 6.5(b)
Pride Permitted Liens....................................... Section 6.20
Pride Real Property......................................... Section 6.5(d)
Pride Regulatory Filings.................................... Section 6.6(c)
Pride Reports............................................... Section 6.7
Pride Right................................................. Section 6.3
Pride Rights Agreement...................................... Section 6.3
Pride Superior Proposal..................................... Section 7.4(a)
Proxy Statement/Prospectus.................................. Section 7.10(a)
Pride Stock Option.......................................... Section 7.17
Pride Stock Option Agreement................................ Recitals
Pride Stock Option Plan..................................... Section 7.17
Rule 145 Affiliates......................................... Section 7.13
Rule 16b-3.................................................. Section 4.6
SEC......................................................... Section 4.6
Securities Act.............................................. Section 5.6(c)
Series A Preferred Stock.................................... Section 6.3
A-vi
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DEFINED TERMS WHERE DEFINED
- ------------- ----------------------
Significant Subsidiary...................................... Section 5.4
Subsidiary.................................................. Section 10.9(d)
Tax......................................................... Section 5.10(q)
Tax Return.................................................. Section 5.10(q)
TBCA........................................................ Section 1.1
Texas Articles of Merger.................................... Section 1.4(b)
Third-Party Provisions...................................... Section 10.3
A-vii
106
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of May 23,
2001, is by and among Pride International, Inc., a corporation organized under
the laws of Louisiana ("Pride"), PM Merger, Inc., a corporation organized under
the laws of Delaware and wholly owned subsidiary of Pride (the "Company"),
Marine Drilling Companies, Inc., a corporation organized under the laws of Texas
("Marine"), and AM Merger, Inc., a corporation organized under the laws of
Delaware and wholly owned subsidiary of Pride ("Merger Sub").
RECITALS
A. The Marine Merger. Merger Sub is a newly organized Delaware
corporation. At the Marine Merger Effective Time, the parties hereto intend to
effect a merger in which (i) Marine will be merged with and into Merger Sub,
(ii) Merger Sub will be the surviving corporation of the merger and (iii) each
outstanding share of Marine Common Stock will be converted into one share of
Pride Common Stock.
B. The Pride Merger. The Company is a newly organized Delaware
corporation. Following the Marine Merger Effective Time, and at the Pride Merger
Effective Time, the parties hereto intend to effect a merger in which (i) Pride
will be merged with and into the Company, (ii) the Company will be the surviving
corporation of the merger and (iii) each outstanding share of Pride Common Stock
(including Pride Common Stock issued in the merger of Marine with and into
Merger Sub) will be converted into one share of Company Common Stock.
C. Advisability of the Mergers. The board of directors of each of Marine,
Merger Sub, Pride and the Company have determined that it is advisable and in
the best interest of their respective shareholders that the Marine Merger and
Pride Merger be consummated, all as hereinafter provided.
D. Intended U.S. Tax Consequences. The parties to this Agreement intend
that, for U.S. federal income tax purposes, each of the Mergers will constitute
a reorganization described in Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
E. Intended U.S. Accounting Treatment. The parties to this Agreement also
intend that the Mergers contemplated by this Agreement will be accounted for as
a pooling of interests under U.S. generally accepted accounting principles.
F. Marine Stock Option Agreement. As a material inducement to the
execution and delivery of this Agreement, Marine and Pride are entering into a
stock option agreement (the "Marine Stock Option Agreement") concurrently with
the execution and delivery of this Agreement, pursuant to which Pride will grant
Marine the option to purchase shares of Pride Common Stock, upon the terms and
subject to the conditions set forth therein.
G. Pride Stock Option Agreement. As a material inducement to the execution
and delivery of this Agreement, Pride and Marine are entering into a stock
option agreement (the "Pride Stock Option Agreement") concurrently with the
execution and delivery of this Agreement, pursuant to which Marine will grant
Pride the option to purchase shares of Marine Common Stock, upon the terms and
subject to the conditions set forth therein.
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 MERGERS
SECTION 1.1 The Marine Merger. Upon the terms and subject to the
conditions of this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL") and the Texas Business Corporation Act (the
"TBCA"), Marine shall be merged with and into Merger Sub (the "Marine
A-1
107
Merger") in accordance with this Agreement, and the separate corporate existence
of Marine shall thereupon cease at the Marine Merger Effective Time. Merger Sub
shall be the surviving entity in the Marine Merger (sometimes hereinafter
referred to as the "Marine Merger Surviving Entity").
SECTION 1.2 The Pride Merger. Upon the terms and subject to the
conditions of this Agreement, and in accordance with the DGCL and the Louisiana
Business Corporation Law (the "LBCL"), following the Marine Merger Effective
Time, Pride shall be merged with and into the Company (the "Pride Merger," and
together with the Marine Merger, the "Mergers") in accordance with this
Agreement, and the separate corporate existence of Pride shall thereupon cease
at the Pride Merger Effective Time. The Company shall be the surviving entity in
the Pride Merger (sometimes hereinafter referred to as the "Pride Merger
Surviving Entity").
SECTION 1.3 The Closing. Upon the terms and subject to the conditions of
this Agreement, the closing of the Mergers (the "Closing") shall take place at
(a) the offices of Baker Botts L.L.P., One Shell Plaza, 910 Louisiana, Houston,
Texas 77002, at 9:00 a.m., local time, on the first business day immediately
following the day on which the last to be fulfilled or waived of the conditions
set forth in Section 8.1, or, if on such day any condition set forth in Section
8.2 or 8.3 has not been fulfilled or waived, as soon as practicable after all
the conditions set forth in Article 8 have been fulfilled or waived in
accordance herewith, or (b) at such other time, date or place as Marine and
Pride may agree in writing. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
SECTION 1.4 Marine Merger Effective Time. (a) Prior to the Closing,
Marine, Merger Sub and Pride shall prepare, and on the Closing Date shall cause
a certificate of merger meeting the requirements of Section 251 of the DGCL with
respect to the Marine Merger (the "Marine Certificate of Merger") to be properly
executed and filed in accordance with such section.
(b) Prior to the Closing, Marine, Merger Sub and Pride shall also prepare,
and on the Closing Date shall cause articles of merger meeting the requirements
of Article 5.04 of the TBCA with respect to the Marine Merger (the "Texas
Articles of Merger") to be properly executed and filed in accordance with such
section.
(c) The Marine Merger shall become effective prior to the Pride Merger at
such time as each of the Marine Certificate of Merger and the Texas Articles of
Merger are properly executed and duly filed, or at such other time (but in any
case preceding the Pride Merger Effective Time) as Marine and Pride shall have
agreed upon and designated in each such filing as the effective time of the
Marine Merger (such time at which the Marine Merger shall have become effective
is herein referred to as the "Marine Merger Effective Time").
SECTION 1.5 Pride Merger Effective Time. (a) Prior to the Closing, Pride
and the Company shall prepare, and on the Closing Date shall cause a certificate
of merger meeting the requirements of Section 251 of the DGCL with respect to
the Pride Merger (the "Pride Certificate of Merger") to be properly executed and
filed in accordance with such section.
(b) Prior to the Closing, the Company and Pride shall prepare, and on the
Closing Date shall cause a certificate of merger meeting the requirements of
Section 12:112 of the LBCL with respect to the Pride Merger (the "Louisiana
Certificate of Merger") to be properly executed and filed in accordance with
such section.
(c) The Pride Merger shall become effective following the Marine Merger at
such time as each of the Pride Certificate of Merger and the Louisiana
Certificate of Merger are properly executed and filed, or at such other time
(but in any case following the Marine Merger Effective Time) as Marine and Pride
shall have agreed upon and designated in each such filing as the effective time
of the Pride Merger (such time at which the Pride Merger shall have become
effective is herein referred to as the "Pride Merger Effective Time," and such
time at which both the Marine Merger and the Pride Merger shall have become
effective is herein referred to as the "Effective Time").
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SECTION 1.6 Effects of the Mergers. The Marine Merger shall have the
effects set forth in Section 259 of the DGCL and Article 5.06 of the TBCA. The
Pride Merger shall have the effects set forth in Section 259 of the DGCL and
Section 12:115 of the LBCL. The Company agrees that it will be responsible for,
and will pay, all applicable fees, charges and incorporation and franchise taxes
required by law to be paid by Pride to the State of Louisiana. Merger Sub agrees
that it will be responsible for, and will pay, all applicable fees, charges and
incorporation and franchise taxes required by law to be paid by Marine to the
State of Texas.
ARTICLE 2
ORGANIZATIONAL DOCUMENTS OF SURVIVING ENTITIES
SECTION 2.1 Certificate of Incorporation of the Pride Merger Surviving
Entity. As of the Pride Merger Effective Time, the certificate of incorporation
of the Company set forth in Exhibit 2.1 hereto shall be the certificate of
incorporation of the Pride Merger Surviving Entity until duly amended in
accordance with applicable law; provided, however, that at the Pride Merger
Effective Time, the certificate of incorporation of the Pride Merger Surviving
Entity shall be amended to provide that the name of the Pride Merger Surviving
Entity from and after the Pride Merger Effective Time shall be "Pride
International, Inc."
SECTION 2.2 Bylaws of the Pride Merger Surviving Entity. As of the Pride
Merger Effective Time, the bylaws of the Company set forth in Exhibit 2.2 hereto
shall be the bylaws of the Pride Merger Surviving Entity until duly amended in
accordance with applicable law.
SECTION 2.3 Certificate of Incorporation of the Marine Merger Surviving
Entity. As of the Marine Merger Effective Time, the certificate of
incorporation of Merger Sub shall be the certificate of incorporation of the
Marine Merger Surviving Entity until duly amended in accordance with applicable
law; provided, however, that if so provided in the Marine Certificate of Merger
the name of Merger Sub shall be amended as provided therein.
SECTION 2.4 Bylaws of the Marine Merger Surviving Entity. As of the
Marine Merger Effective Time, the bylaws of Merger Sub shall be the bylaws of
the Marine Merger Surviving Entity until duly amended in accordance with
applicable law.
SECTION 2.5 Adoption of Stockholder Rights Plan. As of the Effective
Time, the Company shall adopt a stockholder rights plan substantially similar to
the Pride Rights Agreement as in effect on the date hereof with such changes as
may be necessary or advisable to reflect Delaware as the Company's jurisdiction
of incorporation and to conform such stockholder rights plan to the certificate
of incorporation of the Company.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING ENTITIES
SECTION 3.1 Directors of Merger Sub. The directors of Merger Sub
immediately prior to the Marine Merger Effective Time shall be the directors of
the Marine Merger Surviving Entity until their successors are duly elected and
qualified.
SECTION 3.2 Officers of Merger Sub. The officers of Marine immediately
prior to the Marine Merger Effective Time shall be the officers of the Marine
Merger Surviving Entity until their successors are duly appointed.
SECTION 3.3 Directors of the Company. Set forth in Exhibit 3.3 attached
hereto is the name of each individual who shall become a director of the Company
as of the Pride Merger Effective Time, and whether such director has been
designated for membership on the Company's board of directors by Marine or
Pride. If any individual identified in Exhibit 3.3 is unable or unwilling to
serve as a director of the Company as of the Pride Merger Effective Time, then a
substitute director shall be selected by the party
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that initially designated such individual for membership on the Company's board
of directors. From and after the Pride Merger Effective Time, each person
identified in Exhibit 3.3 shall serve as a director of the Company until such
person's successor is duly elected and qualified.
SECTION 3.4 Officers of the Company. Set forth in Exhibit 3.4 hereto is
the name of each individual who shall become an officer of the Company at the
Pride Merger Effective Time and such person's officer position with the Company
as of the Pride Merger Effective Time, and each such officer shall thereafter
serve until his or her successor shall be appointed or their earlier death,
resignation or removal in accordance with the certificate of incorporation and
bylaws of the Company. If any such person is unable or unwilling to serve as an
officer of the Company in the capacity set forth in Exhibit 3.4, then a
substitute officer shall be selected by (i) Marine if the person unable or
unwilling to serve is employed by Marine or its Subsidiaries on the date of this
Agreement, or (ii) Pride if the person unable or unwilling to serve is employed
by Pride or its Subsidiaries on the date of this Agreement.
ARTICLE 4
EFFECT OF THE MERGERS ON THE STOCK OF THE
COMPANY, MARINE, PRIDE AND MERGER SUB; EXCHANGE OF CERTIFICATES
SECTION 4.1 Effect on Marine Stock. As of the Marine Merger Effective
Time, by virtue of the Marine Merger, and without any further action by Marine,
Merger Sub or Pride or by the holders of any securities of Marine, Merger Sub or
Pride:
(a) Cancellation of Treasury Stock and Pride Owned Stock. Each share
of Marine's common stock, par value $.01 per share (the "Marine Common
Stock"), that is owned directly by Marine, by Pride or their respective
subsidiaries immediately prior to the Marine Merger Effective Time shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(b) Conversion of Marine Common Stock. Each issued and outstanding
share of Marine Common Stock (other than shares to be canceled in
accordance with Section 4.1(a)) shall be converted into one fully paid and
nonassessable share of Pride Common Stock (the "Marine Merger
Consideration"). As of the Marine Merger Effective Time, all such shares of
Marine Common Stock shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate or certificates which immediately prior to the Marine Merger
Effective Time represented outstanding shares of Marine Common Stock (the
"Marine Certificates") shall cease to have any rights with respect thereto,
except the right to receive the number of shares of Pride Common Stock into
which such shares have been converted.
SECTION 4.2 Effect on the Stock of Merger Sub. As of the Marine Merger
Effective Time, each share of the common stock, par value $.01 per share, of
Merger Sub that was outstanding prior to the Marine Merger Effective Time shall
not be converted or otherwise effected by the Marine Merger and shall remain
outstanding after the Marine Merger.
SECTION 4.3 Effect on the Stock of the Company. As of the Pride Merger
Effective Time, each share of the common stock, par value $.01 per share, of the
Company ("Company Common Stock") that was outstanding prior to the Pride Merger
Effective Time shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
SECTION 4.4 Effect on Pride Stock. As of the Pride Merger Effective Time,
by virtue of the Pride Merger and without any action on the part of Pride or the
Company or the holders of any securities of Pride or the Company:
(a) Cancellation of Treasury Stock and Marine Owned Stock. Each share
of Pride's common stock, no par value (the "Pride Common Stock"), that is
owned directly by Pride, by Marine or by their respective subsidiaries
immediately prior to the Pride Merger Effective Time shall automatically
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be canceled and retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(b) Conversion of Pride Common Stock. Each issued and outstanding
share of Pride Common Stock (including shares of Pride Common Stock issued
in the Marine Merger but excluding shares of Pride Common Stock to be
canceled in accordance with Section 4.4(a)), shall be converted into one
(the "Pride Exchange Ratio") fully paid and nonassessable share of Company
Common Stock (the "Pride Merger Consideration"). As of the Pride Merger
Effective Time, all such shares of Pride Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate or certificates or rights
thereto that immediately prior to the Pride Merger Effective Time which
represent outstanding shares of Pride Common Stock (the "Pride
Certificates") shall cease to have any rights with respect thereto, except
the right to receive certificates ("Company Certificates") representing the
number of shares of Company Common stock into which such shares have been
converted.
SECTION 4.5 Exchange of Certificates.
(a) Exchange Agent. As of the Closing Date, the Company shall enter into
an agreement with American Stock Transfer & Trust Company (the "Exchange
Agent"), which shall provide that the Company shall deposit with the Exchange
Agent, for the benefit of the holders of Marine Common Stock and Pride Common
Stock, for exchange in accordance with this Article 4, through the Exchange
Agent, Company Certificates representing the number of shares of Company Common
Stock (such shares of Company Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Pride Merger
Effective Time being hereinafter referred to as the "Exchange Fund") issuable
pursuant to this Article 4.
(b) Exchange Procedures. As soon as reasonably practicable after the Pride
Merger Effective Time, the Exchange Agent shall mail to each holder of record of
a Marine Certificate or a Pride Certificate (each a "Certificate" and
collectively the "Certificates") whose shares were converted pursuant to Section
4.1(b) and/or Section 4.4(b), (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Marine and Pride may
reasonably specify), and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the consideration set forth in Article 4. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a Company Certificate
representing that number of shares of Company Common Stock which such holder has
the right to receive pursuant to the provisions of this Article 4, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Marine Common Stock not registered in the transfer
records of Marine or of Pride Common Stock not registered in the transfer
records of Pride, a Company Certificate representing the proper number of shares
of Company Common Stock may be issued to a person other than the person in whose
name the Certificate so surrendered is registered if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other non-income taxes
required by reason of the issuance of shares of Company Common Stock to a person
other than the registered holder of such Certificate or establish to the
satisfaction of the Company that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 4.5, each Certificate shall be
deemed at any time after the Pride Merger Effective Time to represent only the
right to receive upon such surrender Company Certificates representing the
number of shares of Company Common Stock into which the shares of Pride Common
Stock formerly represented by such Certificate (including shares of Pride Common
Stock issuable in respect of Marine Common Stock as a result of the Marine
Merger) have been converted. No interest will be paid or will accrue on any cash
payable to holders of Certificates pursuant to the provisions of this Article 4.
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(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Company Common Stock with a record date
after the Pride Merger Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Company Common Stock
represented thereby and all such dividends and other distributions shall be paid
by the Company to the Exchange Agent and shall be included in the Exchange Fund,
in each case until the surrender of such Certificate in accordance with this
Article 4. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Certificate there shall be paid to the holder of
the Company Certificate representing shares of Company Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the Pride
Merger Effective Time theretofore paid with respect to such shares of Company
Common Stock and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Pride Merger Effective Time
but prior to such surrender and with a payment date subsequent to such surrender
payable with respect to such shares of Company Common Stock. The Company shall
make available to the Exchange Agent cash for these purposes.
(d) No Further Ownership Rights in Marine Common Stock and Pride Common
Stock. All shares of Company Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article 4
(including any cash paid pursuant to this Article 4) shall be deemed to have
been issued (and paid) in full satisfaction of all rights pertaining to the
shares of Pride Common Stock (including shares of Pride Common Stock issuable in
respect of Marine Common Stock as a result of the Marine Merger) theretofore
represented by such Certificates, subject, however, to the Pride Merger
Surviving Entity's obligation to pay any dividends or make any other
distributions with a record date prior to the Pride Merger Effective Time which
may have been authorized or made by Marine on such shares of Marine Common Stock
or by Pride on such shares of Pride Common Stock, as the case may be, which
remain unpaid at the Pride Merger Effective Time.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Pride Merger Effective Time shall be delivered to the Company upon demand,
and any holders of the Certificates who have not theretofore complied with this
Article 4 shall thereafter look only to the Company for payment of their claim
for Pride Merger Consideration and any dividends or distributions with respect
to Company Common Stock.
(f) No Liability. None of the Company, Marine, Pride, Merger Sub or the
Exchange Agent shall be liable to any person in respect of any shares of Company
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate shall
not have been surrendered prior to seven years after the Pride Merger Effective
Time (or immediately prior to such earlier date on which any Pride Merger
Consideration, any cash payable to the holder of such Certificate pursuant to
this Article 4 or any dividends or distributions payable to the holder of such
Certificate would otherwise escheat to or become the property of any
governmental body or authority), any Pride Merger Consideration, cash, dividends
or distributions in respect of such Certificate shall, to the extent permitted
by applicable law, become the property of the Company, free and clear of all
claims or interest of any person previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by the Company, on a daily basis. Any
interest and other income resulting from such investments shall be paid to the
Company; provided, however, that no such investment or loss shall affect the
amounts payable to any holder of a Certificate.
(h) Exchanges by Affiliates. Notwithstanding anything in this Agreement to
the contrary, any Company Common Stock and Company Certificates therefor issued
to affiliates of Marine as a result of the Mergers shall be subject to the
restrictions on transfer described in Section 7.13 and Exhibits 7.13(a) and
7.13(b)(1), and such shares shall bear restrictive legends as described in
Exhibit 7.13(a)(1). Any Company Common Stock and Certificates therefor issued to
affiliates of Pride as a result of the Pride
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Merger shall be subject to the restrictions on transfer described in Section
7.13(b) and Exhibit 7.13(b)(2).
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Company, the posting by such person of a bond in such reasonable amount as the
Company may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Pride Merger Consideration and,
if applicable, any unpaid dividends and distributions on shares of Company
Common Stock deliverable in respect thereof, pursuant to this Agreement.
SECTION 4.6 Rule 16b-3 Approval. Each of the Company, Marine, Merger Sub
and Pride agree that their respective board of directors or the executive
compensation committee of their board of directors shall, at or prior to the
Marine Merger Effective Time, adopt resolutions specifically approving, for
purposes of Rule 16b-3 ("Rule 16b-3") of the United States Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the receipt, pursuant to this Agreement, of
Company Common Stock and of options to acquire Company Common Stock, by
executive officers or directors of each of Marine and Pride who become executive
officers or directors of the Company subject to Rule 16b-3.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MARINE
Except as set forth in the disclosure letter delivered to Pride by Marine
at or prior to the execution hereof (the "Marine Disclosure Letter"), Marine
represents and warrants to Pride and the Company the following:
SECTION 5.1 Existence; Good Standing; Corporate Authority. Marine is a
corporation duly incorporated, validly existing and in good standing under the
laws of Texas. Marine is duly qualified to do business and, to the extent such
concept or similar concept exists in the relevant jurisdiction, is in good
standing under the laws of any jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified does not and is not reasonably likely to have, individually or in the
aggregate, a Marine Material Adverse Effect (as defined in Section 10.9(c)).
Marine 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
Marine's restated articles of incorporation and bylaws previously made available
to Pride are true and correct and contain all amendments as of the date hereof.
SECTION 5.2 Authorization, Validity and Effect of Agreements. Marine has
the requisite corporate power and authority to execute and deliver this
Agreement, the Pride Stock Option Agreement and all other agreements and
documents contemplated hereby and thereby to which it is a party. The
consummation by Marine of the transactions contemplated hereby and by the Pride
Stock Option Agreement have been duly authorized by all requisite corporate
action on behalf of Marine, other than the approvals referred to in Section
5.19. This Agreement and the Pride Stock Option Agreement constitute valid and
legally binding obligations of Marine, enforceable against Marine in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and general principles of equity. Marine has taken all action necessary to
render the restrictions set forth in Part 13 of the TBCA inapplicable to this
Agreement and the transactions contemplated hereby. No other state takeover or
business combination statute applies to the transactions contemplated by this
Agreement or the Pride Stock Option Agreement.
SECTION 5.3 Capitalization. As of the date of this Agreement, the
authorized capital stock of Marine consists of 200,000,000 shares of common
stock, par value $.01 per share, and 20,000,000 shares of preferred stock, par
value $.01 per share, of which 200,000 shares have been designated Junior
Participating Preferred Stock ("Junior Preferred Stock"). As of May 18, 2001,
58,697,281 shares of
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Marine Common Stock and no shares of Junior Preferred Stock were outstanding. At
the same date, there were 3,576,359 shares of Marine Common Stock reserved for
issuance upon exercise of outstanding Marine Stock Options (as defined in
Section 7.16). All such issued and outstanding shares of Marine Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. One right to purchase Junior Preferred Stock (each, a "Marine
Right") issued pursuant to the Rights Agreement, dated as of November 15, 1996
(the "Marine Rights Agreement"), as amended, between Marine and American Stock
Transfer & Trust Company is associated with and attached to each outstanding
share of Marine Common Stock. As of the date of this Agreement, except for the
Pride Stock Option Agreement, the Marine Rights and as set forth in this Section
5.3, there are no outstanding shares of capital stock and there are no options,
warrants, calls, subscriptions, convertible securities or other rights,
agreements or commitments which obligate Marine or any of its Subsidiaries to
issue, transfer or sell any shares of capital stock or other voting securities
of Marine or any of its Subsidiaries. Marine 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 Marine on any matter.
SECTION 5.4 Significant Subsidiaries. For purposes of this Agreement,
"Significant Subsidiary" shall mean significant subsidiary as defined in Rule
1-02 of Regulation S-X of the SEC under the Exchange Act. Each of Marine's
Significant Subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing (where
applicable) in each jurisdiction in which the ownership, operation or lease of
its property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so qualified or to be in good
standing does not and is not reasonably likely to have a Marine Material Adverse
Effect. As of the date of this Agreement, all of the outstanding shares of
capital stock of, or other ownership interests in, each of Marine's Significant
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and are owned, directly or indirectly, by Marine 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 5.5 Compliance with Laws; Permits. Except for such matters as,
individually or in the aggregate, do not or are not reasonably likely to have a
Marine Material Adverse Effect and except for matters arising under
Environmental Laws which are treated exclusively in Section 5.13:
(a) Neither Marine nor any Subsidiary of Marine is in violation of any
applicable law, rule, regulation, code, governmental determination, order,
treaty, convention, governmental certification requirement or other public
limitation, U.S. or non-U.S. (collectively, the "Marine Applicable Laws"),
relating to the ownership or operation of any of their respective assets,
and no claim is pending or, to the knowledge of Marine, threatened with
respect to any such matters. No condition exists that is not disclosed in
the Marine Disclosure Letter and which does or is reasonably likely to
constitute a violation of or deficiency under any Marine Applicable Law
relating to the ownership or operation of the assets of Marine or any
Subsidiary of Marine.
(b) Marine and each Subsidiary of Marine hold all permits, licenses,
certifications, variations, exemptions, orders, franchises and approvals of
all governmental or regulatory authorities necessary for the conduct of
their respective businesses (the "Marine Permits"). All Marine Permits are
in full force and effect and there exists no default thereunder or breach
thereof, and Marine has no notice or actual knowledge that such Marine
Permits will not be renewed in the ordinary course after the Marine Merger
Effective Time. No governmental authority has given, or to the knowledge of
Marine threatened to give, any action to terminate, cancel or reform any
Marine Permit.
(c) Each drilling rig or other drilling unit owned by Marine or a
subsidiary of Marine which is subject to classification is in class
according to the rules and regulations of the applicable classifying body
and is duly and lawfully documented under the laws of its flag
jurisdiction.
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(d) Marine and each Subsidiary of Marine 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 ("Marine
Real Property") except where the failure to possess any of the same does
not and is not reasonably likely to have a Marine Material Adverse Effect.
There exists no material default or breach with respect to, and no party or
governmental authority has taken or, to the knowledge of Marine, 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 Marine Real
Property.
SECTION 5.6 No Conflict. (a) Neither the execution and delivery by Marine
of this Agreement, the Pride Stock Option Agreement nor the consummation by
Marine of the transactions contemplated hereby or thereby in accordance with
their respective terms will (i) subject to the approvals referred to in Section
5.19, conflict with or result in a breach of any provisions of the restated
articles of incorporation or bylaws of Marine, (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 Marine
or its Subsidiaries under, or result in being declared void, voidable, or
without further binding effect, or otherwise result in a detriment to Marine 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 Marine or any of its Subsidiaries is a party, or by which Marine or any of
its Subsidiaries or any of their properties is bound or affected or (iii)
subject to the filings and other matters referred to in Section 5.6(c),
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
Marine 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 Marine Material Adverse Effect.
(b) Neither the execution and delivery by Marine of this Agreement, the
Pride Stock Option Agreement nor the consummation by Marine of the transactions
contemplated hereby and thereby in accordance with their respective terms will
result in any "change of control" or similar event or circumstance under the
terms of any Marine Material Contract or under any contract or plan under which
any officers or directors of Marine or any of its Subsidiaries are entitled to
payments or benefits, which gives rise to rights or benefits not otherwise
available absent such change of control or similar event.
(c) Neither the execution and delivery by Marine of this Agreement, the
Pride Stock Option Agreement nor the consummation by Marine of the transactions
contemplated hereby and thereby in accordance with their respective terms will
require any consent, approval or authorization of, or filing or registration
with, any governmental or regulatory authority, other than (i) the filing of the
Marine Certificate of Merger, (ii) the filing of the Texas Articles of Merger,
(iii) 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 state securities and
"Blue Sky" laws, applicable non-U.S. competition, antitrust or premerger
notification laws, and (iv) the filing of a listing application with the NYSE
with respect to any Marine Common Stock issued upon exercise of the Pride Stock
Option ((i), (ii), (iii) and (iv) collectively, the "Marine Regulatory
Filings"), except for any consent, approval or authorization the failure of
which to obtain and for any filing or registration the failure of which to make
does not and is not reasonably likely to have a Marine Material Adverse Effect
or substantially impair or delay the consummation of the transactions
contemplated hereby.
SECTION 5.7 SEC Documents. Marine has timely filed with the SEC all
documents required to be so filed by it in the preceding twelve months pursuant
to Sections 13(a), 14(a) and 15(d) of the Exchange Act. Marine and its
Subsidiaries have filed with the SEC all documents required to be so filed by
them in the preceding three fiscal years and during 2001 pursuant to Section
13(a) of the Exchange
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Act without regard to Rule 12b-25. Marine has made available to Pride 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
"Marine Reports"). As of its respective date, each Marine Report (i) complied in
all material respects in accordance with the applicable requirements of the
Exchange Act and the rules and regulations thereunder and (ii) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading
except for such statements, if any, as have been modified by subsequent filings
with the SEC prior to the date hereof. Each of the consolidated balance sheets
included in or incorporated by reference into Marine Reports (including the
related notes and schedules) fairly presents in all material respects the
consolidated financial position of Marine 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 Marine
Reports (including any related notes and schedules) fairly presents in all
material respects the results of operations, cash flows or changes in
shareholders' equity, as the case may be, of Marine and its Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to (x)
such exceptions as may be permitted by Form 10-Q and Regulation S-X of the SEC
and (y) normal year-end audit adjustments), in each case in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Except as and to the extent set forth
on the most recent consolidated balance sheet of Marine and its Subsidiaries
included in Marine Reports, including all notes thereto, as of the date of such
balance sheet, neither Marine nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a balance
sheet of Marine or in the notes thereto prepared in accordance with generally
accepted accounting principles consistently applied, other than liabilities or
obligations which do not and are not reasonably likely to have, individually or
in the aggregate, a Marine Material Adverse Effect.
SECTION 5.8 Litigation. Except as would not have a Marine Material
Adverse Effect, Section 5.8 of the Marine Disclosure Letter contains an accurate
summary of each litigation matter pending or threatened against Marine or any of
its Subsidiaries that is not summarized in the Marine Reports. Except as
described in Marine Reports filed on or prior to the date of this Agreement,
there are no actions, suits or proceedings pending against Marine or any of its
Subsidiaries or, to Marine's knowledge, threatened against Marine or any of its
Subsidiaries, at law or in equity, before or by any U.S. federal, state or
non-U.S. court, commission, board, bureau, agency or instrumentality, that are
reasonably likely to have, individually or in the aggregate, a Marine Material
Adverse Effect.
SECTION 5.9 Absence of Certain Changes. From December 31, 2000 to the
date of this Agreement, there has not been (i) any event or occurrence that has
had or is reasonably likely to have a Marine Material Adverse Effect, (ii) any
material change by Marine or any of its Subsidiaries, when taken as a whole, in
any of its accounting methods, principles or practices or any of its tax
methods, practices or elections, (iii) any declaration, setting aside or payment
of any dividend or distribution in respect of any capital stock of Marine or any
redemption, purchase or other acquisition of any of its securities or (iv) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase
or other employee benefit plan, except in the ordinary course of business.
SECTION 5.10 Taxes. Except for such matters as, individually or in the
aggregate, do not or are not reasonably likely to have a Marine Material Adverse
Effect, and except as disclosed in the Marine Disclosure Letter (it being
understood that inclusion of a matter in the Marine Disclosure Letter does not
necessarily mean that such matter is or is reasonably likely to have a Marine
Material Adverse Effect):
(a) Each of Marine and its Subsidiaries has filed all Tax Returns that
it was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by any of Marine and its Subsidiaries (whether
or not shown on any Tax Return) have been paid. None of Marine and its
Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where any of Marine and its
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Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the assets of
any of Marine and its Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax.
(b) Each of Marine and its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
shareholder, or other third party.
(c) No officer or employee responsible for Tax matters of any of
Marine and its Subsidiaries expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax liability of any of Marine and its
Subsidiaries either (i) claimed or raised by any authority in writing or
(ii) as to which any of the officers or employees responsible for Tax
matters of Marine and its Subsidiaries has knowledge based upon personal
contact with any agent of such authority. Section 5.10 of the Marine
Disclosure Letter lists all federal, state, local, and foreign income Tax
Returns filed with respect to any of Marine and its Subsidiaries for
taxable periods ended on or after December 31, 1998, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit or have been noticed for audit.
(d) None of Marine and its Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) None of Marine and its Subsidiaries has filed a consent under Code
Section 341(f) concerning collapsible corporations.
(f) A valid and timely Code Section 338 election was made with respect
to each non-United States entity treated as a corporation under the Code
which was acquired after December 31, 1985 by Marine or any of its
Subsidiaries and for which such an election was permissible.
(g) None of Marine and its Subsidiaries are parties to a gain
recognition agreement under U.S. Treasury Reg. Section 1.367(a)-8.
(h) None of Marine and its Subsidiaries are parties to, or have a
request pending for, any advance pricing agreements under Internal Revenue
Service Revenue Procedure 96-53.
(i) None of Marine and its Subsidiaries has paid, or is obligated to
make any payments, in connection with the transactions contemplated by this
Agreement that could reasonably be expected to be non deductible under Code
Section 280G.
(j) Marine has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the
previous five years.
(k) Marine has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662.
(l) None of Marine and its Subsidiaries is a party to any Tax
allocation or Tax sharing agreement.
(m) None of Marine and its Subsidiaries (i) has been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other
than a group the common parent of which was Marine) since January 1, 1987,
or (ii) has any liability for the Taxes of any Person (other than any of
Marine and its Subsidiaries) under U.S. Treas. Reg. Section 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(n) Section 5.10(n) of the Marine Disclosure Letter sets forth the
following information with respect to each of Marine and its Subsidiaries
as of the most recent practicable date (as well as on an estimated pro
forma basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby) for both United States income tax
purposes and foreign tax purposes where
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applicable: (i) the amount of any net operating loss, net capital loss,
unused investment or other credit, unused foreign tax, or excess charitable
contribution allocable to Marine or Subsidiary; and (ii) the amount of any
deferred gain or loss allocable to Marine or Subsidiary arising out of any
Deferred Intercompany Transaction.
(o) The unpaid Taxes of Marine and its Subsidiaries (i) did not, as of
the date of the most recent balance sheet included in the most recent
Marine Report containing historical financial statements, exceed the
reserve for Tax liability (other than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of such most recent balance sheet (rather than in any
notes thereto) and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom
and practice of Marine and its Subsidiaries in filing their Tax Returns.
(p) Neither Marine nor any of the Marine Subsidiaries knows of any
fact, or has taken any action or has failed to take any action, that is
reasonably likely to (i) prevent the Mergers from qualifying as
reorganizations within the meaning of Section 368(a) of the Code, (ii)
cause the holders who exchange Marine Common Stock solely for Pride Common
Stock pursuant to the Marine Merger to recognize taxable gain with respect
to the Marine Merger, (iii) cause the Pride shareholders, including the
former holders of Marine Common Stock, who exchange Pride Common Stock
solely for Company Common Stock pursuant to the Pride Merger to recognize
taxable gain with respect to the Pride Merger, or (iv) cause income to be
recognized or Tax to be accelerated or be due as a consequence of the
Mergers. Neither Pride nor any of its Subsidiaries has agreed to pay, or
will pay, directly or indirectly, any consideration for Marine Common Stock
other than Pride Common Stock. Neither the Company nor any of its
Subsidiaries has agreed to pay, or will pay, directly or indirectly, any
consideration other than Company Common Stock for Pride Common Stock,
including that issued in the Marine Merger.
(q) For purposes of this Section 5.10 and Section 6.10, the following
terms have the meanings given them below:
(1) "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
(2) "Affiliated Group" means any affiliated group within the
meaning of Code Section 1504(a), or any similar group defined under a
similar provision of state, local or foreign law, determined without
regard to the exceptions in Code Section 1504(b) such that a foreign
corporation shall be considered an "includable corporation."
(3) "Deferred Intercompany Transaction" has the meaning set forth
in Reg. Section 1.1502-13.
(4) "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
(5) "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
SECTION 5.11 Employee Benefit Plans. (a) Section 5.11 of the Marine
Disclosure Letter contains a list of all Marine Benefit Plans. The term "Marine
Benefit Plans" means all material employee benefit plans and other material
benefit arrangements, including all "employee benefit plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"),
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whether or not U.S.-based plans, and all other employee benefit, bonus,
incentive, deferred compensation, stock option (or other equity-based),
severance, employment, change in control, welfare (including post-retirement
medical and life insurance) and fringe benefit plans, practices or agreements,
whether or not subject to ERISA or U.S.-based and whether written or oral,
sponsored, maintained or contributed to or required to be contributed to by
Marine or any of its Subsidiaries, to which Marine or any of its Subsidiaries is
a party or is required to provide benefits under applicable law or in which any
person who is currently, has been or, prior to the Marine Merger Effective Time,
is expected to become an employee of Marine is a participant. Upon the written
request of Pride, Marine will provide to Pride true and complete copies of
Marine Benefit Plans and, if applicable, the most recent trust agreements,
summary plan descriptions, funding statements, annual reports and actuarial
reports, if applicable, for each such plan. Marine has also previously provided
to Pride with respect to each such plan, true and correct copies of
correspondence with governmental entities and Forms 5500 for the past three
calendar years and during 2001 to the date of this Agreement.
(b) Except as for such matters as, individually or in the aggregate, do not
or are not reasonably likely to have a Marine Material Adverse Effect:
(1) all applicable reporting and disclosure requirements have been met
with respect to Marine Benefit Plans;
(2) there has been no "reportable event," as that term is defined in
Section 4043 of ERISA, with respect to Marine Benefit Plans subject to
Title IV of ERISA for which the 30-day reporting requirement has not been
waived;
(3) to the extent applicable, Marine Benefit Plans comply and have
complied with the requirements of ERISA, the Code, other applicable law,
with the regulations of any applicable jurisdiction, and with the operative
documents for each such plan;
(4) any Marine Benefit Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
IRS;
(5) Marine Benefit Plans have been maintained and operated in
accordance with their terms, and, to Marine's knowledge, there are no
breaches of fiduciary duty in connection with Marine Benefit Plans;
(6) there are no pending or, to Marine's knowledge, threatened claims
against or otherwise involving any Marine Benefit Plan, and no suit, action
or other litigation (excluding claims for benefits incurred in the ordinary
course of Marine Benefit Plan activities) has been brought against or with
respect to any such Marine Benefit Plan;
(7) there are no pending audits or investigations by any governmental
entity involving any Marine Benefit Plan;
(8) all material contributions required to be made as of the date
hereof to Marine Benefit Plans have been made or provided for;
(9) Marine has not engaged in a transaction with respect to any Marine
Benefit Plan for which it could be subject (either directly or indirectly)
to a liability for either a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Code;
(10) with respect to Marine Benefit Plans or any "employee pension
benefit plans," as defined in Section 3(2) of ERISA, that are subject to
Title IV of ERISA and have been maintained or contributed to within six
years prior to the Marine Merger Effective Time by Marine, its Subsidiaries
or any trade or business (whether or not incorporated) which is under
common control, or which is treated as a single employer, with Marine or
any of its Subsidiaries under Section 414(b), (c), (m) or (o) of the Code
(a "Marine ERISA Affiliate"), (i) neither Marine nor any of its
Subsidiaries has incurred any direct or indirect liability under Title IV
of ERISA in connection with any termination thereof or withdrawal
therefrom, and (ii) there does not exist any accumulated
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funding deficiency within the meaning of Section 412 of the Code or Section
302 of ERISA, whether or not waived; and
(11) All individuals who performed any compensatory services for
Marine or any Subsidiary of Marine, whether as an employee, independent
contractor or "leased employee" (as defined in Section 414(n) of the Code),
are, and have been, properly classified for purposes of withholding taxes
and eligibility to participate in, and coverage under, any Marine Benefit
Plan.
(c) Neither Marine nor any of its Subsidiaries nor any Marine ERISA
Affiliate contributes to, or has an obligation to contribute to, and has not
within six years prior to the Marine Merger Effective Time contributed to, or
had an obligation to contribute to, a "multiemployer plan" within the meaning of
Section 3(37) of ERISA, a "multiple employer welfare association" within the
meaning of Section 3(40) of ERISA, or a "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code, and the
execution of, and performance of the transactions contemplated by this
Agreement, other than Section 7.16, will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
benefit plan, policy, arrangement or agreement or any trust or loan (in
connection therewith) that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund benefits with respect
to any employee of Marine or any Subsidiary thereof.
(d) No Marine Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of Marine or any Subsidiary of Marine for periods extending beyond
their retirement date or other termination of service other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan" or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary). Each Marine Benefit Plan may be unilaterally amended or
terminated by Marine without liability, except as to benefits accrued or awarded
thereunder prior to amendment or termination.
SECTION 5.12 Labor Matters. (a) As of the date of this Agreement, (i)
neither Marine nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or similar contract, agreement or understanding
with a labor union or similar labor organization (A) covering any U.S. employees
or (B) covering, in any single instance, 10% or more of the employees of Marine
and its Subsidiaries taken as a whole, and (ii) to Marine's knowledge, there are
no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened (x) involving any U.S.
employees or (y) involving, in any single instance, 10% or more of the employees
of Marine and its Subsidiaries taken as a whole.
(b) Except for such matters as are disclosed in the Marine Reports and
matters that do not and are not reasonably likely to have a Marine Material
Adverse Effect, (i) neither Marine nor any Subsidiary of Marine has received any
written complaint of any unfair labor practice or other unlawful employment
practice or any written notice of any material violation of any federal, state
or local statutes, laws, ordinances, rules, regulations, orders or directives
with respect to the employment of individuals by, or the employment practices
of, Marine or any Subsidiary of Marine 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 Marine or any Subsidiary of Marine pending or, to the
knowledge of Marine threatened, before any governmental authority by or
concerning the employees working in their respective businesses.
SECTION 5.13 Environmental Matters. (a) Marine and each Subsidiary of
Marine has been and is in compliance with all applicable final and binding
orders of any court, governmental authority or arbitration board or tribunal and
any applicable law, ordinance, rule, regulation or other legal requirement
(including common law) related to human health and the environment
("Environmental Laws") except for such matters as do not and are not reasonably
likely to have, individually or in the aggregate, a Marine Material Adverse
Effect. There are no past or present facts, conditions or circumstances that
interfere with the conduct of any of their respective businesses in the manner
now conducted or which interfere with
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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 Marine Material Adverse Effect.
(b) Except for such matters as do not and are not reasonably likely to
have, individually or in the aggregate, a Marine Material Adverse Effect, no
judicial or administrative proceedings or governmental investigations are
pending or, to the knowledge of Marine, threatened against Marine or its
Subsidiaries that allege the violation of or seek to impose liability pursuant
to any Environmental Law, and there are no past or present facts, conditions or
circumstances at, on or arising out of, or otherwise associated with, any
current or, to the knowledge of Marine or its Subsidiaries, former businesses,
assets or properties of Marine or any Subsidiary of Marine, including but not
limited to on-site or off-site disposal, release or spill of any material,
substance or waste classified, characterized or otherwise regulated as
hazardous, toxic, pollutant, contaminant or words of similar meaning under
Environmental Laws, including petroleum or petroleum products or byproducts
("Hazardous Materials") which violate Environmental Law or are reasonably likely
to give rise to (i) costs, expenses, liabilities or obligations for any cleanup,
remediation, disposal or corrective action under any Environmental Law, (ii)
claims arising for personal injury, property damage or damage to natural
resources, or (iii) civil, criminal or administrative fines, penalties or
injunctive relief.
(c) Neither Marine nor any of its Subsidiaries has (i) received any notice
of noncompliance with, violation of, or liability or potential liability under
any Environmental Law or (ii) entered into any consent decree or order or is
subject to any order of any court or governmental authority or tribunal under
any Environmental Law or relating to the cleanup of any Hazardous Materials,
except for any such matters as do not and are not reasonably likely to have a
Marine Material Adverse Effect.
SECTION 5.14 Intellectual Property. Marine and its Subsidiaries own or
possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights and proprietary information used or held
for use in connection with their respective businesses as currently being
conducted, except where the failure to own or possess such licenses and other
rights does not and is not reasonably likely to have, individually or in the
aggregate, a Marine Material Adverse Effect, and there are no assertions or
claims challenging the validity of any of the foregoing that are reasonably
likely to have, individually or in the aggregate, a Marine Material Adverse
Effect. To the knowledge of Marine, the conduct of Marine's and its
Subsidiaries' respective businesses as currently conducted does not conflict
with any patents, patent rights, licenses, trademarks, trademark rights, trade
names, trade name rights or copyrights of others that are reasonably likely to
have, individually or in the aggregate, a Marine Material Adverse Effect. To the
knowledge of Marine, there is no material infringement of any proprietary right
owned by or licensed by or to Marine or any of its Subsidiaries that is
reasonably likely to have individually or in the aggregate, a Marine Material
Adverse Effect.
SECTION 5.15 Decrees, Etc. Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a Marine Material
Adverse Effect, (i) no order, writ, fine, injunction, decree, judgment, award or
determination of any court or governmental authority has been issued or entered
against Marine or any Subsidiary of Marine that continues to be in effect that
affects the ownership or operation of any of their respective assets, and (ii)
no criminal order, writ, fine, injunction, decree, judgment or determination of
any court or governmental authority has been issued against Marine or any
Subsidiary of Marine.
SECTION 5.16 Insurance. (a) Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a Marine Material
Adverse Effect, Marine and its Subsidiaries maintain insurance coverage with
financially responsible insurance companies in such amounts and against such
losses as are customary in the offshore drilling business as conducted by Marine
prior to the date hereof.
(b) Except for such matters as do not and are not reasonably likely to
have, individually or in the aggregate, a Marine Material Adverse Effect, no
event relating specifically to Marine 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
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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 Marine's knowledge, no threat
in writing has been made to cancel (excluding cancellation upon expiration or
failure to renew) any such insurance policy of Marine or any Subsidiary of
Marine during the period of one year prior to the date hereof. Prior to the date
hereof, no event has occurred, including the failure by Marine or any Subsidiary
of Marine to give any notice or information or by giving any inaccurate or
erroneous notice or information, which materially limits or impairs the rights
of Marine or any Subsidiary of Marine under any such excess liability, hull or
protection and indemnity insurance policies.
SECTION 5.17 No Brokers. Marine has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Marine, Pride or the Company to pay any finder's fees, brokerage
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Marine has retained Morgan Stanley & Co. Incorporated as its financial
advisor, the arrangements with which have been disclosed in writing to Pride
prior to the date hereof.
SECTION 5.18 Opinion of Financial Advisor. The board of directors of
Marine has received the opinion of Morgan Stanley & Co. Incorporated to the
effect that, as of the date of this Agreement, the Marine Merger Consideration
is fair to the shareholders of Marine from a financial point of view.
SECTION 5.19 Vote Required. The only votes of the holders of any class or
series of Marine capital stock necessary to approve any transaction contemplated
by this Agreement are the affirmative vote in favor of the adoption of this
Agreement of the holders of at least a majority of the outstanding shares of
Marine Common Stock.
SECTION 5.20 Ownership of Drilling Rigs. As of the date hereof, Marine or
a Subsidiary of Marine has good and indefeasible title to the drilling rigs
listed in Marine's most recent annual report on Form 10-K, in each case free and
clear of all Liens except for (i) defects or irregularities of title or
encumbrances of a nature that do not materially impair the ownership or
operation of these assets and which have not had and are not reasonably likely
to have a Marine 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 $5.0 million being described in Marine Disclosure Letter), (iii) Liens
for taxes, assessments or other governmental charges or levies not yet due or
which are being contested in good faith, (iv) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are being contested in good
faith, (v) operators', vendors', suppliers of necessaries to Marine's drilling
rigs, carriers', warehousemen's, repairmen's, mechanics', workmen's,
materialmen's, construction or shipyard liens (during repair or upgrade periods)
or other similar Liens arising by operation of law in the ordinary course of
business or statutory landlord's liens, each of which is in respect of
obligations that have not been outstanding more than 90 days (so long as no
action has been taken to file or enforce such Liens within said 90-day period)
or which are being contested in good faith and (vi) other Liens disclosed in
Marine Disclosure Letter (the Liens described in clauses (i), (ii), (iii), (iv),
(v) and (vi), collectively, "Marine Permitted Liens"). No such asset is leased
under an operating lease from a lessor that, to Marine's knowledge, has incurred
non-recourse indebtedness to finance the acquisition or construction of such
asset.
SECTION 5.21 Undisclosed Liabilities. Neither Marine 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 Marine Reports, (ii) are referred to in the Marine
Disclosure Letter or (iii) do not and are not reasonably likely to have,
individually or in the aggregate, a Marine Material Adverse Effect.
SECTION 5.22 Certain Contracts. (a) Section 5.22 of Marine Disclosure
Letter contains a list of all of the following contracts or agreements (other
than those listed as an exhibit to Marine's Annual Report
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on Form 10-K for the year ended December 31, 2000) to which Marine or any
Subsidiary of Marine is a party or by which any of them is bound as of the date
of this Agreement: (i) any non-competition agreement that purports to limit the
manner in which, or the localities in which, all or any portion of their
respective businesses is conducted; (ii) any drilling rig construction or
conversion contract with respect to which the drilling rig has not been
delivered and paid for; (iii) any drilling contracts of one year or greater
remaining duration or drilling contracts of a shorter duration which if extended
at the election of Marine's customer would have a remaining duration of one year
or more; (iv) any contract or agreement for the borrowing of money with a
borrowing capacity or outstanding indebtedness of $5.0 million or more; (v) any
contract for the acquisition or disposition of a "business" (as such term is
defined in Article 11-01(d) of Regulation S-X of the SEC or (vi) any "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the
SEC) (all contracts or agreements of the types described in clauses (i) through
(vi) being referred to herein as "Marine Material Contracts").
(b) As of the date of this Agreement, each Marine Material Contract is, to
the knowledge of Marine, in full force and effect, and Marine and each of its
Subsidiaries have in all material respects performed all obligations required to
be performed by them to date under each Marine Material Contract, 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 Marine Material Adverse Effect. Except for such matters as do not
and are not reasonably likely to have a Marine Material Adverse Effect, neither
Marine 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
Marine, 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
Marine Material Contract or (y) has received written notice of the desire of the
other party or parties to any such Marine Material Contract to exercise any
rights such party has to cancel, terminate or repudiate such contract or
exercise remedies thereunder. Each Marine Material Contract is enforceable by
Marine or a Subsidiary of Marine in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights and general principles of equity, except
where such unenforceability is not reasonably likely to create, individually or
in the aggregate, a Marine Material Adverse Effect.
SECTION 5.23 Capital Expenditure Program. As of the date of this
Agreement, Section 5.23 of the Marine Disclosure Letter accurately sets forth in
all material respects, for each of Marine's sustaining, life extension and
newbuild capital expenditure programs, the capital expenditures for all such
programs that were forecasted to be incurred in 2001 on an annual basis.
SECTION 5.24 Improper Payments. No bribes, kickbacks or other improper
payments have been made by Marine or any Subsidiary of Marine or agent of any of
them in connection with the conduct of their respective businesses or the
operation of their respective assets, and neither Marine, any Subsidiary of
Marine nor any agent of any of them has received any such payments from vendors,
suppliers or other persons, where any such payment made or received is
reasonably likely to have, individually or in the aggregate, a Marine Material
Adverse Effect.
SECTION 5.25 Amendment to Marine Rights Agreement. Marine has amended or
taken other action under Marine Rights Agreement so that none of the execution
and delivery of this Agreement, the execution and delivery of the Pride Stock
Option Agreement, the conversion of shares of Marine Common Stock into the right
to receive shares of Company Common Stock in accordance with this Agreement, the
consummation of the Mergers, the issuance of Marine Common Stock upon exercise
of the Pride Stock Option or any other transactions contemplated hereby or by
the Pride Stock Option Agreement, will cause: (i) the Marine Rights to become
exercisable under the Marine Rights Agreement; (ii) the Company, Pride or any of
Pride's shareholders or Subsidiaries to be deemed an "Acquiring Person" (as
defined in Marine Rights Agreement); (iii) any such event to be an event
requiring an adjustment of the purchase price of the Marine Rights under Section
12(a)(ii) of the Marine Rights Agreement; (iv) Section 14 of the Marine Rights
Agreement to be or become applicable to any such event; or (v) a "Shares
Acquisition Date" or a "Distribution Date" (each as defined in Marine Rights
Agreement) to occur upon any such
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event, and so that the Marine Rights will expire immediately prior to the Marine
Merger Effective Time. Marine has delivered to Pride a true and complete copy of
Marine Rights Agreement, as amended to date.
SECTION 5.26 Pooling of Interests. To the knowledge of Marine as of the
date of this Agreement, neither it nor any of its Subsidiaries has taken, or
agreed to take, any action or failed to take any action which action or failure
(without giving effect to any actions or failures to act by Pride or any of its
Subsidiaries) that is known to Marine as of the date of this Agreement to
prevent the treatment of the Mergers contemplated herein as (i) a pooling of
interests for accounting purposes under the requirements of Opinion No. 16
(Business Combinations) of the Accounting Principles Board of the American
Institute of Certified Public Accountants, the Financial Accounting Standards
Board and the rules of the SEC, or (ii) reorganizations within the meaning of
Section 368(a) of the Code.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PRIDE
Except as set forth in the disclosure letter delivered to Marine by Pride
at or prior to the execution hereof (the "Pride Disclosure Letter"), Pride
represents and warrants to Marine and the Company the following:
SECTION 6.1 Existence; Good Standing; Corporate Authority. Pride is a
corporation duly incorporated, validly existing and in good standing under the
laws of Louisiana. Pride is duly qualified to do business and, to the extent
such concept or similar concept exists in the relevant jurisdiction, is in good
standing under the laws of any jurisdiction in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified does not and is not reasonably likely to have, individually or in the
aggregate, a Pride Material Adverse Effect (as defined in Section 10.9). Pride
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 Pride's
certificate of incorporation and bylaws previously made available to Marine are
true and correct and contain all amendments as of the date hereof.
SECTION 6.2 Authorization, Validity and Effect of Agreements. Pride has
the requisite corporate power and authority to execute and deliver this
Agreement, the Marine Stock Option Agreement and all other agreements and
documents contemplated hereby and thereby to which it is a party. The
consummation by Pride of the transactions contemplated hereby and by the Marine
Stock Option Agreement have been duly authorized by all requisite corporate
action on behalf of Pride, other than the approvals referred to in Section 6.19.
This Agreement and the Marine Stock Option Agreement constitute valid and
legally binding obligations of Pride, enforceable against Pride in accordance
with their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and general principles of equity. Pride has taken all action necessary to render
the restrictions set forth in R.S. 12:133 and 12:135-140.2 of the LBCL
inapplicable to this Agreement and the transactions contemplated hereby. No
other state takeover or business combination statute applies to the transactions
contemplated by this Agreement or the Marine Stock Option Agreement.
SECTION 6.3 Capitalization. As of the date of this Agreement, the
authorized capital stock of Pride consists of 200,000,000 shares of common
stock, no par value per share, and 50,000,000 shares of preferred stock, no par
value per share, of which 2,000,000 shares have been designated Series A Junior
Participating Preferred Stock ("Series A Preferred Stock"). As of May 22, 2001,
73,597,802 shares of Pride Common Stock and no shares of Series A Preferred
Stock were outstanding. Section 6.3 of the Pride Disclosure Letter sets forth
the number of shares of Pride Common Stock reserved for issuance as of May 18,
2001. All such issued and outstanding shares of Pride Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. One right to purchase Junior Participating Preferred Stock (each, a
"Pride Right") issued pursuant to the Rights Agreement, dated as of September 9,
1998 (the "Pride Rights Agreement"), as amended, between Pride and American
Stock Transfer & Trust Company is associated with and attached to each
outstanding share of Pride Common
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Stock. As of the date of this Agreement, except for the Marine Stock Option
Agreement, the Pride Rights, the Put and Exchange Agreement between Pride and
First Reserve Fund VIII, L.P., a Delaware limited partnership, and as set forth
in this Section 6.3, there are no outstanding shares of capital stock and there
are no options, warrants, calls, subscriptions, convertible securities or other
rights, agreements or commitments which obligate Pride or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock or other
voting securities of Pride or any of its Subsidiaries, except as described in
the notes to the financial statements of Pride included in its Form 10-Q report
for the quarter ended March 31, 2001 filed with the SEC. Pride 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 Pride on any
matter, except as described in the notes to the financial statements of Pride
included in its Form 10-Q report for the quarter ended March 31, 2001 filed with
the SEC.
SECTION 6.4 Significant Subsidiaries. Each of Pride's Significant
Subsidiaries is a corporation or other legal entity duly organized, validly
existing and, to the extent such concept or similar concept exists in the
relevant jurisdiction, in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate or other entity power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted, and is duly qualified to do business and is in
good standing (where applicable) in each jurisdiction in which the ownership,
operation or lease of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing does not and is not reasonably likely to have a Pride
Material Adverse Effect. As of the date of this Agreement, all of the
outstanding shares of capital stock of, or other ownership interests in, each of
Pride's Significant Subsidiaries are duly authorized, validly issued, fully paid
and nonassessable and are owned, directly or indirectly, by Pride free and clear
of all Liens.
SECTION 6.5 Compliance with Laws; Permits. Except for such matters as,
individually or in the aggregate, do not or are not reasonably likely to have a
Pride Material Adverse Effect and except for matters arising under Environmental
Laws which are treated exclusively in Section 6.13:
(a) Neither Pride nor any Subsidiary of Pride is in violation of any
applicable law, rule, regulation, code, governmental determination, order,
treaty, convention, governmental certification requirement or other public
limitation, U.S. or non-U.S. (collectively, the "Pride Applicable Laws"),
relating to the ownership or operation of any of their respective assets,
and no claim is pending or, to the knowledge of Pride, threatened with
respect to any such matters. No condition exists that is not disclosed in
the Pride Disclosure Letter and which does or is reasonably likely to
constitute a violation of or deficiency under any Pride Applicable Law
relating to the ownership or operation of the assets of Pride or any
Subsidiary of Pride.
(b) Pride and each Subsidiary of Pride hold all permits, licenses,
certifications, variations, exemptions, orders, franchises and approvals of
all governmental or regulatory authorities necessary for the conduct of
their respective businesses (the "Pride Permits"). All Pride Permits are in
full force and effect and there exists no default thereunder or breach
thereof, and Pride has no notice or actual knowledge that such Pride
Permits will not be renewed in the ordinary course after the Marine Merger
Effective Time. No governmental authority has given, or to the knowledge of
Pride threatened to give, any action to terminate, cancel or reform any
Pride Permit.
(c) Each drilling rig, drillship or other drilling unit owned by Pride
or a subsidiary of Pride which is subject to classification is in class
according to the rules and regulations of the applicable classifying body
and is duly and lawfully documented under the laws of its flag
jurisdiction.
(d) Pride and each Subsidiary of Pride 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 ("Pride Real Property")
except where the failure to possess any of the same does not and is not
reasonably likely to have a Pride Material Adverse Effect. There exists no
material default or breach with respect to, and no party or governmental
authority has taken or, to the knowledge of Pride, threatened to take, any
action to
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terminate, cancel or reform any such permit, license, operating authority,
order, exemption, franchise, variance, consent, approval or other
authorization pertaining to Pride Real Property.
SECTION 6.6 No Conflict. (a) Neither the execution and delivery by Pride
of this Agreement, the Marine Stock Option Agreement nor the consummation by
Pride of the transactions contemplated hereby or thereby in accordance with
their respective terms will (i) subject to the approvals referred to in Section
6.19, conflict with or result in a breach of any provisions of the restated
articles of incorporation or bylaws of Pride, (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 Pride or
its Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, or otherwise result in a detriment to Pride 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
Pride or any of its Subsidiaries is a party, or by which Pride or any of its
Subsidiaries or any of their properties is bound or affected or (iii) subject to
the filings and other matters referred to in Section 6.6(c), 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 Pride 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 Pride Material Adverse Effect.
(b) Neither the execution and delivery by Pride of this Agreement nor the
consummation by Pride of the transactions contemplated hereby in accordance with
the terms hereof will result in any "change of control" under the indentures and
supplemental indentures pursuant to which any outstanding indebtedness of Pride
has been issued. Except as disclosed in the Pride Disclosure Letter, neither the
execution and delivery by Pride of this Agreement nor the consummation by Pride
of the transactions contemplated hereby in accordance with the terms hereof will
result in any "change of control" or similar event or circumstance under the
terms of any Pride Material Contract or under any contract or plan under which
any officers or directors of Pride or any of its Subsidiaries are entitled to
payments or benefits, which gives rise to rights or benefits not otherwise
available absent such change of control or similar event.
(c) Neither the execution and delivery by Pride of this Agreement, the
Marine Stock Option Agreement nor the consummation by Pride of the transactions
contemplated hereby and thereby in accordance with their respective terms will
require any consent, approval or authorization of, or filing or registration
with, any governmental or regulatory authority, other than (i) the filing of the
Marine Certificate of Merger, (ii) the filing of the Pride Certificate of
Merger, (iii) the filing of the Louisiana Certificate of Merger, (iv) filings
required under the HSR Act, the Exchange Act, the Securities Act or applicable
state securities and "Blue Sky" laws, applicable non-U.S. competition, antitrust
or premerger notification laws, and (v) the filing of a listing application with
the NYSE with respect to any Pride Common Stock issued upon exercise of the
Marine Stock Option ((i), (ii), (iii), (iv) and (v) collectively, the "Pride
Regulatory Filings"), except for any consent, approval or authorization the
failure of which to obtain and for any filing or registration the failure of
which to make does not and is not reasonably likely to have a Pride Material
Adverse Effect or substantially impair or delay the consummation of the
transactions contemplated hereby.
SECTION 6.7 SEC Documents. Pride has timely filed with the SEC all
documents required to be so filed by it in the preceding twelve months pursuant
to Sections 13(a), 14(a) and 15(d) of the Exchange Act. Pride and its
Subsidiaries have filed with the SEC all documents required to be so filed by
them in the preceding three fiscal years and during 2001 pursuant to Sections
13(a), 14(a) and 15(d) of the Exchange Act. Pride has made available to Marine
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
"Pride Reports"). As of its respective date, each Pride Report (i) complied in
all material respects in accordance with the applicable
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requirements of the Exchange Act and the rules and regulations thereunder and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading except for such statements, if any, as have been modified by
subsequent filings with the SEC prior to the date hereof. Each of the
consolidated balance sheets included in or incorporated by reference into Pride
Reports (including the related notes and schedules) fairly presents in all
material respects the consolidated financial position of Pride 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 Pride Reports (including any related notes and
schedules) fairly presents in all material respects the results of operations,
cash flows or changes in shareholders' equity, as the case may be, of Pride and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to (x) such exceptions as may be permitted by Form 10-Q
and Regulation S-X of the SEC and (y) normal year-end audit adjustments), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein. Except as and to the extent set forth on the most recent consolidated
balance sheet of Pride and its Subsidiaries included in Pride Reports, including
all notes thereto, as of the date of such balance sheet, neither Pride nor any
of its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of Pride or in the notes
thereto prepared in accordance with generally accepted accounting principles
consistently applied, other than liabilities or obligations which do not and are
not reasonably likely to have, individually or in the aggregate, a Pride
Material Adverse Effect.
SECTION 6.8 Litigation. Except as would not have a Pride Material
Adverse Effect, Section 6.8 of the Pride Disclosure Letter contains an accurate
summary of each litigation matter pending or threatened against Pride or any of
its Subsidiaries that is not summarized in the Pride Reports. Except as
described in Pride Reports filed on or prior to the date of this Agreement,
there are no actions, suits or proceedings pending against Pride or any of its
Subsidiaries or, to Pride's knowledge, threatened against Pride or any of its
Subsidiaries, at law or in equity, before or by any U.S. federal, state or
non-U.S. court, commission, board, bureau, agency or instrumentality, that are
reasonably likely to have, individually or in the aggregate, a Pride Material
Adverse Effect.
SECTION 6.9 Absence of Certain Changes. From December 31, 2000 to the
date of this Agreement, there has not been (i) any event or occurrence that has
had or is reasonably likely to have a Pride Material Adverse Effect, (ii) any
material change by Pride or any of its Subsidiaries, when taken as a whole, in
any of its accounting methods, principles or practices or any of its tax
methods, practices or elections, (iii) any declaration, setting aside or payment
of any dividend or distribution in respect of any capital stock of Pride or any
redemption, purchase or other acquisition of any of its securities, or (iv) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option, stock purchase
or other employee benefit plan, except in the ordinary course of business.
SECTION 6.10 Taxes. Except for such matters as, individually or in the
aggregate, do not or are not reasonably likely to have a Pride Material Adverse
Effect, and except as disclosed in the Pride Disclosure Letter (it being
understood that inclusion of a matter in the Pride Disclosure Letter does not
necessarily mean that such matter is or is reasonably likely to have a Pride
Material Adverse Effect):
(a) Each of Pride and its Subsidiaries has filed all Tax Returns that
it was required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by any of Pride and its Subsidiaries (whether
or not shown on any Tax Return) have been paid. None of Pride and its
Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where any of Pride and its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of any of Pride and its
Subsidiaries that arose in connection with any failure (or alleged failure)
to pay any Tax.
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(b) Each of Pride and its Subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder, or
other third party.
(c) No officer or employee responsible for Tax matters of any of Pride
and its Subsidiaries expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax liability of any of Pride and its Subsidiaries
either (i) claimed or raised by any authority in writing or (ii) as to
which any of the officers or employees responsible for Tax matters of Pride
and its Subsidiaries has knowledge based upon personal contact with any
agent of such authority. Section 6.10 of the Pride Disclosure Letter lists
all federal, state, local, and foreign income Tax Returns filed with
respect to any of Pride and its Subsidiaries for taxable periods ended on
or after December 31, 1998, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit or have been noticed for audit.
(d) None of Pride and its Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) None of Pride and its Subsidiaries has filed a consent under Code
Section 341(f) concerning collapsible corporations.
(f) A valid and timely Code Section 338 election was made with respect
to each non-United States entity treated as a corporation under the Code
which was acquired after December 31, 1985 by Pride or any of its
Subsidiaries and for which such an election was permissible.
(g) None of Pride and its Subsidiaries are parties to a gain
recognition agreement under U.S. Treasury Reg. Section 1.367(a)-8.
(h) None of Pride and its Subsidiaries are parties to, or have a
request pending for, any advance pricing agreements under Internal Revenue
Service Revenue Procedure 96-53.
(i) None of Pride and its Subsidiaries has paid or is obligated to
make any payments in connection with the transactions contemplated by this
Agreement that could be reasonably expected to be non-deductible under Code
Section 280G.
(j) Pride has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the
previous five years.
(k) Pride has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Section
6662.
(l) None of Pride and its Subsidiaries is a party to any Tax
allocation or Tax sharing agreement.
(m) None of Pride and its Subsidiaries (i) has been a member of an
Affiliated Group filing a consolidated federal income Tax Return (other
than a group the common parent of which was Pride) since January 1, 1987,
or (ii) has any liability for the Taxes of any Person (other than any of
Pride and its Subsidiaries) under U.S. Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(n) Section 6.10(n) of the Pride Disclosure Letter sets forth the
following information with respect to each of Pride and its Subsidiaries as
of the most recent practicable date (as well as on an estimated pro forma
basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby) for both United States income tax
purposes and foreign tax purposes where applicable: (i) the amount of any
net operating loss, net capital loss, unused investment or other credit,
unused foreign tax, or excess charitable contribution allocable to Pride or
any Subsidiary; and (ii) the amount of any deferred gain or loss allocable
to Pride or Subsidiary arising out of any Deferred Intercompany
Transaction.
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(o) The unpaid Taxes of Pride and its Subsidiaries (i) did not, as of
the date of the most recent balance sheet included in the most recent Pride
Report containing historical financial statements, exceed the reserve for
Tax liability (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
face of such most recent balance sheet (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of
Pride and its Subsidiaries in filing their Tax Returns.
(p) Neither Pride nor any of the Pride Subsidiaries knows of any fact,
or has taken any action or has failed to take any action, that is
reasonably likely to (i) prevent the Mergers from qualifying as
reorganizations within the meaning of Section 368(a) of the Code, (ii)
cause the holders who exchange Marine Common Stock solely for Pride Common
Stock pursuant to the Marine Merger to recognize taxable gain with respect
to the Marine Merger, (iii) cause the Pride shareholders, including the
former holders of Marine Common Stock, who exchange Pride Common Stock
solely for Company Common Stock pursuant to the Pride Merger to recognize
taxable gain with respect to the Pride Merger, or (iv) cause income to be
recognized or Tax to be accelerated or be due as a consequence of the
Mergers. Neither Pride nor any of its Subsidiaries has agreed to pay, or
will pay, directly or indirectly, any consideration for Marine Common Stock
other than Pride Common Stock. Neither the Company nor any of its
Subsidiaries has agreed to pay, or will pay, directly or indirectly, any
consideration other than Company Common Stock for Pride Common Stock,
including that issued in the Marine Merger.
SECTION 6.11 Employee Benefit Plans. (a) Section 6.11 of the Pride
Disclosure Letter contains a list of all Pride Benefit Plans. The term "Pride
Benefit Plans" means all material employee benefit plans and other material
benefit arrangements, including all "employee benefit plans" as defined in
Section 3(3) of ERISA, whether or not U.S.-based plans, and all other employee
benefit, bonus, incentive, deferred compensation, stock option (or other
equity-based), severance, employment, change in control, welfare (including
post-retirement medical and life insurance) and fringe benefit plans, practices
or agreements, whether or not subject to ERISA or U.S.-based and whether written
or oral, sponsored, maintained or contributed to or required to be contributed
to by Pride or any of its Subsidiaries, to which Pride or any of its
Subsidiaries is a party or is required to provide benefits under applicable law
or in which any person who is currently, has been or, prior to the Marine Merger
Effective Time, is expected to become an employee of Pride is a participant.
Upon written request from Marine, Pride will provide to Marine true and complete
copies of Pride Benefit Plans and, if applicable, the most recent trust
agreements, summary plan descriptions, funding statements, annual reports and
actuarial reports, if applicable, for each such plan. Pride has also previously
provided to Marine with respect to each such plan, true and correct copies of
correspondence with governmental entities and Forms 5500 for the past three
calendar years and during 2001 to the date of this Agreement.
(b) Except as for such matters as, individually or in the aggregate, do not
or are not reasonably likely to have a Pride Material Adverse Effect:
(1) all applicable reporting and disclosure requirements have been met
with respect to Pride Benefit Plans;
(2) there has been no "reportable event," as that term is defined in
Section 4043 of ERISA, with respect to Pride Benefit Plans subject to Title
IV of ERISA for which the 30-day reporting requirement has not been waived;
(3) to the extent applicable, Pride Benefit Plans comply and have
complied with the requirements of ERISA, the Code, other applicable law,
with the regulations of any applicable jurisdiction, and with the operative
documents for each such plan;
(4) any Pride Benefit Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
IRS;
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(5) Pride Benefit Plans have been maintained and operated in
accordance with their terms, and, to Pride's knowledge, there are no
breaches of fiduciary duty in connection with Pride Benefit Plans;
(6) there are no pending or, to Pride's knowledge, threatened claims
against or otherwise involving any Pride Benefit Plan, and no suit, action
or other litigation (excluding claims for benefits incurred in the ordinary
course of Pride Benefit Plan activities) has been brought against or with
respect to any such Pride Benefit Plan;
(7) there are no pending audits or investigations by any governmental
entity involving any Pride Benefit Plan;
(8) all material contributions required to be made as of the date
hereof to Pride Benefit Plans have been made or provided for;
(9) Pride has not engaged in a transaction with respect to any Pride
Benefit Plan for which it could be subject (either directly or indirectly)
to a liability for either a civil penalty assessed pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Code;
(10) with respect to Pride Benefit Plans or any "employee pension
benefit plans," as defined in Section 3(2) of ERISA, that are subject to
Title IV of ERISA and have been maintained or contributed to within six
years prior to the Marine Merger Effective Time by Pride, its Subsidiaries
or any trade or business (whether or not incorporated) which is under
common control, or which is treated as a single employer, with Pride or any
of its Subsidiaries under Section 414(b), (c), (m) or (o) of the Code (a
"Pride ERISA Affiliate"), (i) neither Pride nor any of its Subsidiaries has
incurred any direct or indirect liability under Title IV of ERISA in
connection with any termination thereof or withdrawal therefrom, and (ii)
there does not exist any accumulated funding deficiency within the meaning
of Section 412 of the Code or Section 302 of ERISA, whether or not waived;
and
(11) All individuals who performed any compensatory services for Pride
or any Subsidiary of Pride, whether as an employee, independent contractor
or "leased employee" (as defined in Section 414(n) of the Code) are, and
have been, properly classified for purposes of withholding taxes and
eligibility to participate in, and coverage under, any Pride Benefit Plan.
(c) Neither Pride nor any of its Subsidiaries nor any Pride ERISA Affiliate
contributes to, or has an obligation to contribute to, and has not within six
years prior to the Marine Merger Effective Time contributed to, or had an
obligation to contribute to, a "multiemployer plan" within the meaning of
Section 3(37) of ERISA, a "multiple employer welfare association" within the
meaning of Section 3(40) of ERISA, or a "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code, and the
execution of, and performance of the transactions contemplated by, this
Agreement, other than Section 7.17, will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
benefit plan, policy, arrangement or agreement or any trust or loan (in
connection therewith) that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund benefits with respect
to any employee of Pride or any Subsidiary thereof.
(d) No Pride Benefit Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of Pride or any Subsidiary of Pride for periods extending beyond their
retirement date or other termination of service other than (i) coverage mandated
by applicable law, (ii) death benefits under any "pension plan" or (iii)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary). Each Pride Benefit Plan may be unilaterally amended or
terminated by Pride without liability, except as to benefits accrued or awarded
thereunder prior to amendment or termination.
SECTION 6.12 Labor Matters. (a) As of the date of this Agreement, (i)
neither Pride nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or similar contract, agreement or understanding
with a labor union or similar labor organization (A) covering any U.S. employees
or (B) covering, in any single instance, 10% or more of the employees of Pride
and its
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Subsidiaries taken as a whole, and (ii) to Pride's knowledge, there are no
organizational efforts with respect to the formation of a collective bargaining
unit presently being made or threatened (x) involving any U.S. employees or (y)
involving, in any single instance, 10% or more of the employees of Pride and its
Subsidiaries taken as a whole.
(b) Except for such matters as are disclosed in the Pride Reports and
matters that do not and are not reasonably likely to have a Pride Material
Adverse Effect, (i) neither Pride nor any Subsidiary of Pride has received any
written complaint of any unfair labor practice or other unlawful employment
practice or any written notice of any material violation of any federal, state
or local statutes, laws, ordinances, rules, regulations, orders or directives
with respect to the employment of individuals by, or the employment practices
of, Pride or any Subsidiary of Pride 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 Pride or any Subsidiary of Pride pending or, to the knowledge
of Pride threatened, before any governmental authority by or concerning the
employees working in their respective businesses.
SECTION 6.13 Environmental Matters. (a) Pride and each Subsidiary of
Pride 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 Pride Material Adverse Effect. There are no past or present facts,
conditions or circumstances that interfere with the conduct of any of their
respective businesses in the manner now conducted or which interfere with
continued compliance with any Environmental Law except for any non-compliance or
interference that is not reasonably likely to have, individually or in the
aggregate, a Pride Material Adverse Effect.
(b) Except for such matters as do not and are not reasonably likely to
have, individually or in the aggregate, a Pride Material Adverse Effect, no
judicial or administrative proceedings or governmental investigations are
pending or, to the knowledge of Pride, threatened against Pride or its
Subsidiaries that allege the violation of or seek to impose liability pursuant
to any Environmental Law, and there are no past or present facts, conditions or
circumstances at, on or arising out of, or otherwise associated with, any
current or, to the knowledge of Pride or its Subsidiaries, former businesses,
assets or properties of Pride or any Subsidiary of Pride, including but not
limited to on-site or off-site disposal, release or spill of any Hazardous
Materials which violate Environmental Law or are reasonably likely to give rise
to (i) costs, expenses, liabilities or obligations for any cleanup, remediation,
disposal or corrective action under any Environmental Law, (ii) claims arising
for personal injury, property damage or damage to natural resources, or (iii)
civil, criminal or administrative fines, penalties or injunctive relief.
(c) Neither Pride nor any of its Subsidiaries has (i) received any notice
of noncompliance with, violation of, or liability or potential liability under
any Environmental Law or (ii) entered into any consent decree or order or is
subject to any order of any court or governmental authority or tribunal under
any Environmental Law or relating to the cleanup of any Hazardous Materials,
except for any such matters as do not and are not reasonably likely to have a
Pride Material Adverse Effect.
SECTION 6.14 Intellectual Property. Pride and its Subsidiaries own or
possess adequate licenses or other valid rights to use all patents, patent
rights, trademarks, trademark rights and proprietary information used or held
for use in connection with their respective businesses as currently being
conducted, except where the failure to own or possess such licenses and other
rights does not and is not reasonably likely to have, individually or in the
aggregate, a Pride Material Adverse Effect, and there are no assertions or
claims challenging the validity of any of the foregoing that are reasonably
likely to have, individually or in the aggregate, a Pride Material Adverse
Effect. To the knowledge of Pride, the conduct of Pride's and its Subsidiaries'
respective businesses as currently conducted does not conflict with any patents,
patent rights, licenses, trademarks, trademark rights, trade names, trade name
rights or copyrights of others that are reasonably likely to have, individually
or in the aggregate, a Pride Material Adverse Effect. To the knowledge of Pride,
there is no material infringement of any proprietary right owned by or licensed
by or to Pride or any of its Subsidiaries that is reasonably likely to have,
individually or in the aggregate, a Pride Material Adverse Effect.
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SECTION 6.15 Decrees, Etc. Except for such matters as do not and are not
reasonably likely to have, individually or in the aggregate, a Pride Material
Adverse Effect, (i) no order, writ, fine, injunction, decree, judgment, award or
determination of any court or governmental authority has been issued or entered
against Pride or any Subsidiary of Pride that continues to be in effect that
affects the ownership or operation of any of their respective assets, and (ii)
no criminal order, writ, fine, injunction, decree, judgment or determination of
any court or governmental authority has been issued against Pride or any
Subsidiary of Pride.
SECTION 6.16 Insurance. (a) Except for such matters as do not and are
not reasonably likely to have, individually or in the aggregate, a Pride
Material Adverse Effect, Pride and its Subsidiaries maintain insurance coverage
with financially responsible insurance companies in such amounts and against
such losses as are customary in the international and domestic drilling business
conducted by Pride and its Subsidiaries prior to the date hereof.
(b) Except for such matters as do not and are not reasonably likely to
have, individually or in the aggregate, a Pride Material Adverse Effect, no
event relating specifically to Pride 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 Pride's knowledge, no threat in writing has been made to cancel (excluding
cancellation upon expiration or failure to renew) any such insurance policy of
Pride or any Subsidiary of Pride during the period of one year prior to the date
hereof. Prior to the date hereof, no event has occurred, including the failure
by Pride or any Subsidiary of Pride to give any notice or information or by
giving any inaccurate or erroneous notice or information, which materially
limits or impairs the rights of Pride or any Subsidiary of Pride under any such
excess liability, hull or protection and indemnity insurance policies.
SECTION 6.17 No Brokers. Pride has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Pride, Marine or the Company to pay any finder's fees, brokerage
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Pride has retained Salomon Smith Barney Inc. as its financial advisor, the
arrangements with which have been disclosed in writing to Marine prior to the
date hereof.
SECTION 6.18 Opinion of Financial Advisor. The board of directors of
Pride has received the opinion of Salomon Smith Barney Inc. to the effect that,
as of the date of this Agreement, the Pride Exchange Ratio is fair to the
shareholders of Pride from a financial point of view.
SECTION 6.19 Vote Required. The only votes of the holders of any class
or series of Pride capital stock necessary to approve any transaction
contemplated by this Agreement are the affirmative vote in favor of the issuance
of shares of Pride Common Stock pursuant to the Marine Merger (the "Pride
Issuance") and the adoption of this Agreement of the holders of at least a
majority of the Pride Common Stock represented at the Pride Meeting (as
hereafter defined) at which a quorum is present.
SECTION 6.20 Ownership of Drilling Rigs and Drillships. As of the date
hereof, Pride or a Subsidiary of Pride has good and indefeasible title to the
drilling rigs listed in Pride's most recent annual report on Form 10-K, in each
case free and clear of all Liens except for (i) defects or irregularities of
title or encumbrances of a nature that do not materially impair the ownership or
operation of these assets and which have not had and are not reasonably likely
to have a Pride 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 $5.0 million being described in Pride Disclosure Letter), (iii) Liens
for taxes, assessments or other governmental charges or levies not yet due or
which are being contested in good faith, (iv) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are
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being contested in good faith, (v) operators', vendors', suppliers of
necessaries to Pride's drilling rigs, carriers', warehousemen's, repairmen's,
mechanics', workmen's, materialmen's, construction or shipyard liens (during
repair or upgrade periods) or other similar Liens arising by operation of law in
the ordinary course of business or statutory landlord's liens, each of which is
in respect of obligations that have not been outstanding more than 90 days (so
long as no action has been taken to file or enforce such Liens within said
90-day period) or which are being contested in good faith and (vi) other Liens
disclosed in Pride Disclosure Letter (the Liens described in clauses (i), (ii),
(iii), (iv), (v) and (vi), collectively, "Pride Permitted Liens"). No such asset
is leased under an operating lease from a lessor that, to Pride's knowledge, has
incurred non-recourse indebtedness to finance the acquisition or construction of
such asset.
Section 6.21 Undisclosed Liabilities. Neither Pride 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 Pride Reports, (ii) are referred to in the Pride Disclosure
Letter or (iii) do not and are not reasonably likely to have, individually or in
the aggregate, a Pride Material Adverse Effect.
Section 6.22 Certain Contracts. (a) Section 6.22 of Pride Disclosure
Letter contains a list of all of the following contracts or agreements (other
than those listed as an exhibit to Pride's Annual Report on Form 10-K for the
year ended December 31, 2000) to which Pride or any Subsidiary of Pride is a
party or by which any of them is bound as of the date of this Agreement: (i) any
non-competition agreement that purports to limit the manner in which, or the
localities in which, all or any portion of their respective businesses is
conducted, other than any such limitation that is not material to Pride and its
Subsidiaries, taken as a whole; (ii) any drilling rig construction or conversion
contract with respect to which the drilling rig has not been delivered and paid
for; (iii) any drilling contracts of one year or greater remaining duration or
drilling contracts of a shorter duration which if extended at the election of
Pride's customer would have a remaining duration of one year or more; (iv) any
contract or agreement for the borrowing of money with a borrowing capacity or
outstanding indebtedness of $5.0 million or more; (v) any contract for the
acquisition or disposition of a "business" (as such term is defined in Article
11-01(d) of Regulation S-X of the SEC; or (vi) any "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC) (all contracts
or agreements of the types described in clauses (i) through (vi) being referred
to herein as "Pride Material Contracts").
(b) As of the date of this Agreement, each Pride Material Contract is, to
the knowledge of Pride, in full force and effect, and Pride and each of its
Subsidiaries have in all material respects performed all obligations required to
be performed by them to date under each Pride Material Contract, 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 Pride Material Adverse Effect. Except for such matters as do not
and are not reasonably likely to have a Pride Material Adverse Effect, neither
Pride 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 Pride,
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 Pride
Material Contract or (y) has received written notice of the desire of the other
party or parties to any such Pride Material Contract to exercise any rights such
party has to cancel, terminate or repudiate such contract or exercise remedies
thereunder. Each Pride Material Contract is enforceable by Pride or a Subsidiary
of Pride in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights and general principles of equity, except where such
unenforceability is not reasonably likely to create, individually or in the
aggregate, a Pride Material Adverse Effect.
Section 6.23 Capital Expenditure Program. As of the date of this
Agreement, Section 6.23 of the Pride Disclosure Letter accurately sets forth in
all material respects, for each of Pride's sustaining, life extension and
newbuild capital expenditure programs, the capital expenditures for all such
programs that were forecasted to be incurred in 2001 on an annual basis.
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Section 6.24 Improper Payments. No bribes, kickbacks or other improper
payments have been made by Pride or any Subsidiary of Pride or agent of any of
them in connection with the conduct of their respective businesses or the
operation of their respective assets, and neither Pride, any Subsidiary of Pride
nor any agent of any of them has received any such payments from vendors,
suppliers or other persons, where any such payment made or received is
reasonably likely to have, individually or in the aggregate, a Pride Material
Adverse Effect.
Section 6.25 Amendment to Pride Rights Agreement. Pride has amended or
taken other action under the Pride Rights Agreement so that none of the
execution and delivery of this Agreement, the execution and delivery of the
Marine Stock Option Agreement, the conversion of shares of Pride Common Stock
into the right to receive shares of Company Common Stock in accordance with this
Agreement, the consummation of the Mergers, the issuance of Pride Common Stock
upon exercise of the Marine Stock Option or any other transactions contemplated
hereby or by the Marine Stock Option Agreement, will cause: (i) Pride Rights to
become exercisable under the Pride Rights Agreement; (ii) the Company, Pride or
any of Pride's shareholders or Subsidiaries to be deemed an "Acquiring Person"
(as defined in the Pride Rights Agreement); (iii) any such event to be an event
requiring an adjustment of the purchase price of the Pride Rights under Section
11(a)(ii) of the Pride Rights Agreement; (iv) Section 13 of the Pride Rights
Agreement to be or become applicable to any such event; or (v) a "Stock
Acquisition Date" or a "Distribution Date" (each as defined in Pride Rights
Agreement) to occur upon any such event, and so that the Pride Rights will
expire immediately prior to the Marine Merger Effective Time. Pride has
delivered to Marine a true and complete copy of the Pride Rights Agreement, as
amended to date.
SECTION 6.26 Pooling of Interests. To the knowledge of Pride as of the
date of this Agreement, neither it nor any of its Subsidiaries has taken, or
agreed to take, any action or failed to take any action which action or failure
(without giving effect to any actions or failures to act by Marine or any of its
Subsidiaries) that is known to Pride as of the date of this Agreement to prevent
the treatment of the Mergers contemplated herein as (i) a pooling of interests
for accounting purposes under the requirements of Opinion No. 16 (Business
Combinations) of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board and the
rules of the SEC, or (ii) reorganizations within the meaning of Section 368(a)
of the Code.
SECTION 6.27 Representations and Warranties Relating to the Company and
Merger Sub. (a) Each of the Company and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Neither the Company nor Merger Sub owns any properties (other than the
initial cash subscription for shares) or has commenced any business or
operations. Pride has delivered to Marine true and correct copies of the
certificate of incorporation and bylaws of each of the Company and Merger Sub.
(b) The Company has an authorized capital stock consisting of (i)
400,000,000 shares of Company Common Stock, 20 shares of which were issued and
outstanding on the date hereof and immediately prior to the Pride Merger
Effective Time, and (ii) 50,000,000 shares of preferred stock, par value $.01
per share, none of which were issued and outstanding as of the date hereof and
immediately prior to the Pride Merger Effective Time. As of the date hereof and
immediately prior to the Marine Merger Effective Time, all of the issued and
outstanding shares of capital stock of Merger Sub are owned by Pride. As of the
date hereof and immediately prior to the Pride Merger Effective Time, all of the
issued and outstanding shares of capital stock of the Company are owned by
Pride.
(c) Each of the Company and Merger Sub has the corporate power and
authority and has taken all corporate action necessary to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been (i) duly and validly authorized by the board of directors and
sole stockholder of each of the Company and Merger Sub and (ii) duly and validly
executed and delivered by the Company and Merger Sub and constitutes the valid
and binding obligation of each of the Company and Merger Sub, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other Laws relating to or
affecting creditors' rights generally or by equitable principles.
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(d) Each of the Company and Merger Sub has been formed solely to consummate
the Pride Merger and Marine Merger, respectively, and each of the Company and
Merger Sub has not conducted and will not conduct any business activities or
other operations of any kind other than the issuance of shares of their capital
stock to Pride, prior to the Pride Merger Effective Time and Marine Merger
Effective Time, respectively.
ARTICLE 7
COVENANTS AND AGREEMENTS
SECTION 7.1 Conduct of Marine's Business. Prior to the Marine Merger
Effective Time, and except (i) as set forth in the Marine Disclosure Letter,
(ii) as expressly contemplated by any other provision of this Agreement, (iii)
as contemplated by the Pride Stock Option Agreement, (iii) as required by
Applicable Laws (provided that Marine has provided Pride with advance notice of
the proposed action to the extent practicable), or (iv) as otherwise consented
to by Pride in writing, Marine:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(b) shall use its commercially reasonable best efforts, and shall
cause each of its Subsidiaries to use its commercially reasonable best
efforts, to preserve intact their business organizations and goodwill
(except that any of its Subsidiaries may be merged with or into, or be
consolidated with any of its Subsidiaries or may be liquidated into Marine
or any of its Subsidiaries), keep available the services of their
respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;
(c) shall not amend its articles of incorporation or bylaws;
(d) shall promptly notify Pride of any material change in its
condition (financial or otherwise) or business or any termination,
cancellation, repudiation or material breach of any Marine Material
Contract (or communications indicating that the same may be contemplated)
or any material litigation or material governmental complaints,
investigations or hearings (or communications indicating that the same may
be contemplated), or the breach in any material respect of any
representation or warranty contained herein;
(e) shall promptly deliver to Pride true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) shall not,
(1) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement (including Marine Rights
issued pursuant to the Marine Rights Agreement) or pursuant to the
exercise of stock options and stock awards granted after the date hereof
and expressly permitted under this Agreement or in connection with
transactions permitted by Section 7.1(i), issue any shares of its
capital stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof,
(2) grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any shares of its
capital stock, except the issuance of Marine Rights with permitted
issuances of Marine Common Stock,
(3) amend or otherwise modify any option, warrant, conversion right
or other right to acquire any shares of its capital stock existing on
the date hereof,
(4) 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
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employment or consulting agreement, except in each case in the ordinary
course of business consistent with past practice,
(5) with respect to any of its former, present or future officers
or directors, increase any compensation or benefits or enter into, amend
or extend (or permit the extension of) any employment or consulting
agreement,
(6) adopt any new employee benefit plan or agreement (including any
stock option, stock benefit or stock purchase plan) or amend (except as
required by law) any existing employee benefit plan in any material
respect, except for changes which are less favorable to participants in
such plans,
(7) except as approved by good faith action of the board of
directors of Marine after Marine has provided Pride with advance written
notice of the proposed action and consulted in advance with Pride
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 Mergers, or
(8) permit any holder of an option to acquire Marine Common Stock
outstanding on the date hereof to have shares withheld upon exercise,
for tax purposes, in excess of the number of shares needed to satisfy
the minimum statutory withholding requirements for federal and state
withholding;
(g) shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or (ii) redeem, purchase or otherwise acquire any shares of its
capital stock or capital stock of any of its Subsidiaries, or make any
commitment for any such action;
(h) shall not, and shall not permit any of its Subsidiaries to, sell,
lease or otherwise dispose of any of its assets (including capital stock of
Subsidiaries) which are material to Marine, individually or in the
aggregate, except for sales of surplus equipment or sales of other assets
in the ordinary course of business;
(i) shall not, and shall not permit any of its Subsidiaries to, except
pursuant to contractual commitments in effect on the date hereof and
disclosed in the Marine Disclosure Letter, acquire or agree to acquire by
merging or consolidating with, or by purchasing an equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof, in each case (i) for an aggregate consideration for
all such acquisitions in excess of $1 million (excluding acquisitions
approved in writing by Pride) or (ii) where a filing under the HSR Act or
any non-U.S. competition, antitrust or premerger notification laws is
required;
(j) shall not, except as may be required as a result of a change in
generally accepted accounting principles, change any of the material
accounting principles or practices used by it;
(k) shall, and shall cause any of its Subsidiaries to, use reasonable
efforts to maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are
customary for such party;
(l) shall not, and shall not permit any of its Subsidiaries to,
(1) 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,
(2) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes, or
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(3) change in any material respect any of its methods of reporting
any item for tax purposes from those employed in the preparation of its
tax returns for the most recent taxable year for which a return has been
filed, except as may be required by applicable law;
(m) shall not, and shall not permit any of its Subsidiaries to,
(1) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of Marine or any of its Subsidiaries or
guarantee any debt securities of others,
(2) except in the ordinary course of business, enter into any
material lease (whether such lease is an operating or capital lease) or
create any material mortgages, Liens, security interests or other
encumbrances on its property in connection with any indebtedness thereof
(other than the Marine Permitted Liens), or
(3) make or commit to make aggregate capital expenditures in excess
of $1 million per month for each month from the date of this Agreement
to the Marine Merger Effective Time over the capital expenditures
forecast disclosed in the Marine Disclosure Letter for such month,
excluding capital expenditures covered by insurance (A) for any partial
loss not covered by loss of hire insurance, not in excess of $1 million
per occurrence or series of related occurrences and (B) for any vessel
for which Marine has bound loss of hire insurance, provided, however,
that capital expenditures in connection with the total loss (actual or
constructive) of any vessel shall require the consent of Pride;
(n) shall not, and shall cause its Subsidiaries not to, purchase or
otherwise acquire any Pride Common Stock;
(o) subject to Section 7.7, shall not take any action that is
reasonably likely to delay materially or adversely affect the ability of
any of the parties hereto to obtain any consent, authorization, order or
approval of any governmental commission, board or other regulatory body or
the expiration of any applicable waiting period required to consummate the
transactions contemplated by this Agreement;
(p) unless in the good faith opinion of the board of directors of
Marine after consultation with its outside legal counsel the following
would be inconsistent with its fiduciary duties, (i) shall not terminate,
amend, modify or waive any provision of any agreement containing a
standstill covenant to which it is a party and (ii) during such period
shall enforce, to the fullest extent permitted under applicable law, the
provisions of such agreement, including by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States of America or any
state having jurisdiction; and
(q) shall not (i) agree in writing or otherwise to take any of the
foregoing actions or (ii) permit any of its Subsidiaries to agree in
writing or otherwise to take any of the foregoing actions that refer to
Subsidiaries.
SECTION 7.2 Conduct of Pride's Business. Prior to the Marine Merger
Effective Time, and except (i) as set forth in the Pride Disclosure Letter, (ii)
as expressly contemplated by any other provision of this Agreement, (iii) as
contemplated by the Marine Stock Option Agreement, (iv) as required by
Applicable Laws (provided that Pride has provided Marine with advance notice of
the proposed action to the extent practicable), or (v) as otherwise consented to
by Marine in writing, Pride:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(b) shall use its commercially reasonable best efforts, and shall
cause each of its Subsidiaries to use its commercially reasonable best
efforts, to preserve intact their business organizations and goodwill
(except that any of its Subsidiaries may be merged with or into, or be
consolidated with any of its Subsidiaries or may be liquidated into Pride
or any of its Subsidiaries), keep available the
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services of their respective officers and employees and maintain
satisfactory relationships with those persons having business relationships
with them;
(c) shall not amend its articles of incorporation or bylaws;
(d) shall promptly notify Marine of any material change in its
condition (financial or otherwise) or business or any termination,
cancellation, repudiation or material breach of any Pride Material Contract
(or communications indicating that the same may be contemplated) or any
material litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated),
or the breach in any material respect of any representation or warranty
contained herein;
(e) shall promptly deliver to Marine true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) shall not,
(1) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date
hereof and disclosed pursuant to this Agreement (including Pride Rights
issued pursuant to the Pride Rights Agreement) or pursuant to the
exercise of stock options and stock awards granted after the date hereof
and expressly permitted under this Agreement or in connection with
transactions permitted by Section 7.2(i), issue any shares of its
capital stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof,
(2) grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any shares of its
capital stock, except the issuance of Pride Rights with permitted
issuances of Pride Common Stock,
(3) amend or otherwise modify any option, warrant, conversion right
or other right to acquire any shares of its capital stock existing on
the date hereof,
(4) 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,
(5) with respect to any of its former, present or future officers
or directors, increase any compensation or benefits or enter into, amend
or extend (or permit the extension of) any employment or consulting
agreement,
(6) adopt any new employee benefit plan or agreement (including any
stock option, stock benefit or stock purchase plan) or amend (except as
required by law) any existing employee benefit plan in any material
respect, except for changes which are less favorable to participants in
such plans,
(7) except as approved by good faith action of the board of
directors of Pride after Pride has provided Marine with advance written
notice of the proposed action and consulted in advance with Marine
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 Mergers, or
(8) permit any holder of an option to acquire Pride Common Stock
outstanding on the date hereof to have shares withheld upon exercise,
for tax purposes, in excess of the number of shares needed to satisfy
the minimum statutory withholding requirements for federal and state
withholding;
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(g) shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or (ii) redeem, purchase or otherwise acquire any shares of its
capital stock or capital stock of any of its Subsidiaries, or make any
commitment for any such action;
(h) shall not, and shall not permit any of its Subsidiaries to, sell,
lease or otherwise dispose of any of its assets (including capital stock of
Subsidiaries) which are material to Pride individually or in the aggregate,
except for sales of surplus equipment or sales of other assets in the
ordinary course of business;
(i) shall not, and shall not permit any of its Subsidiaries to, except
pursuant to contractual commitments in effect on the date hereof and
disclosed in the Pride Disclosure Letter, acquire or agree to acquire by
merging or consolidating with, or by purchasing an equity interest in or a
substantial portion of the assets of, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof, in each case (i) for an aggregate consideration for
all such acquisitions in excess of $1 million (excluding acquisitions
approved in writing by Marine) or (ii) where a filing under the HSR Act or
any non-U.S. competition, antitrust or premerger notification laws is
required;
(j) shall not, except as may be required as a result of a change in
generally accepted accounting principles, change any of the material
accounting principles or practices used by it;
(k) shall, and shall cause any of its Subsidiaries to, use reasonable
efforts to maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are
customary for such party;
(l) shall not, and shall not permit any of its Subsidiaries to,
(1) 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,
(2) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to taxes, or
(3) change in any material respect any of its methods of reporting
any item for tax purposes from those employed in the preparation of its
tax returns for the most recent taxable year for which a return has been
filed, except as may be required by applicable law;
(m) shall not, and shall not permit any of its Subsidiaries to,
(1) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of Pride or any of its Subsidiaries or
guarantee any debt securities of others,
(2) except in the ordinary course of business, enter into any
material lease (whether such lease is an operating or capital lease) or
create any material mortgages, Liens, security interests or other
encumbrances on its property in connection with any indebtedness thereof
(other than the Pride Permitted Liens), or
(3) make or commit to make aggregate capital expenditures in excess
of $1 million per month for each month from the date of this Agreement
to the Marine Merger Effective Time over the capital expenditures
forecast disclosed in the Pride Disclosure Letter for such month,
excluding capital expenditures covered by insurance (A) for any partial
loss not covered by loss of hire insurance, not in excess of $1 million
per occurrence or series of related occurrences and (B) for any vessel
for which the Pride has bound loss of hire insurance, provided, however,
that capital expenditures in connection with the total loss (actual or
constructive) of any vessel shall require the consent of Pride.
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(n) shall not, and shall cause its Subsidiaries not to, purchase or
otherwise acquire any Marine Common Stock;
(o) subject to Section 7.7, shall not take any action that is
reasonably likely to delay materially or adversely affect the ability of
any of the parties hereto to obtain any consent, authorization, order or
approval of any governmental commission, board or other regulatory body or
the expiration of any applicable waiting period required to consummate the
transactions contemplated by this Agreement;
(p) unless in the good faith opinion of the board of directors of
Pride after consultation with its outside legal counsel the following would
be inconsistent with its fiduciary duties, (i) shall not terminate, amend,
modify or waive any provision of any agreement containing a standstill
covenant to which it is a party; and (ii) during such period shall enforce,
to the fullest extent permitted under applicable law, the provisions of
such agreement, including by obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions
thereof in any court of the United States of America or any state having
jurisdiction;
(q) shall not (i) agree in writing or otherwise to take any of the
foregoing actions or (ii) permit any of its Subsidiaries to agree in
writing or otherwise to take any of the foregoing actions that refer to
Subsidiaries;
(r) shall not, and shall not permit the Company to amend the
certificate of incorporation or bylaws of the Company;
(s) shall not, and shall not permit either Merger Sub or the Company
to issue any shares of capital stock, rights, options or warrants to
purchase shares of capital stock of either the Company or Merger Sub except
to Pride;
(t) shall not permit either Merger Sub or the Company to engage in any
business activities (other than as contemplated by this Agreement), or
liquidate, merge or consolidate with any other corporation or permit any
other corporation to merge into or consolidate with either Merger Sub or
the Company; and
(u) shall cause Merger Sub and the Company to take any actions
required to be taken by them under this Agreement and to refrain from
taking any actions that they are prohibited from taking under this
Agreement.
SECTION 7.3 No Solicitation by Marine. (a) Marine agrees that (i) neither
it nor any of its Subsidiaries shall, and it shall not authorize or permit any
of its officers, directors, employees, agents or representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) to, and on becoming aware of it will stop such
person from continuing to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing nonpublic information), or take any
action designed to facilitate, directly or indirectly, any inquiry, proposal or
offer (including, without limitation, any proposal or offer to its shareholders)
with respect to a tender or exchange offer, merger, consolidation, business
combination, purchase or similar transaction or series of transactions (other
than the transactions contemplated by this Agreement) involving, individually or
in the aggregate, 15% or more of the assets, net revenues, EBITDA, or net income
of Marine and its Subsidiaries on a consolidated basis or 15% or more of any
class of capital stock of Marine (any such proposal, offer or transaction being
hereinafter referred to as a "Marine Acquisition Proposal") or cooperate with or
assist, participate or engage in any discussions or negotiations concerning a
Marine Acquisition Proposal; and (ii) it will immediately cease and cause to be
terminated any existing negotiations with any parties conducted heretofore with
respect to any of the foregoing; provided that nothing contained in this
Agreement shall prevent Marine or its board of directors from (A) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to a Marine
Acquisition Proposal or (B) prior to the Cutoff Date, providing information
(pursuant to a confidentiality and standstill agreement in reasonably customary
form with terms at least as favorable to Marine with respect to confidentiality
as the Agreement dated April 2, 2001, between Marine and Pride (the
"Confidentiality Agreement") and which does not contain terms that
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prevent Marine from complying with its obligations under this Section 7.3) to or
engaging in any negotiations or discussions with any person or entity who has
made an unsolicited bona fide written Marine Acquisition Proposal with respect
to all the outstanding capital stock of Marine or all or substantially all the
assets of Marine and its Subsidiaries on a consolidated basis that, in the good
faith judgment of the board of directors of Marine, taking into account the
likelihood of financing and consummation, and based on the advice of a financial
advisor of recognized national reputation, is superior to the Mergers (a "Marine
Superior Proposal"), to the extent the board of directors of Marine, after
consultation with its outside legal counsel, determines that the failure to do
so would be inconsistent with its fiduciary obligations.
(b) Prior to taking any action referred to in Section 7.3(a), if Marine
intends to participate in any such discussions or negotiations or provide any
such information to any such third party, Marine shall give prompt prior oral
and written notice to Pride of each such action. Marine will immediately notify
Pride orally and in writing of any such requests for such information or the
receipt of any Marine Acquisition Proposal or any inquiry with respect to or
that could lead to a Marine Acquisition Proposal, including the identity of the
person or group engaging in such discussions or negotiations, requesting such
information or making such Marine Acquisition Proposal, and the material terms
and conditions of any Marine Acquisition Proposal. Marine will (i) keep Pride
fully informed of the status and details (including any changes or proposed
changes to such status or details) on a timely basis of any such requests,
Marine Acquisition Proposals or inquiries and (ii) provide to Pride as soon as
practicable after receipt or delivery thereof with copies of all correspondence
and other written material sent or provided to Marine from any third party in
connection with any Marine Acquisition Proposal or sent or provided by Marine to
any third party in connection with any Marine Acquisition Proposal. Any written
notice under this Section 7.3 shall be given by facsimile with receipt confirmed
or personal delivery, and any oral notice under this Section 7.3 shall be given
to Paul A. Bragg, or such other person identified by Marine to Pride in writing.
(c) Nothing in this Section 7.3 shall permit Marine to enter into any
agreement with respect to a Marine Acquisition Proposal during the term of this
Agreement, it being agreed that during the term of this Agreement (except
pursuant to Section 9.3(c)), Marine shall not enter into any agreement with any
person that provides for, or in any way facilitates, a Marine Acquisition
Proposal, other than a confidentiality and standstill agreement in reasonably
customary form with confidentiality terms at least as favorable to Marine as the
Confidentiality Agreement and which does not contain terms that prevent Marine
from complying with its obligations under this Section.
(d) For purposes hereof, the "Cutoff Date," when used with respect to
Marine, means the date the condition set forth in Section 8.1(a) is satisfied.
SECTION 7.4 No Solicitation by Pride. (a) Pride agrees that (i) neither
it nor any of its Subsidiaries shall, and it shall not authorize or permit any
of its officers, directors, employees, agents or representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) to, and on becoming aware of it will stop such
person from continuing to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing nonpublic information), or take any
action designed to facilitate, directly or indirectly, any inquiry, proposal or
offer (including, without limitation, any proposal or offer to its shareholders)
with respect to a tender or exchange offer, merger, consolidation, business
combination, purchase or similar transaction or series of transactions (other
than the transactions contemplated by this Agreement) involving, individually or
in the aggregate, 15% or more of the assets, net revenues, EBITDA or net income
of Pride and its Subsidiaries on a consolidated basis or 15% or more of any
class of capital stock of Pride (any such proposal, offer or transaction being
hereinafter referred to as a "Pride Acquisition Proposal") or cooperate with or
assist, participate or engage in any discussions or negotiations concerning a
Pride Acquisition Proposal; and (ii) it will immediately cease and cause to be
terminated any existing negotiations with any parties conducted heretofore with
respect to any of the foregoing; provided that nothing contained in this
Agreement shall prevent Pride or its board of directors from (A) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to a Pride Acquisition
Proposal or (B) prior to the Cutoff Date, providing information (pursuant to a
confidentiality and standstill agreement in reasonably customary form with terms
at least as favorable to
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Pride with respect to confidentiality as the Confidentiality Agreement and which
does not contain terms that prevent Pride from complying with its obligations
under this Section 7.4) to or engaging in any negotiations or discussions with
any person or entity who has made an unsolicited bona fide written Pride
Acquisition Proposal with respect to all the outstanding capital stock of Pride
or all or substantially all the assets of Pride and its Subsidiaries on a
consolidated basis that, in the good faith judgment of the board of directors of
Pride, taking into account the likelihood of financing and consummation and
based on the advice of a financial advisor of recognized national reputation, is
superior to the Mergers (a "Pride Superior Proposal"), to the extent the board
of directors of Pride, after consultation with its outside legal counsel,
determines that the failure to do so would be inconsistent with its fiduciary
obligations.
(b) Prior to taking any action referred to in Section 7.4(a), if Pride
intends to participate in any such discussions or negotiations or provide any
such information to any such third party, Pride shall give prompt prior oral and
written notice to Marine of each such action. Pride will immediately notify
Marine orally and in writing of any such requests for such information or the
receipt of any Pride Acquisition Proposal or any inquiry with respect to or that
could lead to a Pride Acquisition Proposal, including the identity of the person
or group engaging in such discussions or negotiations, requesting such
information or making such Pride Acquisition Proposal and the material terms and
conditions of any Pride Acquisition Proposal. Pride will (i) keep Marine fully
informed of the status and details (including any changes or proposed changes to
such status or details) on a timely basis of any such requests, Marine
Acquisition Proposals or inquiries and (ii) provide to Marine as soon as
practicable after receipt or delivery thereof with copies of all correspondence
and other written material sent or provided to Pride from any third party in
connection with any Pride Acquisition Proposal or sent or provided by Pride to
any third party in connection with any Pride Acquisition Proposal. Any written
notice under this Section 7.4 shall be given by facsimile with receipt confirmed
or personal delivery, and any oral notice under this Section 7.4 shall be given
to Jan Rask, or such other person identified by Pride to Marine in writing.
(c) Nothing in this Section 7.4 shall permit Pride to enter into any
agreement with respect to a Pride Acquisition Proposal during the term of this
Agreement, it being agreed that during the term of this Agreement (except
pursuant to Section 9.4(c)), Pride shall not enter into any agreement with any
person that provides for, or in any way facilitates, a Pride Acquisition
Proposal, other than a confidentiality and standstill agreement in reasonably
customary form with terms at least as favorable to Pride as the Confidentiality
Agreement and which does not contain terms that prevent Pride from complying
with its obligations under this Section 7.4.
(d) For purposes hereof, the "Cutoff Date," when used with respect to Pride
means the date the condition set forth in Section 8.1(b) is satisfied.
SECTION 7.5 Rights Agreements. (a) Except for actions contemplated by
this Agreement that are taken by Marine simultaneously with its entering into a
binding definitive agreement pursuant to Section 9.3(c), the board of directors
of Marine shall not take any other action to (i) terminate the Marine Rights
Agreement, (ii) redeem the Marine Rights, (iii) amend the Marine Rights
Agreement in a manner adverse to Pride or the Company or (iv) cause any person
not to be or become an "Acquiring Person."
(b) Except for actions contemplated by this Agreement that are taken by
Pride simultaneously with its entering into a binding definitive agreement
pursuant to Section 9.4(c), the board of directors of Pride shall not take any
other action to (i) terminate the Pride Rights Agreement, (ii) redeem the Pride
Rights, (iii) amend the Pride Rights Agreement in a manner adverse to Marine or
the Company or (iv) cause any person not to be or become an "Acquiring Person."
SECTION 7.6 Meetings of Shareholders. (a) Each of Marine and Pride shall
take all action necessary, in accordance with applicable law, its articles of
incorporation and bylaws to convene a meeting of its shareholders as promptly as
practicable to consider and vote upon the adoption of this Agreement and
approval of the Marine Merger in the case of Marine and the Pride Merger and the
Pride Issuance in the case of Pride. The meeting of Marine's shareholder is
herein referred to as the "Marine Meeting," the meeting of Pride's shareholders
is referred to as the "Pride Meeting," and both such meetings are referred
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to as the "Meetings." Marine and Pride shall coordinate and cooperate with
respect to the timing of the Meetings and shall use their respective reasonable
best efforts to hold the Meetings on the same day. Notwithstanding any other
provision of this Agreement, unless this Agreement is terminated in accordance
with the terms hereof, Marine and Pride shall each (to the extent permitted or
limited by the laws of its state of incorporation), submit this Agreement to its
respective shareholders, whether or not the board of directors of Marine or
Pride, as the case may be, withdraws, modifies or changes its recommendation and
declaration regarding the foregoing matters.
(b) Marine through its board of directors, has adopted resolutions
declaring the Marine Merger to be advisable and in the best interest of Marine's
shareholders and shall recommend that this Agreement and the Marine Merger be
approved and adopted by Marine shareholders and shall use its reasonable best
efforts to solicit from Marine's shareholders proxies in favor thereof;
provided, however, that the board of directors of Marine may at any time prior
to the Marine Merger Effective Time, upon five business days' prior written
notice to Pride, withdraw, modify or change any recommendation and declaration
regarding such matters or recommend and declare advisable any Marine Superior
Proposal, if in the good faith opinion of Marine's board of directors after
consultation with its outside legal counsel the failure to so withdraw, modify
or change its recommendation and declaration or to so recommend and declare
advisable any Marine Superior Proposal would be inconsistent with its fiduciary
obligations.
(c) Pride, through its board of directors, has adopted resolutions
declaring the Pride Issuance and the Pride Merger to be advisable and in the
best interest of Pride's shareholders and shall recommend that the Pride
Issuance, this Agreement and the Pride Merger be approved and adopted by Pride
shareholders and shall use its reasonable best efforts to solicit from Pride's
shareholders proxies in favor thereof; provided, however, that the board of
directors of Pride may at any time prior to the Marine Merger Effective Time
upon five business days' prior written notice to Marine, withdraw, modify or
change any recommendation and declaration regarding such matters or recommend
and declare advisable any Pride Superior Proposal, if in the good faith opinion
of Pride's board of directors after consultation with its outside legal counsel
the failure to so withdraw, modify or change its recommendation and declaration
or to so recommend and declare advisable any Pride Superior Proposal would be
inconsistent with its fiduciary obligations.
(d) The Company has caused this Agreement, the Mergers and the other
transactions contemplated hereby to be approved and adopted by its board of
directors and only stockholder at or prior to the execution and delivery of this
Agreement by the Company. If so required by law or the Company's certificate of
incorporation or bylaws, the Company shall cause any amendment to this Agreement
executed by Marine and Pride to be likewise promptly approved and adopted by the
Company's board of directors and stockholders and promptly executed and
delivered by the Company.
SECTION 7.7 Filings; Commercially Reasonable Best Efforts, Etc. (a)
Subject to the terms and conditions herein provided, each of Marine and Pride
shall:
(1) make their respective required filings under the HSR Act to be
made pursuant to this Section 7.7 (and shall share equally all filing fees
incident thereto), which filings shall be made not more than 15 business
days from the date hereof, and thereafter shall promptly make any other
required submissions under the HSR Act;
(2) use their commercially reasonable best efforts to cooperate with
one another in (i) determining which filings are required to be made prior
to the Marine Merger Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to the Marine
Merger Effective Time from, governmental or regulatory authorities of the
United States, the several states and non-U.S. jurisdictions in connection
with the execution and delivery of this Agreement and the consummation of
the Mergers and the transactions contemplated hereby; and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations without causing a Marine Material Adverse Effect
or a Pride Material Adverse Effect;
(3) promptly notify each other of any communication concerning this
Agreement or the transactions contemplated hereby to that party from any
governmental authority and permit the other
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party to review in advance any proposed communication concerning this
Agreement or the transactions contemplated hereby to any governmental
entity;
(4) not agree to participate in any meeting or discussion with any
governmental authority in respect of any filings, investigation or other
inquiry concerning this Agreement or the transactions contemplated hereby
unless it consults with the other party in advance and, to the extent
permitted by such governmental authority, gives the other party the
opportunity to attend and participate thereat;
(5) furnish the other party with copies of all correspondence, filings
and communications (and memoranda setting forth the substance thereof)
between them and their affiliates and their respective representatives on
the one hand, and any government or regulatory authority or members or
their respective staffs on the other hand, with respect to this Agreement
and the transactions contemplated hereby, except for copies of their
respective filings under the HSR Act; and
(6) furnish the other party with such necessary information and
reasonable assistance as such other party and its affiliates may reasonably
request in connection with their preparation of necessary filings,
registrations or submissions of information to any governmental or
regulatory authorities, including, without limitation, any filings
necessary or appropriate under the provisions of the HSR Act.
(b) Without limiting Section 7.7(a), but subject to Section 7.7(c), Marine
and Pride each shall:
(i) each use commercially reasonable best efforts to avoid the entry
of, or to have vacated, terminated or modified, any decree, order or
judgment that would restrain, prevent or delay the Closing; and
(ii) each use commercially reasonable best efforts to take any and all
steps necessary to obtain any consents or eliminate any impediments to the
Mergers.
(c) Nothing in this Agreement shall require any of the Company, Marine or
Pride to (i) dispose of any of its assets or to limit its freedom of action with
respect to any of its businesses, (ii) 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 Marine Merger Effective Time, (iii) commit or
agree to any of the foregoing, (iv) obtain any consents, approvals, permits or
authorizations or to remove any impediments to the Mergers relating to antitrust
laws or (v) avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order in any suit or proceeding relating to
antitrust laws, other than matters described in the immediately preceding
clauses (i) through and including (v), which in each such case may be
conditioned upon the consummation of the Mergers and the transactions
contemplated hereby and which, in the reasonable judgment of each of Marine and
Pride, in each such case do not and are not reasonably likely to individually or
in the aggregate either have a (i) Marine Material Adverse Effect; (ii) Pride
Material Adverse Effect; or (iii) Company Material Adverse Effect (as defined in
Section 10.9(c)) following the Mergers.
(d) The Company, Marine and Pride intend that the Mergers will each qualify
as a reorganization within the meaning of Section 368(a) of the Code. The
Company, Marine and Pride shall each use their respective commercially
reasonable best efforts to cause each of the Mergers to qualify as
reorganizations within the meaning of Section 368(a) of the Code and shall not
take actions, cause actions to be taken or fail to take actions that (i) could
reasonably be expected to prevent either of the Mergers from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (ii) could
reasonably be expected to cause the Marine shareholders who exchange their
Marine Common Stock for Pride Common Stock pursuant to the Marine Merger or
Pride shareholders, including the former holders of Marine Common Stock, who
exchange their Pride Common Stock for Company Common Stock pursuant to the Pride
Merger to recognize taxable gain with respect to the Marine Merger or Pride
Merger, as the case may be, pursuant to Section 368(a) of the Code.
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(e) The Company, Marine and Pride intend that the Mergers will each qualify
as a pooling of interests transaction as described in Section 5.26 and Section
6.26. Each of Marine and Pride shall not take any action and shall not fail to
take any action which action or failure to take action would prevent, or would
be reasonably likely to prevent, the Mergers from qualifying for pooling of
interest accounting treatment.
(f) Prior to the Marine Merger Effective Time, Marine, Merger Sub and Pride
shall file: (i) with the Secretary of State of Delaware the Marine Certificate
of Merger and (ii) with the Secretary of State of Texas the Texas Articles of
Merger.
(g) Promptly after the Marine Merger Effective Time, the Company and Pride
shall file: (i) with the Secretary of State of Delaware the Pride Certificate of
Merger and (ii) with the Secretary of State of Louisiana the Louisiana
Certificate of Merger.
SECTION 7.8 Inspection. From the date hereof to the Marine Merger
Effective Time, each of Marine and Pride shall allow all designated officers,
attorneys, accountants and other representatives of Marine or Pride, as the case
may be, access, at all reasonable times, upon reasonable notice, to the records
and files, correspondence, audits, audit work papers, tax returns (foreign and
domestic) and related work papers, environmental compliance correspondence,
permits and files, rigs, ships and other assets, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs of Marine and Pride and their respective
Subsidiaries, including inspection of such assets; provided, however, that no
investigation pursuant to this Section 7.8 shall affect any representation or
warranty given by any party hereunder, and provided, further that
notwithstanding the provision of information or investigation by any party, no
party shall be deemed to make any representation or warranty except as expressly
set forth in this Agreement. Notwithstanding the foregoing, no party shall be
required to provide any information which it reasonably believes it may not
provide to the other party by reason of applicable law, rules or regulations,
which constitutes information protected by attorney/client privilege, or which
it is required to keep confidential by reason of contract or agreement with
third parties. The parties hereto shall make reasonable and appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply. Each of Marine and Pride agrees that it shall
not, and shall cause its respective representatives not to, use any information
obtained pursuant to this Section 7.8 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. All non-public
information obtained pursuant to this Section 7.8 shall be governed by the
Confidentiality Agreement.
SECTION 7.9 Publicity. The parties will consult with each other and will
mutually agree upon any press releases or public announcements pertaining to
this Agreement or the transactions contemplated hereby and shall not issue any
such press releases or make any such public announcements prior to such
consultation and agreement, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange, in which case the party proposing to issue such press release or make
such public announcement shall use its best efforts to consult in good faith
with the other party before issuing any such press releases or making any such
public announcements.
SECTION 7.10 Registration Statement on Form S-4. (a) Each of Marine and
Pride shall cooperate and promptly prepare and Pride and the Company 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 Pride Common Stock and
Company Common Stock issuable in the Mergers upon exercise or conversion of
options, warrants or convertible securities which following the Mergers will be
exercisable for, or convertible into, Company Common Stock. A portion of the
Form S-4 shall also serve as the joint proxy statement with respect to the
respective meetings of the shareholders of Marine and Pride in connection with
the transactions contemplated by this Agreement (the "Proxy
Statement/Prospectus"). The respective parties will cause the Proxy
Statement/Prospectus and the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Marine and Pride shall each use
commercially reasonable best efforts, and shall cooperate with one another, so
as to have the Form S-4 declared effective by the SEC as promptly as
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practicable. Pride shall use commercially reasonable best efforts to obtain,
prior to the effective date of the Form S-4, all necessary state securities law
or "Blue Sky" permits or approvals required to carry out the transactions
contemplated by this Agreement and the parties shall share equally all expenses
incident thereto (including all SEC and other filing fees and all printing and
mailing expenses associated with the Form S-4 and the Proxy
Statement/Prospectus). Pride will advise Marine, promptly after it receives
notice thereof, of the time when the Form S-4 has been declared effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Pride Common Stock issuable in connection
with the Marine Merger for offering or sale in any jurisdiction or any request
by the SEC for amendment of the Proxy Statement/Prospectus or the Form S-4 or
comments thereon and responses thereto or requests by the SEC for additional
information. Each of the parties shall also promptly provide each other party
copies of all written correspondence received from the SEC and summaries of all
oral comments received from the SEC in connection with the transactions
contemplated by this Agreement. Each of the parties shall promptly provide each
other party with drafts of all correspondence intended to be sent to the SEC in
connection with the transactions contemplated by this Agreement and allow each
such party the opportunity to comment thereon prior to delivery to the SEC.
(b) Marine and Pride shall each use its 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 Marine and Pride shall ensure that the information provided by
it for inclusion or incorporation by reference 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 Marine and Pride or, in
the case of information provided by it for inclusion or incorporation by
reference in the Form S-4 or any amendment or supplement thereto, at the time it
becomes effective, (i) will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading and (ii) will comply as to form in all material respects
with the provisions of the Securities Act and the Exchange Act.
(d) The filing fees payable to the SEC with respect to the Form S-4 or any
amendment thereto shall be paid by Marine and Pride. Marine and Pride shall each
contribute to such filing fee expense in proportion to the number of shares of
Company Common Stock estimated to be issuable as of the date of such filing, on
a fully diluted basis, to their respective security holders.
SECTION 7.11 Listing Applications. (a) Pride shall promptly prepare and
submit to the New York Stock Exchange (the "NYSE") a listing application
covering the Pride Common Stock covered by the Form S-4 and shall use its
commercially reasonable best efforts to obtain, prior to the Marine Merger
Effective Time, approval for the listing on the NYSE of such Pride Common Stock,
subject to official notice of issuance.
(b) Pride shall cause the Company to promptly prepare and submit to the
NYSE a listing application covering the Company Common Stock and shall use (and
cause the Company to use) its commercially reasonable best efforts to obtain,
prior to the Marine Merger Effective Time, approval for the listing on the NYSE
of such Company Common Stock, subject to official notice of issuance.
(c) The listing fees payable to the NYSE with respect to the listing
applications or any amendments thereto shall be paid on behalf of the Pride
and/or Company by Marine and Pride. Marine and Pride shall each contribute to
such listing fee expense in proportion to the number of shares of Company Common
Stock estimated to be issuable as of the date of such filings, on a fully
diluted basis, to their respective security holders at the Pride Merger
Effective Time.
SECTION 7.12 "Comfort" Letters of Accountants. (a) Marine shall use
commercially reasonable best efforts to cause to be delivered to Pride "comfort"
letters of KPMG LLP, Marine's independent public accountants, dated the
effective date of the Form S-4 and the Closing Date, respectively, and addressed
to Pride with regard to certain financial information regarding Marine included
in the Form S-4,
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in form reasonably satisfactory to Pride and customary in scope and substance
for "comfort" letters delivered by independent public accountants in connection
with registration statements similar to the Form S-4.
(b) Pride shall use commercially reasonable best efforts to cause to be
delivered to Marine "comfort" letters of PricewaterhouseCoopers LLP, Pride's
independent public accountants, dated the effective date of the Form S-4 and the
Closing Date, respectively, and addressed to Marine with regard to certain
financial information regarding Pride included in the Form S-4, in form
reasonably satisfactory to Marine and customary in scope and substance for
"comfort" letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
SECTION 7.13 Agreements of Affiliates. (a) At least five business days
prior to the Marine Merger Effective Time, each of Marine and Pride shall cause
to be prepared and delivered to each other a list identifying all persons who
each believes, at the date of the meeting of their respective shareholders to
consider and vote upon the adoption of this Agreement, may be deemed to be
"affiliates" of Marine or Pride, as the case may be, as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145
Affiliates"). Each of Marine and Pride shall use their respective commercially
reasonable best efforts to cause each person who is identified as its Rule 145
Affiliate in such list to deliver to the Company, at or prior to the Marine
Merger Effective Time, a written agreement, in the form of Exhibit 7.13(a)(1) in
the case of Marine affiliates and in the form of Exhibit 7.13(a)(2) in the case
of Pride affiliates. The Company shall be entitled to place restrictive legends
on any Company Common Stock issued to such Rule 145 Affiliates pursuant to the
Mergers.
(b) Marine shall use its commercially reasonable best efforts to obtain,
within 15 days after the date of this Agreement, a letter agreement in
substantially the form of Exhibit 7.13(b)(1) from each person listed in Section
7.13(b)(1) of the Marine Disclosure Letter. Pride shall use its commercially
reasonable best efforts to obtain, within 15 days after the date of this
Agreement, a letter agreement in substantially the form of Exhibit 7.13(b)(2)
from each person listed in Section 7.13(b)(2) of the Pride Disclosure Letter.
SECTION 7.14 Expenses. Whether or not the Mergers are consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, except as expressly provided herein or as otherwise agreed in writing
by the parties.
SECTION 7.15 Indemnification and Insurance. (a) (i) From and after the
Marine Merger Effective Time, Pride and (ii) from and after the Pride Merger
Effective Time, the Company and Pride 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, Marine or Pride (or any Subsidiary or division thereof) and each person
who served at the request of the Company, Marine or Pride 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) the Company and
Pride shall pay, as incurred, the fees and expenses of counsel selected by the
Indemnified Party, which counsel shall be reasonably acceptable to the Company,
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) the Company will cooperate in the defense
of any such matter; provided, however, the Pride Merger Surviving Entity shall
not be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld or delayed), and provided further,
that the Company and Pride shall not be obligated pursuant to this Section 7.15
to pay the fees and disbursements of more than one counsel for all Indemnified
Parties in any
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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 parties agree that all rights to indemnification and any provisions
relating to advances of expenses incurred in defense of any action or suit,
whether contained in this Agreement or in the charter, bylaws or other
organizational documents of Marine, Pride or any of their respective
Subsidiaries shall survive the Mergers with respect to matters occurring through
and including the Effective Time.
(c) For a period of six years after the Effective Time, the Company shall
cause to be maintained officers' and directors' liability insurance covering the
Indemnified Parties who are, or at any time prior to the Effective Time, covered
by either Marine's or Pride's existing officers' and directors' liability
insurance policies on terms substantially no less advantageous to the
Indemnified Parties than such existing insurance, provided, however, that the
Company shall not be required to pay annual premiums in excess of 150% of the
sum of the last annual premium paid by each of Marine and Pride prior to the
date hereof (the amount of each such premium being set forth in Section 7.15(c)
of the Marine Disclosure Letter and Pride Disclosure Letter), but in such case
shall purchase as much coverage as reasonably practicable for such amount.
(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 or bylaws of the Company or any of its Subsidiaries, under
applicable law or otherwise. The provisions of this Section 7.15 shall survive
the consummation of the Mergers and expressly are intended to benefit each of
the Indemnified Parties.
(e) In the event the Company or any of its respective successors or assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in either such case, proper provision shall be made so that
the successors and assigns of the Company, as the case may be, shall assume the
obligations set forth in this Section 7.15.
SECTION 7.16 Marine Employee Stock Options, Incentives and Benefit
Plans. (a) At the Marine Merger Effective Time, each outstanding option to
purchase Marine Common Stock (a "Marine Stock Option") granted under Marine's
plans identified in Section 5.11 of the Marine Disclosure Letter as being the
only compensation or benefit plans or agreements pursuant to which Marine Common
Stock may be issued (collectively, the "Marine Stock Option Plans"), whether
vested or unvested, shall be deemed assumed by Pride and shall thereafter be
deemed to constitute an option to acquire the same number of shares of Pride
Common Stock, on the same terms and conditions as were applicable under such
Marine Stock Option immediately prior to the Marine Merger Effective Time (in
accordance with the past practice of Marine with respect to interpretation and
application of such terms and conditions). In addition, Marine shall prior to
the Marine Merger Effective Time make any amendments to the terms of its stock
option or compensation plans or arrangements that are necessary to give effect
to the transactions contemplated by this Section.
(b) Pride shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Pride Common Stock for delivery pursuant to
this Section.
(c) At the Marine Merger Effective Time, each award or account (excluding
restricted stock, awards and Marine Stock Options) then outstanding and not
issued in violation of this Agreement (a "Marine Award") that has been
established, made or granted under any employee incentive or benefit plans,
programs or arrangements and non-employee director plans maintained by Marine on
or prior to the date hereof which provide for grants of equity-based awards or
equity-based accounts shall be amended or converted into a similar instrument of
Pride, in each case with such adjustments to the terms and conditions of such
Marine Awards as are appropriate to preserve the value inherent in such Marine
Awards with no detrimental effects on the holders thereof. The other terms and
conditions of each Marine Award, and the plans or agreements under which they
were issued, shall continue to apply in accordance with their terms and
conditions, including any provisions for acceleration. Marine represents that
(i) there
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are no Marine Awards or Marine Stock Options other than those reflected in
Section 5.11 of the Marine Disclosure Letter and (ii) all employee incentive or
benefit plans, programs or arrangements and non-employee director plans under
which any Marine Award has been established, made or granted and all Marine
Stock Option Plans are disclosed in Section 5.11 of the Marine Disclosure
Letter.
SECTION 7.17 Pride Employee Stock Options, Incentives and Benefit
Plans. (a) At the Pride Merger Effective Time, each outstanding option to
purchase Pride Common Stock (a "Pride Stock Option") granted under Pride's plans
identified in Section 6.11 of the Pride Disclosure Letter as being the only
compensation or benefit plans or agreements pursuant to which Pride Common Stock
may be issued, whether vested or unvested, and all Marine Stock Options assumed
by Pride pursuant to Section 7.16, shall be deemed assumed by the Company and
shall thereafter be deemed to constitute an option to acquire the same number of
shares of Company Common Stock, on the same terms and conditions as were
applicable under such Pride Stock Option or assumed Marine Stock Options
immediately prior to the Pride Merger Effective Time (in accordance with the
past practice of Pride with respect to interpretation and application of such
terms and conditions of Pride Stock Options). In addition, Pride shall prior to
the Marine Merger Effective Time make any amendments to the terms of its stock
option or compensation plans or arrangements that are necessary to give effect
to the transactions contemplated by this Section.
(b) Pride shall take and cause the Company to take all corporate action
necessary to reserve for issuance a sufficient number of shares of Company
Common Stock for delivery pursuant to this Section.
(c) At the Pride Merger Effective Time, each award or account (excluding
restricted stock, awards and Pride Stock Options) then outstanding and not
issued in violation of this Agreement (a "Pride Award") that has been
established, made or granted under any employee incentive or benefit plans,
programs or arrangements and non-employee director plans maintained by Pride on
or prior to the date hereof which provide for grants of equity-based awards or
equity-based accounts, and all Marine Awards converted into awards with respect
to Pride Common Stock, shall be amended or converted into a similar instrument
of the Company, in each case with such adjustments to the terms and conditions
of such Pride Awards or converted into Marine Awards as are appropriate to
preserve the value inherent in such awards with no detrimental effects on the
holders thereof. The other terms and conditions of each Pride Award, and the
plans or agreements under which they were issued, shall continue to apply in
accordance with their terms and conditions, including any provisions for
acceleration. Pride represents that (i) there are no Pride Awards or Pride Stock
Options other than those reflected in Section 6.11 of the Pride Disclosure
Letter and (ii) all employee incentive or benefit plans, programs or
arrangements and non-employee director plans under which any Pride Award has
been established, made or granted and all Pride Stock Option Plans are disclosed
in Section 6.11 of the Pride Disclosure Letter.
SECTION 7.18 Company Covenants Concerning Incentive Compensation and
Benefits. (a) At the Marine Merger Effective Time, or promptly thereafter, the
Company shall file with the SEC a registration statement on an appropriate form
or a post-effective amendment to the Form S-4 with respect to the Company Common
Stock subject to options and other equity-based awards issued pursuant to this
Agreement, as well as comply with applicable state securities registration laws,
for so long as such options or other equity-based awards remain outstanding.
(b) The Company, Marine and Pride each agree that all employees of Marine
and its Subsidiaries immediately prior to the Marine Merger Effective Time and
all employees of Pride and its Subsidiaries immediately prior to the Pride
Merger Effective Time shall be employed by the Company or its Subsidiaries
immediately after the Pride Merger Effective Time, it being understood that
neither the Company nor Merger Sub shall not have any obligations to continue
employing such employees for any length of time thereafter. The Company, Marine
and Pride further agree that the Marine Benefit Plans and the Pride Benefit
Plans in effect at the date of this Agreement shall, to the extent practicable,
remain in effect until otherwise determined after the Pride Merger Effective
Time. To the extent any such Marine Benefit Plan or Pride Benefit Plan is not
continued, the Company will maintain for a period of one year after the Pride
Merger Effective Time benefit plans that are not less favorable, in the
aggregate, to the employees covered, respectively, by the Marine Benefit Plans
and the Pride Benefit Plans, except to the
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extent compliance with this sentence would be unduly burdensome, or would
materially increase the cost thereof in the aggregate.
SECTION 7.19 Company Assumption of Indenture Indebtedness. Prior to or at
the Pride Merger Effective Time, Pride and each of its Subsidiaries shall use
all commercially reasonable efforts to prevent the occurrence, as a result of
the Mergers and the other transactions contemplated by this Agreement, of a
change in control or any other event that constitutes a default (or an event
that, with notice or lapse of time or both, would become a default) under any
indebtedness of Pride. At the Pride Merger Effective Time, the Company shall,
with respect to indebtedness of Pride the terms of which require the Company to
assume such indebtedness in order to avoid default thereunder (collectively, the
"Assumed Indebtedness"), execute and deliver such supplemental indentures or
other instruments as shall be required under the indentures and other agreements
governing such Assumed Indebtedness, expressly assuming the obligations of Pride
with respect to the due and punctual payment of the principal of (and premium,
if any) and interest if any, on, and conversion obligations under all Assumed
Indebtedness.
SECTION 7.20 Pooling Letters. (a) Marine shall use its commercially
reasonable best efforts to obtain a letter from KPMG LLP and addressed to
Marine, a complete copy of which shall be delivered to Pride, in which KPMG LLP
concurs with the conclusion of the management of Marine that, as of the date of
such letter, no conditions exist related to Marine and its Subsidiaries that
would preclude the Company from accounting for the Marine Merger as a pooling of
interests as described in Section 5.26. Such letter shall be dated as of the
effective date of the Form S-4. Marine shall also use its commercially
reasonable best efforts to obtain a letter from KPMG LLP and addressed to
Marine, a complete copy of which shall be delivered to Pride at or before the
Marine Merger Effective Time, in which KPMG LLP reconfirms the matters set forth
in its earlier letter as of the Marine Merger Effective Time.
(b) Pride shall use its commercially reasonable best efforts to obtain a
letter from PricewaterhouseCoopers LLP and addressed to Pride, a complete copy
of which shall have been delivered to Marine, in which PricewaterhouseCoopers
LLP concurs with the conclusion of the management of Pride that, as of the date
of such letter, no conditions exist related to Pride and its Subsidiaries that
would preclude the Company from accounting for the Marine Merger and Pride
Merger as a pooling of interests as described in Section 6.26. Such letter shall
be dated as of the effective date of the Form S-4. Pride shall also use its
commercially reasonable best efforts to obtain a letter from
PricewaterhouseCoopers LLP and addressed to Pride, a complete copy of which
shall be delivered to Marine at or before the Marine Merger Effective Time, in
which PricewaterhouseCoopers LLP reconfirms the matters set forth in its earlier
letter as of the Marine Merger Effective Time.
ARTICLE 8
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation to Effect the
Mergers. The respective obligation of each party to effect the Mergers shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement shall have been adopted and approved by the
requisite vote of the shareholders of Marine in accordance with applicable
law;
(b) This Agreement and the Pride Issuance shall have been adopted and
approved by the requisite vote of the shareholders of Pride in accordance
with applicable law;
(c) Any waiting period applicable to the consummation of the Mergers
under the HSR Act shall have expired or been terminated;
(d) No statute, rule, regulation executive order, decree, ruling or
cease and desist order shall have enacted, entered promulgated or enforced
by any U.S. federal or state or foreign governmental authority which
prohibits the consummation of the Mergers substantially on the terms
contemplated hereby; provided, however, that, prior to invoking this
condition, each party agrees to comply with
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Section 7.7, and with respect to other matters not covered by Section 7.7,
to use its commercially reasonable best efforts to have any such decree,
order or injunction lifted or vacated;
(e) None of the parties hereto shall be subject to any decree, order
or injunction of a United States federal or state or foreign court of
competent jurisdiction which prohibits the consummation of the Mergers;
provided, however, that, prior to invoking this condition, each party
agrees to comply with Section 7.7, and with respect to other matters not
covered by Section 7.7, to use its commercially reasonable best efforts to
have any such decree, order or injunction lifted or vacated;
(f) The Form S-4 shall have become effective and no stop order with
respect thereto shall be in effect; and
(g) The Company Common Stock registered under the Form S-4 to be
issued in connection with the Mergers shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
SECTION 8.2 Conditions to Obligation of Marine to Effect the Marine
Merger. The obligation of Marine to effect the Marine Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) Pride shall have performed, in all material respects, its
covenants and agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Pride contained in this Agreement (i) that are qualified as
to materiality or Pride Material Adverse Effect shall be true and correct
in all respects as of the Closing Date, except to the extent such
representations and warranties expressly relate to an earlier date (in
which case as of such earlier date), and (ii) those not so qualified shall
be true and correct in all respects as of the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier
date (in which case as of such earlier date), except for such breaches of
representations and inaccuracies in warranties in this clause (ii) that do
not and are not reasonably likely to have, individually or in the
aggregate, a Pride Material Adverse Effect, and Marine shall have received
a certificate of Pride executed on its behalf by its President or one of
its Vice Presidents, dated the Closing Date, certifying to such effect.
(b) Marine shall have received the opinion of Porter & Hedges, L.L.P.
in form and substance reasonably satisfactory to Marine and dated the
Closing Date to the effect that, for United States federal income tax
purposes (i) the Marine Merger and the Pride Merger will each qualify as a
reorganization under Section 368(a) of the Code, (ii) no gain or loss will
be recognized by the shareholders of Marine who exchange Marine Common
Stock solely for Pride Common Stock pursuant to the Marine Merger, and who
then exchange such Pride Common Stock solely for Company Common Stock
pursuant to the Pride Merger, and (iii) no gain or loss will be recognized
by Marine or Pride on the transfer of its respective assets in the Mergers.
In rendering such opinion, Porter & Hedges, L.L.P. shall be entitled to
receive and rely upon representations of officers of Marine, the Company
and Pride substantially in the form of Exhibits 8.2 and 8.3, dated as of
the Closing Date.
(c) At any time after the date of this Agreement, there shall not have
been any event or occurrence, or series of events or occurrences, that has
had or is reasonably likely to have, individually or in the aggregate with
all other events or occurrences since the date of this Agreement, a Pride
Material Adverse Effect.
SECTION 8.3 Conditions to Obligation of Pride to Effect the Pride
Merger. The obligations of Pride to effect the Pride Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) Marine shall have performed, in all material respects, its
covenants and agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the
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representations and warranties of Marine contained in this Agreement (i)
that are qualified as to materiality or Marine Material Adverse Effect
shall be true and correct in all respects as of the Closing Date, except to
the extent such representations and warranties expressly relate to an
earlier date (in which case as of such earlier date), and (ii) those not so
qualified shall be true and correct in all respects as of the Closing Date,
except to the extent such representations and warranties expressly relate
to an earlier date (in which case as of such earlier date), except for such
breaches of representations and inaccuracies in warranties in this clause
(ii) that do not and are not reasonably likely to have, individually or in
the aggregate, Pride Material Adverse Effect, and Pride shall have received
a certificate of Marine executed on its behalf by its President or one of
its Vice Presidents, dated the Closing Date, certifying to such effect.
(b) Pride shall have received the opinion of Baker Botts L.L.P. in
form and substance reasonably satisfactory to Pride and dated the Closing
Date to the effect that, for United States federal income tax purposes, (i)
the Marine Merger and the Pride Merger will each qualify as a
reorganization under Section 368(a) of the Code, (ii) no gain or loss will
be recognized by the shareholders of Pride, including the shareholders of
Marine who received Pride Common Stock in the Marine Merger, and who then
exchange such Pride Common Stock solely for Company Common Stock pursuant
to the Pride Merger, and (iii) no gain or loss will be recognized by Marine
or Pride on the transfer of its respective assets in the Mergers. In
rendering such opinion, Baker Botts L.L.P. shall be entitled to receive and
rely upon representations of officers of Pride, the Company and Marine
substantially in the form of Exhibits 8.2 and 8.3, dated as of the Closing
Date.
(c) At any time after the date of this Agreement, there shall not have
been any event or occurrence, or series of events or occurrences, that has
had or is reasonably likely to have, individually or in the aggregate with
all other events or occurrences since the date of this Agreement, a Marine
Material Adverse Effect.
ARTICLE 9
TERMINATION
SECTION 9.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Marine Merger Effective Time by the mutual
written consent of Marine and Pride.
SECTION 9.2 Termination by Marine or Pride. This Agreement may be
terminated at any time prior to the Marine Merger Effective Time by action of
the board of directors of Marine or of Pride if:
(a) the Mergers shall not have been consummated by December 31, 2001;
provided, however, that the right to terminate this Agreement pursuant to
this clause (a) shall not be available to any party whose failure to
perform or observe in any material respect any of its obligations under
this Agreement in any manner shall have been the cause of, or resulted in,
the failure of the Mergers to occur on or before such date;
(b) a meeting (including adjournments and postponements) of the
shareholders of Marine for the purpose of obtaining the approval required
by Section 8.1(a) shall have been held and such shareholder approval shall
not have been obtained;
(c) a meeting (including adjournments and postponements) of the
shareholders of Pride for the purpose of obtaining the approval required by
Section 8.1(b) shall have been held and such shareholder approval shall not
have been obtained; or
(d) a U.S. federal, state or non-U.S. court of competent jurisdiction
or U.S. federal, state or non-U.S. governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
nonappealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause (d) shall have complied with Section 7.7
and, with respect to other
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matters not covered by Section 7.7, shall have used its commercially
reasonable best efforts to remove such injunction, order or decree.
SECTION 9.3 Termination by Marine. This Agreement may be terminated at
any time prior to the Marine Merger Effective Time by action of the board of
directors of Marine, after consultation with its outside legal advisors, if:
(a) there has been a breach by Pride of any representation, warranty,
covenant or agreement set forth in this Agreement or if any representation
or warranty of Pride shall have become untrue, in either case such that the
conditions set forth in Section 8.2(a) would not be satisfied, and any such
breach is not curable, or, if curable, is not cured within 30 days after
written notice of such breach is given to Pride by Marine; provided,
however, that the right to terminate this Agreement pursuant to Section
9.3(a) shall not be available to Marine if it, at such time, is in breach
of any representation, warranty, covenant or agreement set forth in this
Agreement such that the condition set forth in Section 8.3(a) shall not be
satisfied;
(b) the board of directors of Pride shall have withdrawn or materially
modified, in a manner adverse to Marine, its approval or recommendation of
this Agreement or the Pride Merger or recommended a Pride Acquisition
Proposal, or resolved to do so; or
(c) prior to the Cutoff Date, (i) the board of directors of Marine has
received a Marine Superior Proposal, (ii) in light of such Marine Superior
Proposal the board of directors of Marine shall have determined in good
faith, (A) after consultation with its outside legal advisors, that
proceeding with the Marine Merger would be inconsistent with its fiduciary
obligations and (B) that there is a substantial likelihood that the
adoption by Marine's shareholders of this Agreement will not be obtained by
reason of the existence of such Marine Superior Proposal, (iii) Marine has
complied in all material respects with Section 7.3, (iv) Marine has
previously paid the fee due under Section 9.5(a)(i), (v) the board of
directors of Marine concurrently approves, and Marine concurrently enters
into, a binding definitive written agreement providing for the
implementation of such Marine Superior Proposal and (vi) Pride is not at
such time entitled to terminate this Agreement pursuant to Section 9.4(a);
provided, however, that the Company may not effect such termination
pursuant to this Section 9.3(c) unless and until (x) Pride receives at
least ten business days' prior written notice from Marine of its intention
to effect such termination pursuant to this Section 9.3(c) and (y) during
such ten business day period, Marine shall, and shall cause its respective
financial and legal advisors to, consider any adjustment in the terms and
conditions of this Agreement that Pride may propose.
SECTION 9.4 Termination by Pride. This Agreement may be terminated at any
time prior to the Marine Merger Effective Time by action of the board of
directors of Pride after consultation with its outside legal advisors, if:
(a) there has been a breach by Marine of any representation, warranty,
covenant or agreement set forth in this Agreement or if any representation
or warranty of Marine shall have become untrue, in either case such that
the conditions set forth in Section 8.3(a) would not be satisfied, and such
breach is not curable, or, if curable, is not cured within 30 days after
written notice of such breach is given by Pride to Marine; provided,
however, that the right to terminate this Agreement pursuant to Section
9.4(a) shall not be available to Pride if it, at such time, is in breach of
any representation, warranty, covenant or agreement set forth in this
Agreement such that the conditions set forth in Section 8.2(a) shall not be
satisfied; or
(b) the board of directors of Marine shall have withdrawn or
materially modified, in a manner adverse to Pride, its approval or
recommendation of this Agreement or the Marine Merger or recommended a
Marine Acquisition Proposal, or resolved to do so; or
(c) prior to the Cutoff Date, (i) the board of directors of Pride has
received a Pride Superior Proposal, (ii) in light of such Pride Superior
Proposal the board of directors of Pride shall have
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determined in good faith, (A) after consultation with its outside legal
advisors, that proceeding with the Pride Merger would be inconsistent with
its fiduciary obligations and (B) that there is a substantial likelihood
that the adoption by Pride's shareholders of this Agreement will not be
obtained by reason of the existence of such Pride Superior Proposal, (iii)
Pride has complied in all material respects with Section 7.4, (iv) Pride
has previously paid the fee due under Section 9.5(b)(i), (v) the board of
directors of Pride concurrently approves, and Pride concurrently enters
into, a binding definitive written agreement providing for the
implementation of such Pride Superior Proposal and (vi) Marine is not at
such time entitled to terminate this Agreement pursuant to Section 9.3(a);
provided, however, that Pride may not effect such termination pursuant to
this Section 9.4(c) unless and until (x) Marine receives at least ten
business days' prior written notice from Pride of its intention to effect
such termination pursuant to this Section 9.4(c); and (y) during such ten
business day period, Pride shall, and shall cause its respective financial
and legal advisors to, consider any adjustment in the terms and conditions
of this Agreement that Marine may propose.
SECTION 9.5 Effect of Termination.
(a) (i) If this Agreement is terminated:
(A) by Marine or Pride pursuant to Section 9.2(b) [failure to
obtain Marine shareholder approval] after the public announcement of a
Marine Acquisition Proposal, whether or not the Marine Acquisition
Proposal is still pending or has been consummated; or
(B) by Pride pursuant to Section 9.4(b) [withdrawal of Marine board
recommendation to shareholders]; or
(C) by Marine pursuant to Section 9.3(c) [fiduciary out];
then Marine shall pay Pride a fee of $50.0 million at the time of such
termination in cash by wire transfer to an account designated by Pride.
(ii) If this Agreement is terminated by Marine pursuant to Section
9.3(c) and in accordance with the terms thereof, no fee additional to the
fee specified in Section 9.3(c) shall be payable by Marine to Pride.
(b) (i) If this Agreement is terminated:
(A) by Pride or Marine pursuant to Section 9.2(c) [failure to
obtain Pride shareholder approval] after the public announcement of a
Pride Acquisition Proposal, whether or not the Pride Acquisition
Proposal is still pending or has been consummated; or
(B) by Marine pursuant to Section 9.3(b) [withdrawal of Pride board
recommendation to shareholders]; or
(C) by Pride pursuant to Section 9.4(c) [fiduciary out];
then Pride shall pay Marine a fee of $50.0 million at the time of such
termination in cash by wire transfer to an account designated by Marine.
(ii) If this Agreement is terminated by Pride pursuant to Section
9.4(c) and in accordance with the terms thereof, no fee additional to the
fee specified in Section 9.4(c) shall be payable by Pride to Marine.
(c) If this Agreement is terminated by Marine or Pride pursuant to Section
9.2(b) other than in circumstances covered by Section 9.5(a), then Marine shall
pay to Pride a fee of $5.0 million to reimburse Pride for its costs and expenses
incurred in connection with this transaction. If this Agreement is terminated by
Pride or Marine pursuant to Section 9.2(c), other than in circumstances covered
by Section 9.5(b), then Pride shall pay to Marine a fee of $5.0 million to
reimburse Marine for its costs and expenses incurred in connection with this
transaction.
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(d) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 9, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
9.5, and Section 7.14 and except for the provisions of Sections 10.3, 10.4,
10.6, 10.8, 10.9, 10.11, 10.12 and 10.13, provided that nothing herein shall
relieve any party from any liability for any willful and material breach by such
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement and all rights and remedies of such nonbreaching party
under this Agreement in the case of such a willful and material breach, at law
or in equity, shall be preserved.
SECTION 9.6 Extension; Waiver. At any time prior to the Marine Merger
Effective Time, each party may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant hereto
and (c) waive compliance with any of the agreements or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Pride Merger; provided, however, that the agreements contained in
Article 4 and in Sections 3.3, 3.4, 7.13, 7.14, 7.15, 7.16, 7.17, 7.18 and this
Article 10 and the agreements delivered pursuant to this Agreement shall survive
the Pride Merger. The Confidentiality Agreement shall survive any termination of
this Agreement, and the provisions of such Confidentiality Agreement shall apply
to all information and material delivered by any party hereunder.
SECTION 10.2 Notices. Except as otherwise provided herein, any notice
required to be given hereunder shall be sufficient if in writing, and sent by
facsimile transmission or by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
(a) if to Marine or the Company:
Marine Drilling Companies, Inc.
One Sugar Creek Center Boulevard,
Suite 600
Sugar Land, Texas 77489
Attention: Jan Rask
Facsimile: (281) 243-3070
with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
Attention: Nick D. Nicholas
Facsimile: (713) 226-0237
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(b) if to Pride or the Company:
Pride International, Inc.
5845 San Felipe, Suite 3300
Houston, Texas 77057
Attention: Robert Randall
Facsimile: (713) 952-6916
with a copy to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: L. Proctor Thomas
Facsimile: (713) 229-7785
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
SECTION 10.3 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 the provisions
of Article 4 and Section 7.15 and except as provided in any agreements delivered
pursuant hereto (collectively, the "Third-Party Provisions"), nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement. The Third-Party Provisions may be enforced
by the beneficiaries thereof.
SECTION 10.4 Entire Agreement. This Agreement, the exhibits to this
Agreement, the Marine Disclosure Letter, the Pride Disclosure Letter and any
documents delivered by the parties in connection herewith constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto, except that the Confidentiality 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 10.5 Amendments. This Agreement may be amended by the parties
hereto, by action taken or authorized by their boards of directors, at any time
before or after approval of matters presented in connection with the Mergers by
the shareholders of Marine or Pride, 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 10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
its rules of conflict of laws.
SECTION 10.7 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
SECTION 10.8 Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretative effect whatsoever.
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SECTION 10.9 Interpretation. In this Agreement:
(a) Unless the context otherwise requires, words describing the
singular number shall include the plural and vice versa, words denoting any
gender shall include all genders, and words denoting natural persons shall
include corporations and partnerships and vice versa.
(b) The phrase "to the knowledge of" and similar phrases relating to
knowledge of Marine or Pride, as the case may be, shall mean the actual
knowledge of its executive officers and directors.
(c) "Material Adverse Effect" with respect to Marine or Pride shall
mean a material adverse effect on or change in (a) the business, assets,
condition (financial or otherwise) or operations of a party (including the
Pride Merger Surviving Entity when used with respect to Pride) and its
Subsidiaries on a consolidated basis, except for such changes or effects in
general economic, capital market, regulatory or political conditions or
changes that affect generally the marine drilling services industry or
changes arising out of the announcement of this Agreement, or (b) the
ability of the party to consummate the transactions contemplated by this
Agreement or fulfill the conditions to closing. "Company Material Adverse
Effect," "Marine Material Adverse Effect" and "Pride Material Adverse
Effect" mean a Material Adverse Effect with respect to the Company, Marine
and Pride, respectively.
(d) The term "Subsidiary," when used with respect to any party, means
any corporation or other organization (including a limited liability
company), whether incorporated or unincorporated, domestic or foreign, of
which such party directly or indirectly owns or controls (i) 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 or (ii) any form of equity interest or an interest of any other
character that is convertible into an equity interest in such corporation
or organization and such party has working control over the management of
such corporation or organization.
SECTION 10.10 Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
SECTION 10.11 Incorporation of Exhibits. The Marine Disclosure Letter,
the Pride Disclosure Letter and all exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
SECTION 10.12 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
SECTION 10.13 Enforcement of Agreement. (a) The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
(b) Each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Texas state court sitting in Harris County, Texas
or any Federal court located in the Southern District of Texas, Houston,
Division in the event any dispute arises out of this Agreement or any of the
transactions
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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 any Texas
state court or any Federal court sitting in the Southern District of Texas,
Houston Division, and (iv) waives any right to trial by jury with respect to any
action related to or arising out of this Agreement or any of the transactions
contemplated herein.
MARINE DRILLING COMPANIES, INC. PRIDE INTERNATIONAL, INC.
By: /s/ JAN RASK By: /s/ PAUL A. BRAGG
------------------------------------------------- -------------------------------------------------
Jan Rask Paul A. Bragg
President and Chief Executive Officer President and Chief Executive Officer
PM MERGER, INC. AM MERGER, INC.
By: /s/ PAUL A. BRAGG By: /s/ PAUL A. BRAGG
------------------------------------------------- -------------------------------------------------
Paul A. Bragg Paul A. Bragg
President and Chief Executive Officer President and Chief Executive Officer
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ANNEX B
[SALOMON SMITH BARNEY INC. LOGO]
May 23, 2001
The Board of Directors
Pride International, Inc.
5847 San Felipe
Suite 3300
Houston, Texas 77057
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders as of the date hereof of the common stock, without par
value (the "Pride Common Stock"), of Pride International, Inc. ("Pride"), of the
Exchange Ratio (as defined below) in connection with the Mergers (as defined
below) contemplated by the Agreement and Plan of Merger (the "Agreement") to be
entered into by and among Pride, Marine Drilling Companies, Inc. ("Marine"), PM
Merger, Inc., a wholly owned subsidiary of Pride (the "Company"), and AM Merger,
Inc., a wholly owned subsidiary of Pride ("Merger Sub").
As more fully described in the Agreement, Marine will merge with and into
Merger Sub (the "Marine Merger"), and each outstanding share of the common
stock, par value $0.01 per share (the "Marine Common Stock"), of Marine (other
than certain shares specified in the Agreement) will be converted into the right
to receive one share of Pride Common Stock. In connection with and immediately
following the Marine Merger, Pride will merge with and into the Company (the
"Pride Merger," and together with the Marine Merger, the "Mergers"), and each
outstanding share of Pride Common Stock (including shares of Pride Common Stock
issued in the Marine Merger, but excluding certain shares specified in the
Agreement) will be converted into the right to receive one (the "Exchange
Ratio") share of the common stock, par value $0.01 per share (the "Company
Common Stock"), of the Company.
In arriving at our opinion, we reviewed a draft of the Agreement, dated May
23, 2001, and held discussions with certain senior officers and other
representatives and advisors of each of Pride and Marine concerning the
businesses, operations and prospects of Pride and Marine. We examined certain
publicly available business and financial information relating to Pride and
Marine as well as certain financial forecasts and other information and data for
Pride and Marine which were provided to or otherwise discussed with us by the
managements of Pride and Marine, including information relating to certain
strategic implications and operational benefits anticipated to result from the
Mergers. We reviewed the financial terms of the Mergers as set forth in the
Agreement in relation to, among other things, current and historical market
prices and trading volumes of Pride Common Stock and Marine Common Stock; the
historical and projected earnings and other operating data of Pride and Marine;
and the historical and projected capitalization and financial condition of Pride
and Marine. We considered, to the extent publicly available, the financial terms
of certain other similar transactions recently effected which we considered
relevant in evaluating the Mergers and analyzed certain financial, stock market
and other publicly available
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[SALOMON SMITH BARNEY INC. LOGO]
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of Pride and Marine. We also evaluated
the pro forma financial impact of the Mergers on the Company. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other information and financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us and have further relied upon the assurances of the
managements of Pride and Marine that they are not aware of any facts that would
make any of such information inaccurate or misleading. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by or
discussed with us, we have been advised by the managements of Pride and Marine
that such forecasts and other information and data were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
managements of Pride and Marine as to the future financial performance of Pride
and Marine and the strategic implications and operational benefits anticipated
to result from the Mergers. We express no view with respect to such forecasts
and other information and data or the assumptions on which they were based. We
have assumed, with your consent, that the Mergers will be treated as tax-free
reorganizations for United States federal income tax purposes. We have not made
or been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Pride or Marine, nor have we made any
physical inspection of the properties or assets of Pride or Marine. You have
advised us, and we have assumed, that the final terms of the Agreement will not
vary materially from those set forth in the draft reviewed by us. We have
further assumed that the Mergers will be consummated in accordance with the
terms of the Agreement without waiver of any of the conditions precedent to the
Mergers contained in the Agreement.
Our opinion with respect to the Exchange Ratio, as set forth herein,
relates to the relative values of Pride and Marine and takes into account both
the Pride Merger and the Marine Merger. We are not expressing any opinion as to
what the value of the Company Common Stock actually will be when issued in the
Pride Merger or the price at which Company Common Stock will trade subsequent to
the Pride Merger. We were not requested to consider, and our opinion does not
address, the relative merits of the Mergers as compared to any alternative
business strategies that might exist for Pride or the effect of any other
transaction in which Pride might engage. Our opinion, as set forth herein,
relates only to the fairness of the Exchange Ratio to those holders of Pride
Common Stock as of the date hereof. Our opinion necessarily is based upon
information available to us and financial, stock market and other conditions and
circumstances existing and disclosed to us as of the date hereof.
Salomon Smith Barney Inc. is acting as financial advisor to Pride in
connection with the Mergers and will receive a fee for our services, a
significant portion of which is payable only upon the consummation of the Pride
Merger. We have in the past and currently are providing investment banking
services to Pride and Marine unrelated to the Mergers, for which we have
received and may receive compensation. In the ordinary course of business, we
and our affiliates may actively trade or hold the securities of Pride and Marine
for our own account or for the account of our customers and, accordingly, may at
any time hold a long or short position in such securities. Salomon Smith Barney
Inc. and its affiliates (including Citigroup Inc. and its affiliates) may
maintain other relationships with Pride, Marine and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Pride in its evaluation of the Mergers,
and our opinion is not intended to be and does not constitute a recommendation
of the Mergers to Pride or its stockholders, nor does it constitute a
recommendation to any stockholder as to how such stockholder should vote on any
matter relating to the Mergers.
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[SALOMON SMITH BARNEY INC. LOGO]
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Exchange Ratio (taking into
account both the Marine Merger and the Pride Merger) is fair, from a financial
point of view, to the holders of Pride Common Stock.
Very truly yours,
/s/ SALOMON SMITH BARNEY INC.
SALOMON SMITH BARNEY INC.
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ANNEX C
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4600
May 23, 2001
Board of Directors
Marine Drilling Companies, Inc.
One Sugar Creek Center Boulevard, Suite 600
Sugar Land, TX 77478-3556
Gentlemen:
We understand that Pride International, Inc. ("Pride"), PM Merger, Inc., a
wholly-owned subsidiary of Pride ("Newco"), Marine Drilling Companies, Inc.
("Marine") and AM Merger, Inc., a wholly-owned subsidiary of Pride ("Merger
Sub") propose to enter into an Agreement and Plan of Merger, dated as of May 23,
2001 (the "Merger Agreement"), which provides, among other things, for the
merger of Marine with and into Merger Sub (the "Marine Merger") followed by the
merger of Pride with and into Newco (the "Pride Merger," and together with the
Marine Merger, the "Mergers"). Pursuant to the Marine Merger, each outstanding
share of common stock, par value $.01 per share, of Marine (the "Marine Common
Stock"), other than that owned directly by Marine, by Pride or their respective
subsidiaries, will be converted into the right to receive one share (the "Marine
Merger Consideration") of common stock, no par value, of Pride (the "Pride
Common Stock"). We also understand that pursuant to the Pride Merger, each
outstanding share of Pride Common Stock, other than that owned directly by
Pride, by Marine or by their respective subsidiaries, including any shares of
Pride Common Stock issued in the Marine Merger, will be converted into the right
to receive one share of common stock, par value $.01 per share of Newco (the
"Newco Common Stock"). The terms and conditions of the Mergers are more fully
set forth in the Merger Agreement.
You have asked for our opinion as to whether the Marine Merger
Consideration to be received by the holders of shares of Marine Common Stock
pursuant to the Merger Agreement is fair from a financial point of view to such
holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of Marine and Pride;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning Marine and Pride prepared by the
management of Marine and Pride, respectively;
(iii) analyzed certain financial projections prepared by the
management of Marine and Pride, respectively;
(iv) discussed the past and current operations and financial condition
and the prospects of Marine and Pride, including information relating to
certain strategic, financial and operational benefits anticipated from the
Mergers, with senior executives of Marine and Pride;
(v) reviewed the pro forma impact of the Mergers on Newco's earnings
per share and cash flow per share;
(vi) reviewed the reported prices and trading activity for the Marine
Common Stock and the Pride Common Stock;
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(vii) compared the financial performance of Marine and Pride and the
prices and trading activity of the Marine Common Stock and the Pride Common
Stock with that of certain other comparable publicly-traded companies and
their securities;
(viii) reviewed the financial terms, to the extent publicly available,
of certain comparable merger transactions;
(ix) participated in discussions and negotiations among
representatives of Marine and Pride and their financial and legal advisors;
(x) reviewed the Merger Agreement and certain related documents; and
(xi) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, including information
relating to certain strategic, financial and operational benefits anticipated
from the Mergers, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of Marine and Pride. In addition, we have assumed
that the Mergers will be consummated in accordance with the terms set forth in
the Merger Agreement, including, among other things, that the Mergers will be
accounted for as a "pooling-of-interests" business combination in accordance
with U.S. Generally Accepted Accounting Principles and the Mergers will be
treated as a tax-free reorganization and/or exchange, each pursuant to the
Internal Revenue Code of 1986. We have not made any independent valuation or
appraisal of the assets or liabilities of Marine and Pride, nor have we been
furnished with any such appraisals. Our opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to a business combination or other
extraordinary transaction, involving Marine, nor did we negotiate with any
parties, other than Pride in connection with such a business combination or
other extraordinary transaction.
We have acted as financial advisor to the Board of Directors of Marine in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for Pride and have received fees for
the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of Marine and may not be used for any other purposes without our prior
written consent, except that this opinion may be included in any filing made by
Marine in respect of the transaction with the Securities and Exchange
Commission. In addition, this opinion does not in any manner address the prices
at which the Newco Common Stock will trade following consummation of the
Mergers, and Morgan Stanley expresses no opinion or recommendation as to how the
shareholders of Marine should vote at the shareholders' meeting held in
connection with the Mergers.
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Based on and subject to the foregoing, we are of the opinion on the date
hereof that the Marine Merger Consideration to be received by the holders of
shares of Marine Common Stock pursuant to the Merger Agreement is fair from a
financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ WILLIAM D. MCCOMBE
------------------------------------
William D. McCombe
Managing Director
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ANNEX D
CERTIFICATE OF INCORPORATION
OF
PRIDE INTERNATIONAL, INC.
FIRST: The name of the corporation is Pride International, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful business,
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware or any successor statute (the "DGCL").
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 450,000,000 shares, which shall
be divided into (a) 400,000,000 shares of common stock, par value $.01 per share
(the "Common Stock"), and (b) 50,000,000 shares of preferred stock, par value
$.01 per share (the "Preferred Stock"). Shares of any class of capital stock of
the Corporation may be issued for such consideration and for such corporate
purposes as the Board of Directors of the Corporation (the "Board of Directors")
may from time to time determine. Each share of Common Stock shall be entitled to
one vote.
The Preferred Stock may be divided into and issued from time to time in one
or more series as may be fixed and determined by the Board of Directors. The
relative rights and preferences of the Preferred Stock of each series shall be
such as shall be stated in any resolution or resolutions adopted by the Board of
Directors setting forth the designation of the series and fixing and determining
the relative rights and preferences thereof, any such resolution or resolutions
being herein called a "Directors' Resolution." The authority of the Board of
Directors with respect to each series of Preferred Stock shall include, but not
be limited to, determination of the following: (i) the number of shares
constituting that series and the distinctive designation of that series; (ii)
the dividend rate, if any, or any method of computing the dividend on the shares
of that series, whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series; (iii) whether that series shall have voting
rights, in addition to the voting rights provided by law, and, if so, the terms
of such voting rights; (iv) whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion, including
provisions for adjustment of the conversion rate in such events as the Board of
Directors shall determine; (v) whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates; (vi) whether that series shall
have a sinking fund for the redemption or purchase of shares of that series,
and, if so, the terms and amount of such sinking fund; (vii) the rights of the
shares of that series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series; and (viii) any other
relative rights, preferences and limitations of that series.
No stockholder shall, by reason of the holding of shares of any class or
series of capital stock of the Corporation, have a preemptive or preferential
right to acquire or subscribe for any shares or securities of any class, whether
now or hereafter authorized, which may at any time be issued, sold or offered
for sale by the Corporation, unless specifically provided for in a Directors'
Resolution with respect to a series of Preferred Stock. Furthermore, Common
Stock is not convertible, redeemable or assessable, or entitled to the benefits
of any sinking fund.
Cumulative voting of shares of any class or series of capital stock having
voting rights is prohibited unless specifically provided for in a Directors'
Resolution with respect to a series of Preferred Stock.
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FIFTH: (a) Directors. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In addition to the
authority and powers conferred upon the Board of Directors by the DGCL or by the
other provisions of this Certificate of Incorporation, the Board of Directors is
hereby authorized and empowered to exercise all such powers and do all such acts
and things as may be exercised or done by the Corporation, subject to the
provisions of the DGCL, this Certificate of Incorporation and any Bylaws adopted
by the stockholders of the Corporation; provided, however, that no Bylaws
hereafter adopted by the stockholders of the Corporation, or any amendments
thereto, shall invalidate any prior act of the Board of Directors that would
have been valid if such Bylaws or amendment had not been adopted.
(b) Number, Election and Terms of Directors. The number of directors which
shall constitute the whole Board of Directors shall be fixed from time to time
by a majority of the directors then in office, except in the case of an increase
in the number of directors by reason of any provisions contained in a Directors'
Resolution with respect to a series of Preferred Stock. Each director shall
serve for a term ending on the next annual meeting of stockholders following his
or her election to the Board of Directors and until such director's successor
shall have been duly elected and qualified or until his or her earlier death,
resignation or removal.
Election of directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
(c) Removal of Directors. A director of the Corporation may be removed
from office as a director, with or without cause, by the affirmative vote of the
holders of a majority of the voting power of the then issued and outstanding
shares of capital stock of the Corporation entitled to vote in the election of
directors, voting together as a single class.
(d) Vacancies on Board of Directors. Except as provided in Article Fourth
hereof, newly created directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting from death,
resignation, removal or other cause may be filled by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the Board of Directors, or by the stockholders. Any director elected
in accordance with the preceding sentence shall serve for a term ending on the
next annual meeting of stockholders following his or her election to the Board
of Directors and until such director's successor shall have been duly elected
and qualified or until his or her earlier death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
(e) Amendment of Bylaws. In furtherance of, and not in limitation of, the
powers conferred by the laws of the State of Delaware, the Board of Directors is
expressly authorized to make, adopt, amend or repeal the Bylaws of the
Corporation, or adopt new Bylaws, without any action on the part of the
stockholders, except as may be otherwise provided by applicable law or the
Bylaws of the Corporation. Except as otherwise expressly prescribed by law, the
stockholders may not adopt, amend or repeal the Bylaws of the Corporation,
except by the affirmative vote of the holders of a majority of the voting power
of the then issued and outstanding shares of capital stock of the Corporation
entitled to vote in the election of directors, voting together as a single
class.
(f) Certain Amendments. Notwithstanding anything in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the voting power of the then issued and outstanding shares of capital
stock of the Corporation entitled to vote in the election of directors, voting
together as a single class, shall be required to alter, amend or adopt any
provision inconsistent with, or to repeal, paragraph (f) of this Article or
Article Sixth.
SIXTH: From and after the first date (such date, the "Public Status Date")
as of which the Corporation has a class or series of capital stock registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at an annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing by such
stockholders and from and after the Public Status Date,
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the power of the stockholders of the Corporation to consent in writing, without
a meeting, to the taking of any action is specifically denied. Except as
otherwise required by law, or as may be prescribed in a Directors' Resolution,
special meetings of stockholders of the Corporation may be called only by the
Chairman of the Board of Directors or by the President of the Corporation or by
the Board of Directors pursuant to a resolution approved by a majority of the
Board of Directors.
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 director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the 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: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of section 279 of Title 8 of the Delaware Code order a meeting of
this creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
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ANNEX E
BYLAWS
OF
PRIDE INTERNATIONAL, INC.
ARTICLE I
OFFICES
1.1 Registered Office. The registered office of Pride International, Inc.
(the "Corporation") required by the General Corporation Law of the State of
Delaware or any successor statute (the "DGCL"), to be maintained in the State of
Delaware, shall be the registered office named in the Certificate of
Incorporation of the Corporation, as it may be amended or restated in accordance
with the DGCL from time to time (the "Certificate of Incorporation"), or such
other office as may be designated from time to time by the Board of Directors of
the Corporation (the "Board of Directors") in the manner provided by law. Should
the Corporation maintain a principal office within the State of Delaware, such
registered office need not be identical to such principal office of the
Corporation.
1.2 Other Offices. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may determine from time to time or as the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings. Meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated by the Board
of Directors, the Chairman of the Board or the officer calling the meeting.
2.2 Annual Meeting. An annual meeting of the stockholders, for the
election of directors and for the transaction of such other business as may
properly come before the meeting, shall be held at such place, within or without
the State of Delaware, on such date, and at such time as the Board of Directors
shall fix and set forth in the notice of the meeting, which date shall be within
thirteen months subsequent to the last annual meeting of stockholders. At the
annual meeting of the stockholders, only such business shall be conducted as
shall have been properly brought before the annual meeting as set forth in
Section 2.8 hereof. Failure to hold the annual meeting at the designated time or
otherwise shall not work a dissolution of the Corporation.
2.3 Special Meetings. Unless otherwise provided by the provisions of the
DGCL, or by or pursuant to the Certificate of Incorporation, special meetings of
the stockholders may be called at any time only by the Chairman of the Board of
Directors, by the President or by the Board of Directors pursuant to a
resolution approved by the affirmative vote of at least a majority of the Whole
Board, and no such special meeting may be called by any other person or persons
(the term "Whole Board" shall mean the total number of authorized Directors,
whether or not there exist any vacancies in previously authorized
directorships). Upon written request of any person or persons authorized to call
special meetings who have duly called such a special meeting, it shall be the
duty of the Secretary to give due notice thereof to the stockholders. If the
Secretary shall neglect or refuse to give notice of the meeting, the person or
persons calling the meeting may do so. Every special meeting of the stockholders
of the Corporation shall be held on such date and at such place within or
without the State of Delaware as the person or persons calling the meeting may
designate.
2.4 Notice of Meeting. Written or printed notice of all meetings stating
the place, day and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called,
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shall be delivered not less than ten nor more than 60 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Chairman of the Board, President or Secretary of the Corporation, to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered to a stockholder when deposited in the United States mail
addressed to such stockholder at such stockholder's address as it appears on the
stock transfer records of the Corporation, with postage thereon prepaid. Notice
of any meeting of stockholders of the Corporation need not be given to any
stockholder of the Corporation if waived by him in writing in accordance with
Section 7.3 hereof. In addition, attendance at a meeting of the stockholders of
the Corporation shall constitute a waiver of notice of such meeting, except when
a stockholder of the Corporation attends a meeting for the express purpose of
objecting (and so expresses such objection at the beginning of the meeting) to
the transaction of any business on the ground that the meeting is not lawfully
called or convened.
2.5 Registered Holders of Shares; Closing of Share Transfer Records;
Record Date.
(a) Registered Holders as Owners. Unless otherwise provided under Delaware
law, the Corporation may regard the person in whose name any shares issued by
the Corporation are registered in the stock transfer records of the Corporation
at any particular time (including, without limitation, as of a record date fixed
pursuant to paragraph (b) of this Section 2.5) as the owner of those shares at
that time for purposes of voting those shares, receiving distributions thereon
or notices in respect thereof, transferring those shares, exercising rights of
dissent with respect to those shares, entering into agreements with respect to
those shares, or giving proxies with respect to those shares; and neither the
Corporation nor any of its officers, directors, employees or agents shall be
liable for regarding that person as the owner of those shares at that time for
those purposes, regardless of whether that person possesses a certificate for
those shares.
(b) Record Date. For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive a dividend by the Corporation, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than 60 days
and, in the case of a meeting of stockholders, not less than ten days, prior to
the date on which the particular action requiring such determination of
stockholders is to be taken. The Board of Directors shall not close the books of
the Corporation against transfers of shares during the whole or any part of such
period.
If the Board of Directors does not fix a record date for any meeting of the
stockholders, the record date for determining stockholders entitled to notice of
or to vote at such meeting shall be at the close of business on the day next
preceding the day on which notice is given, or, if in accordance with Section
7.3 of these Bylaws notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
2.6 Quorum of Stockholders.
(a) Quorum Generally. Unless otherwise provided by the DGCL or the
Certificate of Incorporation, a majority of the Voting Stock, present in person
or represented by proxy, shall constitute a quorum at any meeting of the
stockholders of the Corporation. The term "Voting Stock" shall mean all
outstanding shares of all classes and series of capital stock of the Corporation
entitled to vote generally in the election of Directors of the Corporation,
considered as one class; and, if the Corporation shall have outstanding at any
time shares of Voting Stock entitled to more or less than one vote for any such
share, each reference in these Bylaws to a proportion or percentage in voting
power of Voting Stock shall be calculated by reference to the portion or
percentage of all votes entitled to be cast by holders of all such shares
generally in the election of Directors of the Corporation. "Broker non-votes"
shall be considered present at the meeting with respect to the determination of
a quorum but shall not be considered as votes cast with respect to matters as to
which no authority is granted.
(b) Quorum with Respect to a Class or Series. If any outstanding class or
series of capital stock of the Corporation shall be entitled to vote as a class
or series with respect to any matter to be submitted to
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a vote of the stockholders, then, with respect to any such matter, in addition
to the requirement of Section 2.6(a), a majority of the outstanding shares of
such class or series of capital stock so entitled to vote shall be required to
be present in person or represented by proxy, in order to constitute a quorum,
unless otherwise provided in a directors' resolution establishing such class or
series.
(c) Continuation of Business. The stockholders present at any duly
convened meeting may continue to do business at such meeting or at any
adjournment thereof notwithstanding any withdrawal from the meeting of holders
of shares counted in determining the existence of a quorum.
2.7 Adjournment. Unless otherwise provided by the Certificate of
Incorporation or these Bylaws, any meeting of the stockholders may be adjourned
from time to time, without notice other than by announcement at the meeting at
which such adjournment is taken, and at any such adjourned meeting at which a
quorum shall be present any action may be taken that could have been taken at
the meeting originally called; provided, however, that if the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting.
2.8 Voting by Stockholders.
(a) Voting on Matters Other than the Election of Directors. With respect
to any matters as to which no other voting requirement is specified by the DGCL,
the Certificate of Incorporation or these Bylaws, the affirmative vote required
for stockholder action shall be that of a majority of the shares present in
person or represented by proxy at the meeting. Broker non-votes shall not be
considered as shares present as to matters with respect to which no authority
has been granted. In the case of a matter submitted for a vote of the
stockholders as to which a stockholder approval requirement is applicable under
the stockholder approval policy of any stock exchange or quotation system on
which the capital stock of the Corporation is traded or quoted, the requirements
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any provision of the Internal Revenue Code, in each case for
which no higher voting requirement is specified by the DGCL, the Certificate of
Incorporation or these Bylaws, the vote required for approval shall be the
requisite vote specified in such stockholder approval policy, Rule 16b-3 or
Internal Revenue Code provision, as the case may be (or the highest such
requirement if more than one is applicable). For the approval of the appointment
of independent public accountants (if submitted for a vote of the stockholders),
the vote required for approval shall be a majority of the votes cast on the
matter.
(b) Voting in the Election of Directors. Unless otherwise provided in the
Certificate of Incorporation or these Bylaws, directors shall be elected by a
plurality of the votes cast by the holders of outstanding shares of capital
stock of the Corporation entitled to vote in the election of directors at a
meeting of stockholders at which a quorum is present.
(c) Stockholder Proposals. At an annual meeting of stockholders of the
Corporation, only such business shall be conducted, and only such proposals
shall be acted upon, as shall have been properly brought before such annual
meeting. To be properly brought before an annual meeting, business or proposals
must (i) be specified in the notice relating to the meeting (or any supplement
thereto) given by or at the direction of the Board of Directors in accordance
with Section 2.4 hereof or (ii) be properly brought before the meeting by a
stockholder of the Corporation who (A) is a stockholder of record at the time of
the giving of such stockholder's notice provided for in this Section 2.8, (B)
shall be entitled to vote at the annual meeting and (C) complies with the
requirements of this Section 2.8, and otherwise be proper subjects for
stockholder action and be properly introduced at the annual meeting. For a
proposal to be properly brought before an annual meeting by a stockholder of the
Corporation, in addition to any other applicable requirements, such stockholder
must have given timely advance notice thereof in writing to the Secretary of the
Corporation. To be timely, such stockholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Corporation not
less than 120 days prior to the scheduled annual meeting date, regardless of any
postponements, deferrals or adjournments of such annual meeting to a later date;
provided, however, that if the scheduled annual meeting date differs from the
annual meeting date of the next preceding annual meeting by greater than 30
days, and if less than 100 days'
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prior notice or public disclosure of the scheduled annual meeting date is given
or made, notice by such stockholder, to be timely, must be so delivered or
received not later than the close of business on the 10th day following the
earlier of the day on which the notice of such meeting was mailed to
stockholders of the Corporation or the day on which such public disclosure was
made. Any such stockholder's notice to the Secretary of the Corporation shall
set forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a description of the proposal desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Corporation's books,
of such stockholder proposing such business and any other stockholders of the
Corporation known by such stockholder to be in favor of such proposal, (iii) the
number of shares of each class or series of capital stock of the Corporation
Beneficially Owned (as defined below) by such stockholder on the date of such
notice and (iv) any material interest of such stockholder in such proposal. A
person shall be the "beneficial owner" of any shares of any class or series of
capital stock of the Corporation of which such person would be the beneficial
owner pursuant to the terms of Rule 13d-3 of the Exchange Act as in effect on
the Public Status Date; stock shall be deemed "Beneficially Owned" by the
beneficial owner or owners thereof. The Chairman of the Board or, if he is not
presiding, the presiding officer of the meeting of stockholders of the
Corporation shall determine whether the requirements of this Section 2.8 have
been met with respect to any stockholder proposal. If the Chairman of the Board
or the presiding officer determines that any stockholder proposal was not made
in accordance with the terms of this Section 2.8, he shall so declare at the
meeting and any such proposal shall not be acted upon at the meeting. At a
special meeting of stockholders of the Corporation, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
properly brought before such special meeting. To be properly brought before such
a special meeting, business or proposals must (i) be specified in the notice
relating to the meeting (or any supplement thereto) given by or at the direction
of the Board of Directors in accordance with Section 2.4 hereof or (ii)
constitute matters incident to the conduct of the meeting as the Chairman of the
Board or the presiding officer of the meeting shall determine to be appropriate.
In addition to the foregoing provisions of this Section 2.8, a stockholder of
the Corporation shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 2.8.
2.9 Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy.
Proxies for use at any meeting of stockholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meeting. All proxies shall
be received and taken charge of and all ballots shall be received and canvassed
by the secretary of the meeting who shall decide all questions relating to the
qualification of voters, the validity of the proxies and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions.
2.10 Approval or Ratification of Acts or Contracts by Stockholders. The
Board of Directors in its discretion may submit any act or contract for approval
or ratification at any annual meeting of the stockholders, or at any special
meeting of the stockholders called for the purpose of considering any such act
or contract, and any act or contract that shall be approved or be ratified by
the vote of the stockholders holding a majority of the issued and outstanding
shares of stock of the Corporation entitled to vote and present in person or by
proxy at such meeting (provided that a quorum is present), shall be as valid and
as binding upon the Corporation and upon all the stockholders as if it has been
approved or ratified by every stockholder of the Corporation.
ARTICLE III
DIRECTORS
3.1 Powers, Number, Classification and Tenure.
(a) Powers of the Board of Directors. The powers of the Corporation shall
be exercised by or under the authority of, and the business and affairs of the
Corporation shall be managed by or under the
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direction of, the Board of Directors. In addition to the authority and powers
conferred upon the Board of Directors by the DGCL, the Certificate of
Incorporation or these Bylaws, the Board of Directors is hereby authorized and
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject to the provisions of the DGCL, the
Certificate of Incorporation and any Bylaw of the Corporation adopted by the
stockholders of the Corporation; provided, however, that no Bylaw of the
Corporation hereafter adopted by the stockholders of the Corporation, nor any
amendment thereto, shall invalidate any prior act of the Board of Directors that
would have been valid if such Bylaw or amendment thereto had not been adopted.
(b) Management. Except as otherwise provided by the Certificate of
Incorporation or these Bylaws or to the extent prohibited by Delaware law, the
Board of Directors shall have the right (which, to the extent exercised, shall
be exclusive) to establish the rights, powers, duties, rules and procedures that
(i) from time to time shall govern the Board of Directors, including, without
limiting the generality of the foregoing, the vote required for any action by
the Board of Directors and (ii) from time to time shall affect the Directors'
power to manage the business and affairs of the Corporation; no Bylaw of the
Corporation shall be adopted by the stockholders of the Corporation that shall
impair or impede the implementation of this Section 3.1(b).
(c) Number of Directors. Within the limits specified in the Certificate of
Incorporation, and subject to such rights of holders of shares of one or more
outstanding series of preferred stock of the Corporation to elect one or more
Directors of the Corporation under circumstances as shall be provided by or
pursuant to the Certificate of Incorporation, the number of Directors of the
Corporation that shall constitute the Board of Directors shall be fixed from
time to time exclusively by, and may be increased or decreased from time to time
exclusively be, the affirmative vote of at least a majority of the Whole Board.
(d) Term. Each Director of the Corporation shall hold office for the full
term for which such Director is elected and until such Director's successor
shall have been duly elected and qualified or until his earlier death,
resignation or removal in accordance with the Certificate of Incorporation and
these Bylaws.
(e) Vacancies. Unless otherwise provided by or pursuant to the Certificate
of Incorporation, newly created directorships resulting from any increase in the
authorized number of Directors of the Corporation and any vacancies on the Board
of Directors resulting from death, resignation or removal in accordance with the
Certificate of Incorporation and these Bylaws may be filled by the affirmative
vote of at least a majority of the remaining Directors of the Corporation then
in office, even if such remaining Directors constitute less than a quorum of the
Board of Directors or by the stockholders. Any Director of the Corporation
elected in accordance with the preceding sentence shall hold office until the
next annual meeting of stockholders and until such Director's successor shall
have been duly elected and qualified or until his earlier death, resignation or
removal in accordance with the Certificate of Incorporation and these Bylaws.
Unless otherwise provided by or pursuant to the Certificate of Incorporation, no
decrease in the number of Directors of the Corporation constituting the Board of
Directors shall shorten the term of any incumbent Director of the Corporation.
3.2 Qualifications. Directors need not be residents of the State of
Delaware or stockholders of the Corporation.
(a) Nomination of Directors. Subject to such rights of holders of shares
of one or more outstanding series of preferred stock of the Corporation to elect
one or more Directors of the Corporation under circumstances as shall be
provided by or pursuant to the Certificate of Incorporation, only persons who
are nominated in accordance with the procedures set forth in this Section 3.3
shall be eligible for election as, and to serve as, Directors of the
Corporation. Nominations of persons for election to the Board of Directors may
be made only at a meeting of the stockholders of the Corporation at which
Directors of the Corporation are to be elected (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the Corporation who is a
stockholder of record at the time of the giving of such stockholder's notice
provided for in this Section 3.3, who shall be entitled to vote at such meeting
in the election of Directors of the Corporation and who complies with the
requirements of this Section 3.3. Any
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such nomination by a stockholder of the Corporation shall be preceded by timely
advance notice in writing to the Secretary of the Corporation. To be timely,
such stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Corporation not less than 120 days prior to
the scheduled annual meeting date, regardless of any postponements, deferrals or
adjournments of such annual meeting to a later date; provided, however, that if
the scheduled annual meeting date differs from the annual meeting date of the
next preceding annual meeting of stockholders of the Corporation by greater than
30 days, and if less than 100 days' prior notice or public disclosure of the
scheduled meeting date is given or made, notice by such stockholder, to be
timely, must be so delivered or received not later than the close of business on
the 10th day following the earlier of the day on which the notice of such
meeting was mailed to stockholders of the Corporation or the day on which such
public disclosure was made. Any such stockholder's notice to the Secretary of
the Corporation shall set forth (i) as to each person whom such stockholder
proposes to nominate for election or re-election as a Director of the
Corporation, (A) the name, age, business address and residence address of such
person, (B) the principal occupation or employment of such person, (C) the
number of shares of each class or series of capital stock of the Corporation
Beneficially Owned by such person on the date of such notice and (D) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors of the Corporation, or is
otherwise required, in each case pursuant to Regulation 14A under the Exchange
Act (including, without limitation, the written consent of such person to having
such person's name placed in nomination at the meeting and to serve as a
Director of the Corporation if elected), and (ii) as to such stockholder giving
the notice, (A) the name and address, as they appear on the Corporation's books,
of such stockholder and any other stockholders of the Corporation known by such
stockholder to be in favor of such person being nominated and (B) the number of
shares of each class or series of capital stock of the Corporation Beneficially
Owned by such stockholder on the date of such notice. The Chairman of the Board
or, if he is not presiding, the presiding officer of the meeting of stockholders
of the Corporation shall determine whether the requirements of this Section 3.3
have been met with respect to any nomination or intended nomination. If the
Chairman of the Board or the presiding officer determines that any nomination
was not made in accordance with the requirements of this Section 3.3, he shall
so declare at the meeting and the defective nomination shall be disregarded. In
addition to the foregoing provisions of this Section 3.2, a stockholder of the
Corporation shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 3.2.
3.3 Place of Meeting; Order of Business. Except as otherwise provided by
law, meetings of the Board of Directors, regular or special, may be held either
within or without the State of Delaware, at whatever place is specified by the
person or persons calling the meeting. In the absence of specific designation,
the meetings shall be held at the principal office of the Corporation. At all
meetings of the Board of Directors, business shall be transacted in such order
as shall from time to time be determined by the Chairman of the Board (if any),
or in his absence by the President, or by resolution of the Board of Directors.
3.4 Regular Meetings. Regular meetings of the Board of Directors shall be
held at such place or places within or without the State of Delaware, at such
hour and on such day as may be fixed by resolution of the Board of Directors,
without further notice of such meetings. The time or place of holding regular
meetings of the Board of Directors may be changed by the Chairman of the Board
or the President by giving written notice thereof as provided in Section 3.6
hereof.
3.5 Special Meetings. Special meetings of the Board of Directors shall be
held, whenever called by the Chairman of the Board, the President or by
resolution adopted by the Board of Directors, at such place or places within or
without the State of Delaware as may be stated in the notice of the meeting.
3.6 Attendance at and Notice of Meetings. Written notice of the time and
place of, and general nature of the business to be transacted at, all special
meetings of the Board of Directors, and written notice of any change in the time
or place of holding the regular meetings of the Board of Directors, shall be
given to each director personally or by mail, telecopier or similar
communication at least one day before the day of the meeting; provided, however,
that notice of any meeting need not be given to any director if
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waived by him in writing, or if he shall be present at such meeting. Attendance
at a meeting of the Board of Directors shall constitute presence in person at
and waiver of notice of such meeting, except where a person attends the meeting
for the express purpose of objecting (and so expresses such objection at the
beginning of the meeting) to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
3.7 Quorum of and Action by Directors. A majority of the directors in
office shall constitute a quorum of the Board of Directors for the transaction
of business; but a lesser number may adjourn from day to day until a quorum is
present. Except as otherwise provided by law or in these Bylaws, all questions
shall be decided by the vote of a majority of the directors present.
3.8 Board and Committee Action by Unanimous Written Consent in Lieu of
Meeting. Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, any action required or permitted to be taken at a meeting of the
Board of Directors or any committee thereof may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all the
members of the Board of Directors or such committee, as the case may be, and
shall be filed with the Secretary of the Corporation.
3.9 Board and Committee Conference Telephone Meetings. Subject to the
provisions required or permitted by the DGCL for notice of meetings, unless
otherwise restricted by the Certificate of Incorporation or these Bylaws,
members of the Board of Directors, or members of any committee designated by the
Board of Directors, may participate in and hold a meeting of such Board of
Directors or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can speak to and hear each other, and attendance at a meeting pursuant
to this Section 3.9 shall constitute presence in person at such meeting, except
where a person attends the meeting for the express purpose of objecting (and so
expresses such objection at the beginning of the meeting) to the transaction of
any business on the ground that the meeting is not lawfully called or convened.
3.10 Compensation. Directors will receive such compensation for their
services as may be fixed by resolution of the Board of Directors and shall
receive their actual expenses of attendance, if any, for each regular or special
meeting of the Board; provided that nothing contained herein shall be construed
to preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
3.11 Removal. A director of the Corporation may be removed from office,
with or without cause, by the affirmative vote of the holders of a majority of
the voting power of the then issued and outstanding shares of capital stock of
the Corporation entitled to vote in the election of directors, voting together
as a single class.
Notwithstanding the first paragraph of this Section 3.11, whenever holders
of outstanding shares of one or more series of Preferred Stock are entitled to
elect members of the Board of Directors pursuant to the provisions applicable in
the case of arrearages in the payment of dividends or other defaults contained
in the resolution or resolutions of the Board of Directors providing for the
establishment of any such series, any such director of the Corporation so
elected may be removed in accordance with the provision of such resolution or
resolutions.
3.12 Committees of the Board of Directors.
(a) The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members one or more committees,
each of which shall be comprised of one or more of its members, and may
designate one or more of its members as alternate members of any committee, who
may, subject to any limitations by the Board of Directors, replace absent or
disqualified members at any meeting of that committee. Any such committee, to
the extent provided in such resolution or in the Certificate of Incorporation or
these Bylaws, shall have and may exercise all of the authority of the Board of
Directors to the extent permitted by the DGCL. Any such committee may authorize
the seal of the Corporation to be affixed to all papers which may require it. In
addition to the above, such
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committee or committees shall have such other powers and limitations of
authority as may be determined from time to time by resolution adopted by the
Board of Directors.
(b) The Board of Directors shall have the power at any time to change the
membership of any such committee and to fill vacancies in it. A majority of the
number of members of any such committee shall constitute a quorum for the
transaction of business unless a greater number is required by a resolution
adopted by the Board of Directors. The act of the majority of the members of a
committee present at any meeting at which a quorum is present shall be the act
of such committee, unless the act of a greater number is required by a
resolution adopted by the Board of Directors. Each such committee may elect a
chairman (unless the Board of Directors appoints a chairman) and may appoint
such subcommittees and assistants as it may deem necessary. Except as otherwise
provided by the Board of Directors, meetings of any committee shall be conducted
in accordance with Sections 3.5, 3.6, 3.7, 3.8, 3.9 and 7.3 hereof. In the
absence or disqualification of a member of a committee, the member or members
present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member. Any member of any such committee elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of a member of a committee shall not of itself create
contract rights.
(c) Any action taken by any committee of the Board of Directors shall
promptly be recorded in the minutes and filed with the Secretary of the
Corporation.
ARTICLE IV
OFFICERS
4.1 Designation. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer and such Executive, Senior or other Vice
Presidents, Assistant Secretaries and other officers as may be elected or
appointed by the Board of Directors. Any number of offices may be held by the
same person, provided that no person holding more than one office may sign, in
more than one capacity, any certificate or other instrument required by law to
be signed by two officers. The Board of Directors shall also elect or appoint
from among the Directors a person to act as Chairman of the Board who shall not
be deemed to be an officer of the Corporation unless he or she has otherwise
been elected or appointed as such.
4.2 Powers and Duties. The officers of the Corporation shall have such
powers and duties as generally pertain to their offices, except as modified
herein or by the Board of Directors, as well as such powers and duties as from
time to time may be conferred by the Board of Directors. The Chairman of the
Board shall have such duties as may be assigned to him by the Board of Directors
and shall preside at meetings of the Board of Directors and at meetings of the
stockholders. The President shall be the Chief Executive Officer of the
Corporation and shall have general supervision over the business, affairs and
property of the Corporation.
4.3 Vacancies. Whenever any vacancies shall occur in any office by death,
resignation, increase in the number of offices of the Corporation, or otherwise,
the same shall be filled by the Board of Directors, and the officer so elected
shall hold office until such officer's successor is elected or appointed or
until his earlier death, resignation or removal.
4.4 Removal. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
4.5 Action with Respect to Securities of Other Corporations. Unless
otherwise directed by the Board of Directors, the Chairman of the Board, the
President, any Vice President and the Treasurer of the
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Corporation shall each have power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of security holders of or
with respect to any action of security holders of any other corporation in which
this Corporation may hold securities and otherwise to exercise any and all
rights and powers which this Corporation may possess by reason of its ownership
of securities in such other corporation.
ARTICLE V
CAPITAL STOCK
5.1 Certificates for Shares. The certificates for shares of the capital
stock of the Corporation shall be in such form as may be approved by the Board
of Directors or may be uncertificated shares. In the case of certificated
shares, the Corporation shall deliver certificates representing shares to which
stockholders are entitled. Certificates representing such certificated shares
shall be signed by the Chairman of the Board, the President or a Vice President
and either the Secretary or an Assistant Secretary of the Corporation, and may
bear the seal of the Corporation or a facsimile thereof. The signatures of such
persons upon a certificate may be facsimiles. The stock record books and the
blank stock certificate books shall be kept by the Secretary of the Corporation,
or at the office of such transfer agent or transfer agents as the Board of
Directors may from time to time by resolution determine. In case any person who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be Chairman of the Board or shall have ceased to be an
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if such person were such officer at the date of its
issuance.
5.2 Transfer of Shares. The shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives upon
surrender and cancellation of certificates for a like number of shares.
5.3 Ownership of Shares. The Corporation shall be entitled to treat the
holder of record of any share or shares of capital stock of the Corporation as
the holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of the State of Delaware.
5.4 Regulations Regarding Certificates. The Board of Directors shall have
the power and authority to make all such rules and regulations as they may deem
expedient concerning the issue, transfer and registration or the replacement of
certificates for shares of capital stock of the Corporation.
5.5 Lost or Destroyed Certificates. The President or any Vice President
may determine the conditions upon which a new certificate of stock may be issued
in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in its discretion, require the owner of such certificate or
his legal representative to give bond, with sufficient surety, to indemnify the
Corporation and each transfer agent and registrar against any and all losses or
claims that may arise by reason of the issue of a new certificate in the place
of the one so lost, stolen or destroyed.
ARTICLE VI
INDEMNIFICATION
6.1 General. The Corporation shall, to the fullest extent permitted by
applicable law in effect on the date of effectiveness of these Bylaws, and to
such greater extent as applicable law may thereafter permit, indemnify and hold
Indemnitee harmless from and against any and all losses, liabilities, claims,
damages and, subject to Section 6.2, Expenses (as this and all other capitalized
words used in this Article VI not previously defined in these Bylaws are defined
in Section 6.16 hereof), whatsoever arising out of any event or occurrence
related to the fact that Indemnitee is or was a director or an officer of the
Corporation or is or was serving in another Corporate Status.
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6.2 Expenses. If Indemnitee is, by reason of his Corporate Status, a
party to and is successful, on the merits or otherwise, in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith. If Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to any Matter in such Proceeding, the Corporation shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by him or on his behalf
relating to such Matter. The termination of any Matter in such a Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result
as to such Matter. To the extent that the Indemnitee is, by reason of his
Corporate Status, a witness in any Proceeding, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
6.3 Advances. In the event of any threatened or pending Proceeding in
which Indemnitee is a party or is involved and that may give rise to a right of
indemnification under this Article VI, following written request to the
Corporation by Indemnitee, the Corporation shall promptly pay to Indemnitee
amounts to cover Expenses reasonably incurred by Indemnitee in such Proceeding
in advance of its final disposition upon the receipt by the Corporation of (i) a
written undertaking executed by or on behalf of Indemnitee providing that
Indemnitee will repay the advance if it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Corporation as provided in
this Article VI and (ii) satisfactory evidence as to the amount of such
Expenses.
6.4 Request for Indemnification. To obtain indemnification, Indemnitee
shall submit to the Secretary of the Corporation a written claim or request.
Such written claim or request shall contain sufficient information to reasonably
inform the Corporation about the nature and extent of the indemnification or
advance sought by Indemnitee. The Secretary of the Corporation shall promptly
advise the Board of Directors of such request.
6.5 Determination of Entitlement; No Change of Control. If there has been
no Change of Control at the time the request for indemnification is submitted,
Indemnitee's entitlement to indemnification shall be determined in accordance
with Section 145(d) of the DGCL. If entitlement to indemnification is to be
determined by Independent Counsel, the Corporation shall furnish notice to
Indemnitee within ten days after receipt of the request for indemnification
notice specifying the identity and address of Independent Counsel. The
Indemnitee may, within 14 days after receipt of such written notice, deliver to
the Corporation a written objection to such selection. Such objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of Independent Counsel and the objection shall set forth
with particularity the factual basis for such assertion. If there is an
objection to the selection of Independent Counsel, either the Corporation or
Indemnitee may petition the Court for a determination that the objection is
without a reasonable basis or for the appointment of Independent Counsel
selected by the Court.
6.6 Determination of Entitlement; Change of Control. If there has been a
Change of Control at the time the request for indemnification is submitted,
Indemnitee's entitlement to indemnification shall be determined in a written
opinion by Independent Counsel selected by Indemnitee. Indemnitee shall give the
Corporation written notice advising of the identity and address of the
Independent Counsel so selected. The Corporation may, within 14 days after
receipt of such written notice of selection, deliver to the Indemnitee a written
objection to such selection. Indemnitee may, within ten days after the receipt
of such objection from the Corporation, submit the name of another Independent
Counsel and the Corporation may, within seven days after receipt of such written
notice, deliver to the Indemnitee a written objection to such selection. Any
objections referred to in this Section 6.6 may be asserted only on the ground
that the Independent Counsel so selected does not meet the requirements of
Independent Counsel and such objection shall set forth with particularity the
factual basis for such assertion. Indemnitee may petition the Court for a
determination that the Corporation's objection to the first or second selection
of Independent Counsel is without a reasonable basis or for the appointment as
Independent Counsel selected by the Court.
6.7 Procedures of Independent Counsel. If a Change of Control shall have
occurred before the request for indemnification is sent by Indemnitee,
Indemnitee shall be presumed (except as otherwise
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expressly provided in this Article VI) to be entitled to indemnification upon
submission of a request for indemnification in accordance with Section 6.4
hereof, and thereafter the Corporation shall have the burden of proof to
overcome the presumption in reaching a determination contrary to the
presumption. The presumption shall be used by Independent Counsel as a basis for
a determination of entitlement to indemnification unless the Corporation
provides information sufficient to overcome such presumption by clear and
convincing evidence or the investigation, review and analysis of Independent
Counsel convinces him by clear and convincing evidence that the presumption
should not apply.
Except in the event that the determination of entitlement to
indemnification is to be made by Independent Counsel, if the person or persons
empowered under Section 6.5 or 6.6 hereof to determine entitlement to
indemnification shall not have made and furnished to Indemnitee in writing a
determination within 60 days after receipt by the Corporation of the request
therefor, the requisite determination of entitlement to indemnification shall be
deemed to have been made and Indemnitee shall be entitled to such
indemnification unless Indemnitee knowingly misrepresented a material fact in
connection with the request for indemnification or such indemnification is
prohibited by applicable law. The termination of any Proceeding or of any Matter
therein, by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Article VI) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Corporation, or with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful. A
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
of the Corporation shall be deemed to have acted in a manner not opposed to the
best interests of the Corporation.
For purposes of any determination hereunder, a person shall be deemed to
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or Proceeding, to have had no reasonable cause to believe his
conduct was unlawful, if his action is based on the records or books of account
of the Corporation or another enterprise or on information, opinions, reports or
statements presented to him or to the Corporation by any of the Corporation's
officers, employees or directors, or by any other person as to matters the
person reasonably believes are in such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation or another enterprise in the course of their duties or on the advice
of legal counsel for the Corporation or another enterprise or on information or
records given or reports made to the Corporation or another enterprise by an
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Corporation or another enterprise. The term
"another enterprise" as used in this Section shall mean any other corporation or
any partnership, limited liability company, association, joint venture, trust,
employee benefit plan or other enterprise for which such person is or was
serving at the request of the Corporation as a director, an officer, employee or
agent. The provisions of this paragraph shall not be deemed to be exclusive or
to limit in any way the circumstances in which an Indemnitee may be deemed to
have met the applicable standards of conduct for determining entitlement to
rights under this Article.
6.8 Independent Counsel Expenses. The Corporation shall pay any and all
reasonable fees and expenses of Independent Counsel incurred acting pursuant to
this Article VI and in any Proceeding to which it is a party or witness in
respect of its investigation and written report and shall pay all reasonable
fees and expenses incident to the procedures in which such Independent Counsel
was selected or appointed. No Independent Counsel may serve if a timely
objection has been made to his selection until a court has determined that such
objection is without a reasonable basis.
6.9 Adjudication. In the event that (i) a determination is made pursuant
to Section 6.5 or 6.6 hereof that Indemnitee is not entitled to indemnification
under this Article VI; (ii) advancement of Expenses is not timely made pursuant
to Section 6.3 hereof; (iii) Independent Counsel has not made and delivered a
written opinion determining the request for indemnification (a) within 90 days
after being appointed by the Court, (b) within 90 days after objections to his
selection have been overruled by the
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Court or (c) within 90 days after the time for the Corporation or Indemnitee to
object to his selection; or (iv) payment of indemnification is not made within
five days after a determination of entitlement to indemnification has been made
or is deemed to have been made pursuant to Section 6.5, 6.6 or 6.7 hereof,
Indemnitee shall be entitled to an adjudication by the Court of his entitlement
to such indemnification or advancement of Expenses. In the event that a
determination shall have been made that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 6.9 shall be conducted in all respects as a de novo trial on the
merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding commenced pursuant to this Section 6.9, the Corporation shall have
the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be. If a determination shall have been
made or is deemed to have been made that Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding commenced pursuant to this Section 6.9, or otherwise, unless
Indemnitee knowingly misrepresented a material fact in connection with the
request for indemnification, or such indemnification is prohibited by law.
The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Section 6.9 that the procedures and
presumptions of this Article VI are not valid, binding and enforceable. If the
Indemnitee, pursuant to this Section 6.9, seeks a judicial adjudication to
enforce his rights under, or to recover damages for breach of, this Article VI,
and if he prevails therein, then Indemnitee shall be entitled to recover from
the Corporation, and shall be indemnified by the Corporation against, any and
all Expenses actually and reasonably incurred by him in such judicial
adjudication. If it shall be determined in such judicial adjudication that
Indemnitee is entitled to receive part but not all of the indemnification or
advancement of Expenses sought, then the Expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be prorated.
6.10 Participation by the Corporation. With respect to any Proceeding:
(a) the Corporation will be entitled to participate therein at its own expense;
(b) except as otherwise provided below, to the extent that it may wish, the
Corporation (jointly with any other indemnifying party similarly notified) will
be entitled to assume the defense thereof, with counsel reasonably satisfactory
to Indemnitee; and (c) the Corporation shall not be liable to indemnify
Indemnitee under this Article VI for any amounts paid in settlement of any
action or claim effected without its written consent, which consent shall not be
unreasonably withheld. After receipt of notice from the Corporation to
Indemnitee of the Corporation's election to assume the defense thereof, the
Corporation will not be liable to Indemnitee under this Article VI for any legal
or other expenses subsequently incurred by Indemnitee in connection with the
defense thereof other than as otherwise provided below. Indemnitee shall have
the right to employ his own counsel in such action, suit, proceeding or
investigation but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at the
expense of Indemnitee unless the employment of counsel by Indemnitee has been
authorized by the Corporation, Indemnitee shall have reasonably concluded that
there is a conflict of interest between the Corporation and Indemnitee in the
conduct of the defense of such action, or the Corporation shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of counsel employed by Indemnitee shall be subject to
indemnification pursuant to the terms of this Article VI. The Corporation shall
not be entitled to assume the defense of any Proceeding brought in the name of
or on behalf of the Corporation or as to which Indemnitee shall have reasonably
concluded that there is a conflict of interest between the Corporation and
Indemnitee in the conduct of the defense of such action. The Corporation shall
not settle any action or claim in any manner which would impose any limitation
or unindemnified penalty on Indemnitee without Indemnitee's written consent,
which consent shall not be unreasonably withheld.
6.11 Nonexclusivity of Rights. The rights of indemnification and
advancement of Expenses as provided by this Article VI shall not be deemed
exclusive of any other rights to which Indemnitee may at any time be entitled to
under applicable law, the Certificate of Incorporation, the Bylaws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this
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Article VI or any provision hereof shall be effective as to any Indemnitee for
acts, events and circumstances that occurred, in whole or in part, before such
amendment, alteration or repeal. The provisions of this Article VI shall
continue as to an Indemnitee whose Corporate Status has ceased for any reason
and shall inure to the benefit of his heirs, executors and administrators.
Neither the provisions of this Article VI or those of any agreement to which the
Corporation is a party shall be deemed to preclude the indemnification of any
person who is not specified in this Article VI as having the right to receive
indemnification or is not a party to any such agreement, but whom the
Corporation has the power or obligation to indemnify under the provisions of the
DGCL.
6.12 Insurance and Subrogation. The Corporation shall not be liable under
this Article VI to make any payment of amounts otherwise indemnifiable hereunder
if, but only to the extent that, Indemnitee has otherwise actually received such
payment under any insurance policy, contract, agreement or otherwise.
In the event of any payment hereunder, the Corporation shall be subrogated
to the extent of such payment to all the rights of recovery of Indemnitee, who
shall execute all papers required and take all action reasonably requested by
the Corporation to secure such rights, including execution of such documents as
are necessary to enable the Corporation to bring suit to enforce such rights.
6.13 Severability. If any provision or provisions of this Article VI
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby; and, to the fullest extent possible,
the provisions of this Article VI shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.
6.14 Certain Actions Where Indemnification Is Not
Provided. Notwithstanding any other provision of this Article VI, no person
shall be entitled to indemnification or advancement of Expenses under this
Article VI with respect to any Proceeding, or any Matter therein, brought or
made by such person against the Corporation.
6.15 Definitions. For purposes of this Article VI:
"Change of Control" means a change in control of the Corporation after
the date Indemnitee acquired his Corporate Status, which shall be deemed to
have occurred in any one of the following circumstances occurring after
such date: (i) there shall have occurred an event that is or would be
required to be reported with respect to the Corporation in response to Item
6(e) of Schedule 14A of Regulation 14A (or in response to any similar item
on any similar schedule or form) promulgated under the Exchange Act, if the
Corporation is or were subject to such reporting requirement; (ii) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) shall have become the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 40% or more of the combined voting power of the
Corporation's then outstanding voting securities without prior approval of
at least two-thirds of the members of the Board of Directors in office
immediately prior to such person's attaining such percentage interest;
(iii) the Corporation is a party to a merger, consolidation, sale of assets
or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of
Directors thereafter; or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors (including, for this purpose, any new director whose election or
nomination for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to
constitute at least a majority of the Board of Directors.
"Corporate Status" describes the status of Indemnitee as a director,
officer, employee, agent or fiduciary of the Corporation or any predecessor
of the Corporation, of Pride Oil Well Service Company, a Texas corporation,
of Pride International, Inc., a Louisiana corporation, of Marine Drilling
Companies, Inc., a Texas corporation, of any subsidiary of the Corporation
or of Pride Oil Well Service Company, Pride International, Inc., Marine
Drilling Companies, Inc., or of any other
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corporation, partnership, limited liability company, association, joint
venture, trust, employee benefit plan or other enterprise which Indemnitee
is or was serving at the request of the Corporation.
"Court" means the Court of Chancery of the State of Delaware or any
other court of competent jurisdiction.
"Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of
the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to
be a witness in a Proceeding.
"Indemnitee" includes any person who is, or is threatened to be made,
a witness in or a party to any Proceeding by reason of his Corporate
Status.
"Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporate law and neither presently is,
nor in the five years previous to his selection or appointment has been,
retained to represent: (i) the Corporation or Indemnitee in any matter
material to either such party or (ii) any other party to the Proceeding
giving rise to a claim for indemnification hereunder.
"Matter" is a claim, a material issue or a substantial request for
relief.
"Proceeding" includes any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative,
except one initiated by an Indemnitee pursuant to Section 6.9 hereof to
enforce his rights under this Article VI.
6.16 Notices. Promptly after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee shall, if he anticipates or
contemplates making a claim for Expenses or an advance pursuant to the terms of
this Article VI, notify the Corporation of the commencement of such Proceeding;
provided, however, that any delay in so notifying the Corporation shall not
constitute a waiver or release by Indemnitee of rights hereunder and that any
omission by Indemnitee to so notify the Corporation shall not relieve the
Corporation from any liability that it may have to Indemnitee otherwise than
under this Article VI. Any communication required or permitted to the
Corporation shall be addressed to the Secretary of the Corporation and any such
communication to Indemnitee shall be addressed to Indemnitee's address as shown
on the Corporation's records unless he specifies otherwise and shall be
personally delivered or delivered by commercial express overnight delivery
service. Any such notice shall be effective upon receipt.
6.17 Contractual Rights. The right to be indemnified or to the
advancement or reimbursement of Expenses (i) is a contract right based upon good
and valuable consideration, pursuant to which Indemnitee may sue as if these
provisions were set forth in a separate written contract between Indemnitee and
the Corporation, (ii) is and is intended to be retroactive and shall be
available as to events occurring prior to the adoption of these provisions and
(iii) shall continue after any rescission or restrictive modification of such
provisions as to events occurring prior thereto.
6.18 Savings Clause. If any provision of this Article VI of the Bylaws is
determined by a court having jurisdiction over the matter to require the
Corporation to do or refrain from doing any act that is in violation of
applicable law, the court shall be empowered to modify or reform such provision
so that, as modified or reformed, such provision provides the maximum of
indemnification permitted by law and such provision, as so modified or reformed,
and the balance of this Section shall be applied in accordance with their terms.
Without limiting the generality of the foregoing, if any portion of this Section
of the Bylaws shall be invalidated on any ground, the Corporation shall
nevertheless indemnify an Indemnitee to the full extent permitted by an
applicable portion of this Section of the Bylaws that shall not have been
invalidated and to the full extent permitted by law with respect to that portion
that has been invalidated.
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6.19 Successors and Assigns. This Section of the Bylaws shall be binding
upon the Corporation, its successors and assigns and shall inure to the benefit
of Indemnitee's heirs and personal representatives.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Bylaw Amendments. The Board of Directors shall have the power to
adopt, amend and repeal from time to time the Bylaws of the Corporation, subject
to the right of stockholders entitled to vote with respect thereto to amend or
repeal such Bylaws as adopted or amended by the Board of Directors. Bylaws of
the Corporation may be adopted, amended or repealed by the affirmative vote of
the holders of a majority of the voting power of the then issued and outstanding
shares of capital stock of the Corporation entitled to vote in the election of
directors, voting together as a single class, at any annual meeting, or at any
special meeting if notice of the proposed amendment be contained in the notice
of said special meeting, or by the Board of Directors as specified in the
preceding sentence.
7.2 Books and Records. The Corporation shall keep books and records of
account and shall keep minutes of the proceedings of its stockholders, its Board
of Directors and each committee of its Board of Directors.
7.3 Waiver of Notice. Whenever any notice is required to be given to any
stockholder, director or committee member under the provisions of the DGCL or
under the Certificate of Incorporation, as amended, or these Bylaws, said notice
shall be deemed to be sufficient if given (i) by telegraphic, facsimile, cable
or wireless transmission or (ii) by deposit of the same in a post office box in
a sealed prepaid wrapper addressed to the person entitled thereto at his post
office address, as it appears on the records of the Corporation, and such notice
shall be deemed to have been given on the day of such transmission or mailing,
as the case may be.
Whenever any notice is required to be given to any stockholder, director or
committee member under the provisions of the DGCL or under the Certificate of
Incorporation, as amended, or these Bylaws, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be equivalent to the giving of such notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these Bylaws.
7.4 Resignations. Any director or officer may resign at any time. Such
resignations shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the President or the Secretary of the Corporation. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
7.5 Seal. The seal of the Corporation shall be in such form as the Board
of Directors may adopt.
7.6 Fiscal Year. The fiscal year of the Corporation shall end on the 31st
day of December of each year or as otherwise provided by a resolution adopted by
the Board of Directors.
7.7 Facsimile Signatures. In addition to the provisions for the use of
facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of the Chairman of the Board, any other director, or any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors.
7.8 Reliance upon Books, Reports and Records. Each director and each
member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the corporation and upon such information, opinions, reports or
statements
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presented to the Corporation by any of its officers or employees, or committees
of the board of Directors, or by any other person as to matters the director or
member reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or behalf of the
Corporation.
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ANNEX F
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 23, 2001 (the "Agreement"), between
Marine Drilling Companies, Inc., a Texas corporation ("Grantee"), and Pride
International, Inc., a Louisiana corporation ("Issuer").
RECITALS
A. Grantee and Issuer are, concurrently with the execution and delivery of
this Agreement, entering into an Agreement and Plan of Merger, dated as of the
date hereof, among Grantee, Issuer, PM Merger, Inc., a Delaware corporation, and
AM Merger, Inc., a Delaware corporation (the "Merger Agreement"), pursuant to
which, among other things, the parties will engage in a business combination in
a merger of equals (the "Merger");
B. As a condition to their willingness to enter into the Merger Agreement,
Grantee has required that Issuer agree, and believing it to be in the best
interests of Issuer, Issuer has agreed, among other things, to grant to Grantee
the Option (as hereinafter defined) to purchase shares of common stock, par
value $.01 per share, of Issuer ("Issuer Common Stock") at a price per share
equal to the Exercise Price (as hereinafter defined);
C. Capitalized terms used without definition herein having the meanings
assigned to them in the Merger Agreement; and
D. In consideration of the foregoing and the mutual representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
OPTION TO PURCHASE SHARES
SECTION 1.1 Grant of Option. (a) Issuer hereby grants to Grantee an
irrevocable option to purchase, in whole or in part, an aggregate of up to
14,645,963 duly authorized, validly issued, fully paid and nonassessable shares
of Issuer Common Stock (representing 19.9% of the outstanding shares of Issuer
Common Stock as of May 22, 2001) on the terms and subject to the conditions set
forth herein (the "Option"); provided, however, that in no event shall the
number of shares of Issuer Common Stock for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Issuer Common Stock at the
time of exercise without giving effect to the issuance of any Option Shares (as
hereinafter defined). The number of shares of Issuer Common Stock that may be
received upon the exercise of the Option and the Exercise Price are subject to
adjustment as herein set forth.
(b) In the event that any (i) additional shares of Issuer Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described in
Section 3.1 hereof), or (ii) shares of Issuer Common Stock are redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of this
Agreement, the number of shares of Issuer Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such issuance or
redemption, such number together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. Nothing contained in this
Section 1.1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to breach or fail to comply with any provision of the Merger Agreement.
As used herein, the term "Option Shares" means the shares of Issuer Common Stock
issuable pursuant to the Option, as the number of such shares shall be adjusted
pursuant to the terms hereof.
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SECTION 1.2 Exercise of Option. (a) The Option may be exercised by
Grantee, in whole or in part, at any time, or from time to time, commencing upon
the Exercise Date and prior to the Expiration Date. As used herein, the term
"Exercise Date" means the date on which Issuer becomes obligated to pay a fee
pursuant to Section 9.5(b)(i) of the Merger Agreement. As used herein, the term
"Expiration Date" means the first to occur prior to Grantee's exercise of the
Option pursuant to Section 1.2(b) of:
(i) the Effective Time;
(ii) 12 months after the first receipt by the Grantee of written
notice from the Issuer of the occurrence of an Exercise Date; or
(iii) the date of termination of the Merger Agreement, unless, in the
case of this clause (iii), an Exercise Date has occurred or could still
occur.
Notwithstanding the termination of the Option, Grantee shall be entitled to
purchase those Option Shares with respect to which it may have exercised the
Option by delivery of an Option Notice (as defined below) prior to the
Expiration Date, and the termination of the Option will not affect any rights
hereunder which by their terms do not terminate or expire prior to or at the
Expiration Date.
(b) In the event Grantee wishes to exercise the Option, Grantee shall send
a written notice to Issuer of its intention to so exercise the Option (an
"Option Notice"), specifying the number of Option Shares to be purchased (and
the denominations of the certificates, if more than one), whether the aggregate
Exercise Price will be paid in cash or by surrendering a portion of the Option
in accordance with Section 1.3(b) or a combination thereof, and the place in the
United States, time and date of the closing of such purchase (the "Option
Closing" and the date of such Closing, the "Option Closing Date"), which date
shall not be less than two business days nor more than ten business days from
the date on which an Option Notice is delivered; provided that the Option
Closing shall be held only if (i) such purchase would not otherwise violate or
cause the violation of, any applicable material law, statute, ordinance, rule or
regulation (collectively, "Laws") (including the HSR Act), and (ii) no material
judgment, order, writ, injunction, ruling or decree of any governmental entity
(collectively, "Orders") shall have been promulgated, enacted, entered into, or
enforced by any governmental entity which prohibits delivery of the Option
Shares, whether temporary, preliminary or permanent; provided, however, that the
parties hereto shall use their reasonable best efforts to (x) promptly make and
process all necessary filings and applications and obtain all consents,
approvals, Orders, authorizations, registrations and declarations or expiration
or termination of any required waiting periods (collectively, "Approvals") and
to comply with any such applicable Laws and (y) have any such Order vacated or
reversed. In the event the Option Closing is delayed pursuant to clause (i) or
(ii) above, the Option Closing shall be within ten business days following the
cessation of such restriction, violation, Law or Order or the receipt of any
necessary Approval, as the case may be (so long as the Option Notice was
delivered prior to the Expiration Date); provided further that, notwithstanding
any prior Option Notice, Grantee shall be entitled to rescind such Option Notice
and shall not be obligated to purchase any Option Shares in connection with such
exercise upon written notice to such effect to Issuer.
(c) At any Option Closing, (i) Issuer shall deliver to Grantee all of the
Option Shares to be purchased by delivery of a certificate or certificates
evidencing such Option Shares in the denominations designated by Grantee in the
Option Notice, and (ii) if the Option is exercised in part and/or surrendered in
part to pay the aggregate Exercise Price pursuant to Section 1.3(b), Issuer and
Grantee shall execute and deliver an amendment to this Agreement reflecting the
Option Shares for which the Option has not been exercised and/or surrendered. If
at the time of issuance of any Option Shares pursuant to an exercise of all or
part of the Option hereunder, Issuer shall have issued any rights or other
securities which are attached to or otherwise associated with the Issuer Common
Stock, then each Option Share issued pursuant to such exercise shall also
represent such rights or other securities with terms substantially the same as
and at least as favorable to Grantee as are provided under any shareholder
rights agreement or similar agreement of Issuer then in effect. At the Option
Closing, Grantee shall pay to Issuer by wire transfer of immediately available
funds to an account specified by Issuer to Grantee in writing at least two
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business days prior to the Option Closing an amount equal to the Exercise Price
multiplied by the number of Option Shares to be purchased for cash pursuant to
this Article I; provided, however, that the failure or refusal of Issuer to
specify an account shall not affect Issuer's obligation to issue the Option
Shares.
(d) Upon the delivery by Grantee to Issuer of the Option Notice and the
tender of the applicable aggregate Exercise Price in immediately available funds
or the requisite portion of the Option in accordance with Section 1.3, Grantee
shall be deemed to be the holder of record of the Option Shares issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer may then
be closed, that certificates representing such Option Shares may not then have
been actually delivered to Grantee, or Issuer may have failed or refused to take
any action required of it hereunder. Issuer shall pay all expenses that may be
payable in connection with the preparation, issuance and delivery of stock
certificates or an amendment to this Agreement under this Section 1.2 and any
filing fees and other expenses arising from the performance of the transactions
contemplated hereby.
SECTION 1.3 Exercise Price; Payments. (a) The purchase and sale of the
Option Shares pursuant to Section 1.2 of this Agreement shall be at a purchase
price equal to $32.65 per Share (as such amount may be adjusted pursuant to the
terms hereof, the "Exercise Price"), payable at Grantee's option in cash, by
surrender of a portion of the Option in accordance with Section 1.3(b), or a
combination thereof.
(b) Grantee may elect to purchase Option Shares issuable, and pay some or
all of the aggregate Exercise Price payable, upon an exercise of the Option by
surrendering a portion of the Option with respect to such number of Option
Shares as is determined by dividing (i) the aggregate Exercise Price payable in
respect of the number of Option Shares being purchased in such manner by (ii)
the excess of the Fair Market Value (as defined below) per share of Issuer
Common Stock as of the last trading day preceding the date Grantee delivers its
Option Notice (such date, the "Option Exercise Date") over the per share
Exercise Price. The "Fair Market Value" per share of Issuer Common Stock shall
be (i) if the Issuer Common Stock is listed on the New York Stock Exchange, Inc.
(the "NYSE") or any other nationally recognized exchange or trading system as of
the Option Exercise Date, the average of last reported sale prices per share of
Issuer Common Stock thereon for the 5 trading days commencing on the 6th trading
day immediately preceding the Option Exercise Date, or (ii) if the Issuer Common
Stock is not listed on the NYSE or any other nationally recognized exchange or
trading system as of the Option Exercise Date, the amount determined by a
mutually acceptable independent investment banking firm as the value per share
the Issuer Common Stock would have if publicly traded on a nationally recognized
exchange or trading system (assuming no discount for minority interest,
illiquidity or restrictions on transfer). That portion of the Option so
surrendered under this Section 1.3(b) shall be canceled and shall thereafter be
of no further force and effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR
SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF MAY
23, 2001, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF PRIDE
INTERNATIONAL, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed, by delivery of
substitute certificate(s) without such reference if such Option Shares have been
registered pursuant to the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or Grantee
has delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act
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and (ii) the reference to restrictions pursuant to this Agreement in the above
legend will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be taken with a view to
the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Act.
SECTION 2.2 Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Option Shares. Issuer has taken all necessary corporate and other
action to authorize and reserve for issuance, and, subject to receipt of
any Approvals, to permit it to issue, the Option Shares and all additional
shares or other securities which may be issued pursuant to Section 3.1 upon
exercise of the Option, and, at all times from the date hereof until such
time as the obligation to deliver Option Shares hereunder terminates, will
have reserved for issuance upon exercise of the Option the Option Shares
and such other additional shares or securities, if any. All of the Option
Shares and all additional shares or other securities or property which may
be issuable pursuant to Section 3.1, upon exercise of the Option and
issuance pursuant hereto, shall be duly authorized, validly issued, fully
paid and nonassessable, shall be delivered free and clear of all Liens of
any nature whatsoever, and shall not be subject to any preemptive or
similar right of any Person.
(b) No Restrictions. No Louisiana law or other state takeover statute
or similar Law and no provision of the Articles of Incorporation or Bylaws
of Issuer or any agreement to which Issuer is a party (a) would or would
purport to impose restrictions which might adversely affect or delay the
consummation of the transactions contemplated by this Agreement, or (b) as
a result of the consummation of the transactions contemplated by this
Agreement, (i) would or would purport to restrict or impair the ability of
Grantee to vote or otherwise exercise the rights of a shareholder with
respect to securities of Issuer or any of its Subsidiaries that may be
acquired or controlled by Grantee or (ii) would or would purport to entitle
any Person to acquire securities of Issuer.
(c) Amendment to Pride Rights Agreement. Issuer has amended or taken
other action under the Pride Rights Agreement so that neither the execution
and delivery of this Agreement or the issuance of Option Shares pursuant to
an exercise of the Option, will cause: (i) the Pride Rights to become
exercisable under the Pride Rights Agreement; (ii) the Grantee or any of
Grantee's shareholders or Subsidiaries to be deemed an "Acquiring Person"
(as defined in the Pride Rights Agreement); (iii) any such event to be an
event requiring an adjustment of the purchase price of the Pride Rights
under Section 11(a)(ii) of the Pride Rights Agreement; (iv) Section 13 of
the Pride Rights Agreement to be or become applicable to any such event; or
(v) a "Stock Acquisition Date" or a "Distribution Date" (each as defined in
the Pride Rights Agreement) to occur upon any such event.
ARTICLE 3
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
SECTION 3.1 Adjustment Upon Changes in Capitalization. In addition to the
adjustment in the number of shares of Issuer Common Stock that may be purchased
upon exercise of the Option pursuant to Section 1.1 of this Agreement, the
number of shares of Issuer Common Stock that may be purchased upon the exercise
of the Option and the Exercise Price shall be subject to adjustment from time to
time as
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provided in this Section 3.1. In the event of any change in the number of issued
and outstanding shares of Issuer Common Stock by reason of any stock dividend,
split-up, merger, recapitalization, combination, conversion, exchange of shares,
spin-off or other change in the corporate or capital structure of Issuer which
would have the effect of altering or otherwise diminishing Grantee's rights
hereunder, the number and kind of Option Shares or other securities subject to
the Option and the Exercise Price therefor shall be appropriately adjusted so
that Grantee shall receive upon exercise of the Option (or, if such a change
occurs between exercise and the Option Closing, upon the Option Closing) the
number and kind of shares or other securities or property that Grantee would
have received in respect of the Option Shares that Grantee is entitled to
purchase upon exercise of the Option if the Option had been exercised (or the
purchase thereunder had been consummated, as the case may be) immediately prior
to such event or the record date for such event, as applicable. The rights of
Grantee under this Section shall be in addition to, and shall in no way limit,
its rights against Issuer for breach of or the failure to perform any provision
of the Merger Agreement.
ARTICLE 4
REGISTRATION RIGHTS
SECTION 4.1 Registration of Option Shares Under the Securities Act. (a)
If requested by Grantee at any time and from time to time within one year after
receipt by Grantee of Option Shares (the "Registration Period"), Issuer shall
use its reasonable best efforts, as promptly as practicable, to effect the
registration under the Securities Act and any applicable state law (a "Demand
Registration") of such number of Option Shares or such other Issuer securities
owned by or issuable to Grantee in accordance with the method of sale or other
disposition contemplated by Grantee, including a "shelf" registration statement
under Rule 415 of the Securities Act or any successor provision, and to obtain
all consents or waivers of other parties that are required therefor. Grantee
agrees to use reasonable best efforts to cause, and to use reasonable best
efforts to cause any underwriters of any sale or other disposition to cause, any
sale or other disposition pursuant to such registration statement to be effected
on a widely distributed basis so that upon consummation thereof no purchaser or
transferee will own beneficially more than 5% of the then-outstanding voting
power of Issuer. With respect to such a "shelf" registration statement, Issuer
shall keep such Demand Registration effective for a period of not less than one
year, unless, in the written opinion of counsel to Issuer, which opinion shall
be delivered to Grantee and which shall be satisfactory in form and substance to
Grantee and its counsel, such registration under the Securities Act is not
required in order to lawfully sell and distribute such Option Shares or other
Issuer securities in the manner contemplated by Grantee. Except with respect to
such a "shelf" registration statement, Issuer shall keep such Demand
Registration effective for a period of not less than 150 days, unless, in the
written opinion of counsel to Issuer, which opinion shall be delivered to
Grantee and which shall be satisfactory in form and substance to Grantee and its
counsel, such registration under the Securities Act is not required in order to
lawfully sell and distribute such Option Shares or other Issuer securities in
the manner contemplated by Grantee. Issuer shall only have the obligation to
effect two Demand Registrations pursuant to this Section 4.1; provided that only
requests relating to a registration statement that has become effective under
the Securities Act shall be counted for purposes of determining the number of
Demand Registrations made. Issuer shall be entitled to postpone for up to 100
days from receipt of Grantee's request for a Demand Registration the filing of
any registration statement in connection therewith if the Board of Directors of
Issuer determines in its good faith reasonable judgment that such registration
would materially interfere with or require premature disclosure of, any material
acquisition, reorganization, pending or proposed offering of Issuer Securities
or other transaction involving Issuer or any other material contract under
active negotiation by Issuer; and provided further that Issuer shall not have
postponed any Demand Registration pursuant to this sentence during the twelve
month period immediately preceding the date of delivery of Grantee's request for
a Demand Registration.
(b) If Issuer effects a registration under the Securities Act of Issuer
Common Stock for its own account or for any other stockholders of Issuer (other
than on Form S-4 or Form S-8, or any successor form), Grantee shall have the
right to participate in such registration and include in such registration the
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number of shares of Issuer Common Stock or such other Issuer securities as
Grantee shall designate by notice to Issuer (an "Incidental Registration" and,
together with a Demand Registration, a "Registration"); provided, however, that,
if the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock or other securities
requested to be included in such Incidental Registration exceeds the number
which can be sold in such offering, Issuer shall include therein (i) first, all
shares proposed to be included therein by Issuer, (ii) second, subject to the
rights of any other holders of registration rights in effect as of the date
hereof, the shares requested to be included therein by Grantee and (iii) third,
shares proposed to be included therein by any other stockholder of Issuer.
Participation by Grantee in any Incidental Registration shall not affect the
obligation of Issuer to effect Demand Registrations under this Section 4.1.
Issuer may withdraw any registration under the Securities Act that gives rise to
an Incidental Registration without the consent of Grantee.
(c) In connection with any Registration pursuant to this Section 4.1, (i)
Issuer and Grantee shall provide each other and any underwriter of the offering
with customary representations, warranties, covenants, indemnification and
contribution obligations in connection with such Registration, and (ii) Issuer
shall use reasonable best efforts to cause any Option Shares included in such
Registration to be approved for listing on the NYSE or any other nationally
recognized exchange or trading system upon which Issuer's securities are then
listed, subject to official notice of issuance, which notice shall be given by
Issuer upon issuance. Grantee will provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed hereunder. The
costs and expenses incurred by issuer in connection with any Registration
pursuant to this Section 4.1 (including any fees related to qualifications under
Blue Sky Laws and SEC filing fees) (the "Registration Expenses") shall be borne
by Issuer, excluding legal fees of Grantee's counsel and underwriting discounts
or commissions with respect to Option Shares to be sold by Grantee included in a
Registration.
SECTION 4.2 Transfers of Option Shares. The Option Shares may not be
sold, assigned, transferred, or otherwise disposed of except (i) in an
underwritten public offering as provided in Section 4.1 or (ii) to any purchaser
of transferee who would not, to the knowledge of the Grantee after reasonable
inquiry, immediately following such sale, assignment, transfer or disposal
beneficially own more than 5% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be permitted to sell any Option
Shares if such sale is made pursuant to a tender or exchange offer that has been
approved or recommended by a majority of the members of the Board of Directors
of Issuer (which majority shall include a majority of directors who were
directors as of the date hereof).
ARTICLE 5
REPURCHASE RIGHTS; SUBSTITUTE OPTIONS
SECTION 5.1 Repurchase Rights. (a) Subject to Section 6.1, at any time on
or after the Exercise Date and prior to the Expiration Date, or, if the Option
has been exercised prior to the Expiration Date, for 120 days after the
Expiration Date, Grantee shall have the right (the "Repurchase Right") to
require Issuer to repurchase from Grantee (i) the Option or any part thereof as
Grantee shall designate at a price (the "Option Repurchase Price") equal to the
amount, subject to reduction at the sole discretion of Grantee pursuant to
clause (iii) of Section 6.1(a), by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Exercise Price, multiplied by the number of Option Shares
as to which the Option is to be repurchased and/or (ii) such number of Option
Shares purchased by Grantee as Grantee shall designate at a price (the "Option
Share Repurchase Price") equal to the Market/Offer Price multiplied by the
number of Option Shares so designated. The term "Market/Offer Price" shall mean
the highest of (i) the highest price per share of Issuer Common Stock offered or
paid in any Pride Acquisition Proposal, or (ii) the highest closing price for
shares of Issuer Common Stock during the six-month period immediately preceding
the date Grantee gives the Repurchase Notice (as hereinafter defined). In
determining the Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by Grantee and reasonably acceptable to Issuer, which determination, absent
manifest error, shall be conclusive for all purposes of this Agreement.
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(b) Grantee shall exercise its Repurchase Right by delivering to Issuer
written notice (a "Repurchase Notice") stating that Grantee elects to require
Issuer to repurchase all or a portion of the Option and/or the Option Shares as
specified therein. The closing of the Repurchase Right (the "Repurchase
Closing") shall take place in the United States at the place, time and date
specified in the Repurchase Notice, which date shall not be less than two
business days nor more than ten business days from the date on which the
Repurchase Notice is delivered. At the Repurchase Closing, subject to the
receipt of a writing evidencing the surrender of the Option and/or certificates
representing Option Shares, as the case may be, Issuer shall deliver to Grantee
the Option Repurchase Price therefor or the Option Share Repurchase Price
therefor, as the case may be, or the portion thereof that Issuer is not then
prohibited under applicable Law from so delivering. At the Repurchase Closing,
(i) Issuer shall pay to Grantee the Option Repurchase Price for the portion of
the Option which is to be repurchased or the Option Shares Repurchase Price for
the number of Option Shares to be repurchased, as the case may be, by wire
transfer of immediately available funds to an account specified by Grantee at
least 24 hours prior to the Repurchase Closing and (ii) if the Option is
repurchased only in part, Issuer and Grantee shall execute and deliver an
amendment to this Agreement reflecting the Option Shares for which the Option is
not being repurchased.
(c) To the extent that Issuer is prohibited under applicable Law from
repurchasing the portion of the Option or the Option Shares designated in such
Repurchase Notice, Issuer shall immediately so notify Grantee and thereafter
deliver, from time to time, to Grantee the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five Business Days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a Repurchase Notice is prohibited under applicable Law from
delivering to Grantee the full amount of the Option Repurchase Price and the
Option Share Repurchase Price for the Option or Option Shares to be repurchased,
respectively, Grantee may rescind the exercise of the Repurchase Right, whether
in whole, in part or to the extent of the prohibition, and, to the extent
rescinded, no part of the amounts, terms or the rights with respect to the
Option or Repurchase Right shall be changed or affected as if such Repurchase
Right were not exercised. Issuer shall use its reasonable best efforts to obtain
all required regulatory and legal approvals and to file any required notices to
permit Grantee to exercise its Repurchase Right and shall use its reasonable
best efforts to avoid or cause to be rescinded or rendered inapplicable any
prohibition on Issuer's repurchase of the Option or the Option Shares.
SECTION 5.2 Substitute Option. (a) In the event that Issuer enters into
an agreement (i) to consolidate with or merge into any Person, other than
Grantee, any Subsidiary of Grantee or the Company (each an "Excluded Person"),
and Issuer is not the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any Person, other than an Excluded Person, to merge
into Issuer and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger, the then outstanding shares of
Issuer Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property or the then
outstanding shares of Issuer Common Stock shall after such merger represent less
than 50% of the outstanding voting securities of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets to any Person, other than an Excluded Person, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that, unless earlier exercised by Grantee, the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Issuer
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments; provided, however, that if
such a conversion or exchange cannot, because of applicable Law be the same as
the Option, such terms shall be as similar as possible and in no event less
advantageous to Grantee than the Option.
(b) In addition to any other restrictions or covenants, Issuer agrees that
it shall not enter or agree to enter into any transaction described in Section
5.2(a) unless the Acquiring Corporation (as hereinafter
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defined) and any Person that controls the Acquiring Corporation assume in
writing all the obligations of Issuer hereunder and agree for the benefit of
Grantee to comply with this Article V.
(c) For purposes of this Section 5.2, the term "Acquiring Corporation"
shall mean (i) the continuing or surviving person of a consolidation or merger
with Issuer (if other than Issuer), (ii) Issuer in a consolidation or merger in
which Issuer is the continuing or surviving or acquiring Person, and (iii) the
transferee of all or substantially all of Issuer's assets.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Total Profit. (a) Notwithstanding any other provision of this
Agreement, in no event shall Grantee's Total Profit (as hereinafter defined)
exceed $50.0 million (the "Limitation Amount") and, if the total amount that
would otherwise be received by Grantee otherwise would exceed such amount,
Grantee, at its sole election, shall either (i) reduce the number of shares of
Issuer Common Stock subject to this Option, (ii) deliver to issuer for
cancellation Option Shares previously purchased by Grantee, (iii) reduce the
amount of the Option Repurchase Price or the Option Share Repurchase Price, (iv)
reduce the fee payable to Grantee pursuant to Section 9.5(b)(i) of the Merger
Agreement, (v) pay cash to Issuer, or (vi) any combination thereof, so that
Grantee's actually realized Total Profit, shall not exceed the Limitation Amount
after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) which would
exceed the Limitation Amount; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
5.1, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 5.1, less (y) Grantee's purchase price for
such Option Shares, (iii) (x) the net cash amounts or the fair market value of
any property received by Grantee pursuant to any consummated arm's-length sales
of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, less (y) Grantee's purchase
price of such Option Shares and (iv) the amount received by Grantee pursuant to
Section 9.5(b)(i) of the Merger Agreement.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposal assuming
that the Option was exercised on such date for such number of Option Shares and
assuming that such Option Shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price (less customary brokerage commissions) for shares of Issuer Common
Stock on the preceding trading day on the NYSE (or on any other nationally
recognized exchange or trading system on which shares of Issuer Common Stock are
then so listed or traded).
SECTION 6.2 Further Assurances; Listing. (a) From time to time, at the
other party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further action
as may be necessary or desirable to consummate the transactions contemplated by
this Agreement, including, without limitation, to vest in Grantee good and
marketable title, free and clear of all Liens, to any Option Shares purchased
hereunder. Issuer agrees not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights
or securities, the Pride Rights Agreement or similar agreement, dissolution or
sale of assets, or by any other voluntary act) the observance or performance of
any of the covenants, agreements or conditions to be observed or performed
hereunder by it.
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(b) If the Issuer Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on the NYSE (or any other national
securities exchange or trading system), Issuer, upon the request of Grantee,
will promptly file an application to list the shares of Issuer Common Stock or
such other securities to be acquired upon exercise of the Option on the NYSE
(and any other national securities exchange or trading system) and will use
reasonable best efforts to obtain approval of such listing as promptly as
practicable.
SECTION 6.3 Division of Option; Lost Options. The Agreement (and the
Option granted hereby) are exchangeable, without expense, at the option of
Grantee, upon presentation and surrender of this Agreement at the principal
office of Issuer, for other agreements providing for Options of different
denominations entitling Grantee to purchase, on the same terms and subject to
the same conditions as are set forth herein, in the aggregate the same number of
Option Shares purchasable hereunder. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft or destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new agreement of like
tenor and date.
SECTION 6.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 6.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to Grantee to:
Marine Drilling Companies, Inc.
One Sugar Creek Center Boulevard,
Suite 600
Sugar Land, Texas 77489
Attention: Jan Rask
Facsimile: (281) 243-3070
with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
Attention: Nick D. Nicholas
Facsimile: (713) 226-0237
(b) if to Issuer to:
Pride International, Inc.
5845 San Felipe, Suite 3300
Houston, Texas 77057
Attention: Robert Randall
Facsimile: (713) 952-6916
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with a copy to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: L. Proctor Thomas
Facsimile: (713) 229-7785
SECTION 6.6 Interpretation. When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an Article
or Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 6.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
SECTION 6.8 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement and the other agreements of the parties referred to herein constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
SECTION 6.9 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Texas (without giving effect to
choice of law principles thereof).
SECTION 6.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 6.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 6.12 Submission to Jurisdiction; Waivers. Each of Grantee and
Issuer hereby (i) consents to submit itself to the personal jurisdiction of any
Texas state court sitting in Harris County, Texas or any Federal court located
in the Southern District of Texas, Houston, Division 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 any Texas state
court or any Federal court sitting
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in the Southern District of Texas, Houston Division, and (iv) waives any right
to trial by jury with respect to any action related to or arising out of this
Agreement or any of the transactions contemplated herein.
SECTION 6.13 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 6.14 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor will any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be
duly executed as of the date first above written.
ISSUER:
PRIDE INTERNATIONAL, INC.
By: /s/ PAUL A. BRAGG
----------------------------------
Paul A. Bragg
President and Chief Executive
Officer
GUARANTEE:
MARINE DRILLING COMPANIES, INC.
By: /s/ JAN RASK
----------------------------------
Jan Rask
President and Chief Executive
Officer
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ANNEX G
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 23, 2001 (the "Agreement"), between
Pride International, Inc., a Louisiana corporation ("Grantee"), and Marine
Drilling Companies, Inc., a Texas corporation ("Issuer").
RECITALS
A. Grantee and Issuer are, concurrently with the execution and delivery of
this Agreement, entering into an Agreement and Plan of Merger, dated as of the
date hereof, among Grantee, Issuer, PM Merger, Inc., a Delaware corporation, and
AM Merger, Inc., a Delaware corporation (the "Merger Agreement"), pursuant to
which, among other things, the parties will engage in a business combination in
a merger of equals (the "Merger");
B. As a condition to their willingness to enter into the Merger Agreement,
Grantee has required that Issuer agree, and believing it to be in the best
interests of Issuer, Issuer has agreed, among other things, to grant to Grantee
the Option (as hereinafter defined) to purchase shares of common stock, par
value $.01 per share, of Issuer ("Issuer Common Stock") at a price per share
equal to the Exercise Price (as hereinafter defined);
C. Capitalized terms used without definition herein having the meanings
assigned to them in the Merger Agreement; and
D. In consideration of the foregoing and the mutual representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
OPTION TO PURCHASE SHARES
SECTION 1.1 Grant of Option. (a) Issuer hereby grants to Grantee an
irrevocable option to purchase, in whole or in part, an aggregate of up to
11,680,759 duly authorized, validly issued, fully paid and nonassessable shares
of Issuer Common Stock (representing 19.9% of the outstanding shares of Issuer
Common Stock as of May 18, 2001) on the terms and subject to the conditions set
forth herein (the "Option"); provided, however, that in no event shall the
number of shares of Issuer Common Stock for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Issuer Common Stock at the
time of exercise without giving effect to the issuance of any Option Shares (as
hereinafter defined). The number of shares of Issuer Common Stock that may be
received upon the exercise of the Option and the Exercise Price are subject to
adjustment as herein set forth.
(b) In the event that any (i) additional shares of Issuer Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement and other than pursuant to an event described in
Section 3.1 hereof), or (ii) shares of Issuer Common Stock are redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of this
Agreement, the number of shares of Issuer Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such issuance or
redemption, such number together with any shares of Issuer Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Issuer Common Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. Nothing contained in this
Section 1.1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to breach or fail to comply with any provision of the Merger Agreement.
As used herein, the term "Option Shares" means the shares of Issuer Common Stock
issuable pursuant to the Option, as the number of such shares shall be adjusted
pursuant to the terms hereof.
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SECTION 1.2 Exercise of Option. (a) The Option may be exercised by
Grantee, in whole or in part, at any time, or from time to time, commencing upon
the Exercise Date and prior to the Expiration Date. As used herein, the term
"Exercise Date" means the date on which Issuer becomes obligated to pay a fee
pursuant to Section 9.5(a)(i) of the Merger Agreement. As used herein, the term
"Expiration Date" means the first to occur prior to Grantee's exercise of the
Option pursuant to Section 1.2(b) of:
(i) the Effective Time;
(ii) 12 months after the first receipt by the Grantee of written
notice from the Issuer of the occurrence of an Exercise Date; or
(iii) the date of termination of the Merger Agreement, unless, in the
case of this clause (iii), an Exercise Date has occurred or could still
occur.
Notwithstanding the termination of the Option, Grantee shall be entitled to
purchase those Option Shares with respect to which it may have exercised the
Option by delivery of an Option Notice (as defined below) prior to the
Expiration Date, and the termination of the Option will not affect any rights
hereunder which by their terms do not terminate or expire prior to or at the
Expiration Date.
(b) In the event Grantee wishes to exercise the Option, Grantee shall send
a written notice to Issuer of its intention to so exercise the Option (an
"Option Notice"), specifying the number of Option Shares to be purchased (and
the denominations of the certificates, if more than one), whether the aggregate
Exercise Price will be paid in cash or by surrendering a portion of the Option
in accordance with Section 1.3(b) or a combination thereof, and the place in the
United States, time and date of the closing of such purchase (the "Option
Closing" and the date of such Closing, the "Option Closing Date"), which date
shall not be less than two business days nor more than ten business days from
the date on which an Option Notice is delivered; provided that the Option
Closing shall be held only if (i) such purchase would not otherwise violate or
cause the violation of, any applicable material law, statute, ordinance, rule or
regulation (collectively, "Laws") (including the HSR Act), and (ii) no material
judgment, order, writ, injunction, ruling or decree of any governmental entity
(collectively, "Orders") shall have been promulgated, enacted, entered into, or
enforced by any governmental entity which prohibits delivery of the Option
Shares, whether temporary, preliminary or permanent; provided, however, that the
parties hereto shall use their reasonable best efforts to (x) promptly make and
process all necessary filings and applications and obtain all consents,
approvals, Orders, authorizations, registrations and declarations or expiration
or termination of any required waiting periods (collectively, "Approvals") and
to comply with any such applicable Laws and (y) have any such Order vacated or
reversed. In the event the Option Closing is delayed pursuant to clause (i) or
(ii) above, the Option Closing shall be within ten business days following the
cessation of such restriction, violation, Law or Order or the receipt of any
necessary Approval, as the case may be (so long as the Option Notice was
delivered prior to the Expiration Date); provided further that, notwithstanding
any prior Option Notice, Grantee shall be entitled to rescind such Option Notice
and shall not be obligated to purchase any Option Shares in connection with such
exercise upon written notice to such effect to Issuer.
(c) At any Option Closing, (i) Issuer shall deliver to Grantee all of the
Option Shares to be purchased by delivery of a certificate or certificates
evidencing such Option Shares in the denominations designated by Grantee in the
Option Notice, and (ii) if the Option is exercised in part and/or surrendered in
part to pay the aggregate Exercise Price pursuant to Section 1.3(b), Issuer and
Grantee shall execute and deliver an amendment to this Agreement reflecting the
Option Shares for which the Option has not been exercised and/or surrendered. If
at the time of issuance of any Option Shares pursuant to an exercise of all or
part of the Option hereunder, Issuer shall have issued any rights or other
securities which are attached to or otherwise associated with the Issuer Common
Stock, then each Option Share issued pursuant to such exercise shall also
represent such rights or other securities with terms substantially the same as
and at least as favorable to Grantee as are provided under any shareholder
rights agreement or similar agreement of Issuer then in effect. At the Option
Closing, Grantee shall pay to Issuer by wire transfer of immediately available
funds to an account specified by Issuer to Grantee in writing at least two
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business days prior to the Option Closing an amount equal to the Exercise Price
multiplied by the number of Option Shares to be purchased for cash pursuant to
this Article I; provided, however, that the failure or refusal of Issuer to
specify an account shall not affect Issuer's obligation to issue the Option
Shares.
(d) Upon the delivery by Grantee to Issuer of the Option Notice and the
tender of the applicable aggregate Exercise Price in immediately available funds
or the requisite portion of the Option in accordance with Section 1.3, Grantee
shall be deemed to be the holder of record of the Option Shares issuable upon
such exercise, notwithstanding that the stock transfer books of Issuer may then
be closed, that certificates representing such Option Shares may not then have
been actually delivered to Grantee, or Issuer may have failed or refused to take
any action required of it hereunder. Issuer shall pay all expenses that may be
payable in connection with the preparation, issuance and delivery of stock
certificates or an amendment to this Agreement under this Section 1.2 and any
filing fees and other expenses arising from the performance of the transactions
contemplated hereby.
SECTION 1.3 Exercise Price; Payments. (a) The purchase and sale of the
Option Shares pursuant to Section 1.2 of this Agreement shall be at a purchase
price equal to $27.72 per Share (as such amount may be adjusted pursuant to the
terms hereof, the "Exercise Price"), payable at Grantee's option in cash, by
surrender of a portion of the Option in accordance with Section 1.3(b), or a
combination thereof.
(b) Grantee may elect to purchase Option Shares issuable, and pay some or
all of the aggregate Exercise Price payable, upon an exercise of the Option by
surrendering a portion of the Option with respect to such number of Option
Shares as is determined by dividing (i) the aggregate Exercise Price payable in
respect of the number of Option Shares being purchased in such manner by (ii)
the excess of the Fair Market Value (as defined below) per share of Issuer
Common Stock as of the last trading day preceding the date Grantee delivers its
Option Notice (such date, the "Option Exercise Date") over the per share
Exercise Price. The "Fair Market Value" per share of Issuer Common Stock shall
be (i) if the Issuer Common Stock is listed on the New York Stock Exchange, Inc.
(the "NYSE") or any other nationally recognized exchange or trading system as of
the Option Exercise Date, the average of last reported sale prices per share of
Issuer Common Stock thereon for the 5 trading days commencing on the 6th trading
day immediately preceding the Option Exercise Date, or (ii) if the Issuer Common
Stock is not listed on the NYSE or any other nationally recognized exchange or
trading system as of the Option Exercise Date, the amount determined by a
mutually acceptable independent investment banking firm as the value per share
the Issuer Common Stock would have if publicly traded on a nationally recognized
exchange or trading system (assuming no discount for minority interest,
illiquidity or restrictions on transfer). That portion of the Option so
surrendered under this Section 1.3(b) shall be canceled and shall thereafter be
of no further force and effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read substantially
as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR
SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS
ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF MAY
23, 2001, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF MARINE
DRILLING COMPANIES, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed, by delivery of
substitute certificate(s) without such reference if such Option Shares have been
registered pursuant to the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or Grantee
has delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act
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and (ii) the reference to restrictions pursuant to this Agreement in the above
legend will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be taken with a view to
the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Act.
SECTION 2.2 Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Option Shares. Issuer has taken all necessary corporate and other
action to authorize and reserve for issuance, and, subject to receipt of
any Approvals, to permit it to issue, the Option Shares and all additional
shares or other securities which may be issued pursuant to Section 3.1 upon
exercise of the Option, and, at all times from the date hereof until such
time as the obligation to deliver Option Shares hereunder terminates, will
have reserved for issuance upon exercise of the Option the Option Shares
and such other additional shares or securities, if any. All of the Option
Shares and all additional shares or other securities or property which may
be issuable pursuant to Section 3.1, upon exercise of the Option and
issuance pursuant hereto, shall be duly authorized, validly issued, fully
paid and nonassessable, shall be delivered free and clear of all Liens of
any nature whatsoever, and shall not be subject to any preemptive or
similar right of any Person.
(b) No Restrictions. No Texas law or other state takeover statute or
similar Law and no provision of the Articles of Incorporation or Bylaws of
Issuer or any agreement to which Issuer is a party (a) would or would
purport to impose restrictions which might adversely affect or delay the
consummation of the transactions contemplated by this Agreement, or (b) as
a result of the consummation of the transactions contemplated by this
Agreement, (i) would or would purport to restrict or impair the ability of
Grantee to vote or otherwise exercise the rights of a shareholder with
respect to securities of Issuer or any of its Subsidiaries that may be
acquired or controlled by Grantee or (ii) would or would purport to entitle
any Person to acquire securities of Issuer.
(c) Amendment to Marine Rights Agreement. Issuer has amended or taken
other action under the Marine Rights Agreement so that neither the
execution and delivery of this Agreement or the issuance of Option Shares
pursuant to an exercise of the Option, will cause: (i) the Marine Rights to
become exercisable under the Marine Rights Agreement; (ii) the Grantee or
any of Grantee's shareholders or Subsidiaries to be deemed an "Acquiring
Person" (as defined in the Marine Rights Agreement); (iii) any such event
to be an event requiring an adjustment of the purchase price of the Marine
Rights under Section 12(a)(ii) of the Marine Rights Agreement; (iv) Section
14 of the Marine Rights Agreement to be or become applicable to any such
event; or (v) a "Shares Acquisition Date" or a "Distribution Date" (each as
defined in Marine Rights Agreement) to occur upon any such event.
ARTICLE 3
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
SECTION 3.1 Adjustment Upon Changes in Capitalization. In addition to the
adjustment in the number of shares of Issuer Common Stock that may be purchased
upon exercise of the Option pursuant to Section 1.1 of this Agreement, the
number of shares of Issuer Common Stock that may be purchased upon the exercise
of the Option and the Exercise Price shall be subject to adjustment from time to
time as
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provided in this Section 3.1. In the event of any change in the number of issued
and outstanding shares of Issuer Common Stock by reason of any stock dividend,
split-up, merger, recapitalization, combination, conversion, exchange of shares,
spin-off or other change in the corporate or capital structure of Issuer which
would have the effect of altering or otherwise diminishing Grantee's rights
hereunder, the number and kind of Option Shares or other securities subject to
the Option and the Exercise Price therefor shall be appropriately adjusted so
that Grantee shall receive upon exercise of the Option (or, if such a change
occurs between exercise and the Option Closing, upon the Option Closing) the
number and kind of shares or other securities or property that Grantee would
have received in respect of the Option Shares that Grantee is entitled to
purchase upon exercise of the Option if the Option had been exercised (or the
purchase thereunder had been consummated, as the case may be) immediately prior
to such event or the record date for such event, as applicable. The rights of
Grantee under this Section shall be in addition to, and shall in no way limit,
its rights against Issuer for breach of or the failure to perform any provision
of the Merger Agreement.
ARTICLE 4
REGISTRATION RIGHTS
SECTION 4.1 Registration of Option Shares Under the Securities Act. (a)
If requested by Grantee at any time and from time to time within one year after
receipt by Grantee of Option Shares (the "Registration Period"), Issuer shall
use its reasonable best efforts, as promptly as practicable, to effect the
registration under the Securities Act and any applicable state law (a "Demand
Registration") of such number of Option Shares or such other Issuer securities
owned by or issuable to Grantee in accordance with the method of sale or other
disposition contemplated by Grantee, including a "shelf" registration statement
under Rule 415 of the Securities Act or any successor provision, and to obtain
all consents or waivers of other parties that are required therefor. Grantee
agrees to use reasonable best efforts to cause, and to use reasonable best
efforts to cause any underwriters of any sale or other disposition to cause, any
sale or other disposition pursuant to such registration statement to be effected
on a widely distributed basis so that upon consummation thereof no purchaser or
transferee will own beneficially more than 5% of the then-outstanding voting
power of Issuer. With respect to such a "shelf" registration statement, Issuer
shall keep such Demand Registration effective for a period of not less than one
year, unless, in the written opinion of counsel to Issuer, which opinion shall
be delivered to Grantee and which shall be satisfactory in form and substance to
Grantee and its counsel, such registration under the Securities Act is not
required in order to lawfully sell and distribute such Option Shares or other
Issuer securities in the manner contemplated by Grantee. Except with respect to
such a "shelf" registration statement, Issuer shall keep such Demand
Registration effective for a period of not less than 150 days, unless, in the
written opinion of counsel to Issuer, which opinion shall be delivered to
Grantee and which shall be satisfactory in form and substance to Grantee and its
counsel, such registration under the Securities Act is not required in order to
lawfully sell and distribute such Option Shares or other Issuer securities in
the manner contemplated by Grantee. Issuer shall only have the obligation to
effect two Demand Registrations pursuant to this Section 4.1; provided that only
requests relating to a registration statement that has become effective under
the Securities Act shall be counted for purposes of determining the number of
Demand Registrations made. Issuer shall be entitled to postpone for up to 100
days from receipt of Grantee's request for a Demand Registration the filing of
any registration statement in connection therewith if the Board of Directors of
Issuer determines in its good faith reasonable judgment that such registration
would materially interfere with or require premature disclosure of, any material
acquisition, reorganization, pending or proposed offering of Issuer Securities
or other transaction involving Issuer or any other material contract under
active negotiation by Issuer; and provided further that Issuer shall not have
postponed any Demand Registration pursuant to this sentence during the twelve
month period immediately preceding the date of delivery of Grantee's request for
a Demand Registration.
(b) If Issuer effects a registration under the Securities Act of Issuer
Common Stock for its own account or for any other stockholders of Issuer (other
than on Form S-4 or Form S-8, or any successor form), Grantee shall have the
right to participate in such registration and include in such registration the
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number of shares of Issuer Common Stock or such other Issuer securities as
Grantee shall designate by notice to Issuer (an "Incidental Registration" and,
together with a Demand Registration, a "Registration"); provided, however, that,
if the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock or other securities
requested to be included in such Incidental Registration exceeds the number
which can be sold in such offering, Issuer shall include therein (i) first, all
shares proposed to be included therein by Issuer, (ii) second, subject to the
rights of any other holders of registration rights in effect as of the date
hereof, the shares requested to be included therein by Grantee and (iii) third,
shares proposed to be included therein by any other stockholder of Issuer.
Participation by Grantee in any Incidental Registration shall not affect the
obligation of Issuer to effect Demand Registrations under this Section 4.1.
Issuer may withdraw any registration under the Securities Act that gives rise to
an Incidental Registration without the consent of Grantee.
(c) In connection with any Registration pursuant to this Section 4.1, (i)
Issuer and Grantee shall provide each other and any underwriter of the offering
with customary representations, warranties, covenants, indemnification and
contribution obligations in connection with such Registration, and (ii) Issuer
shall use reasonable best efforts to cause any Option Shares included in such
Registration to be approved for listing on the NYSE or any other nationally
recognized exchange or trading system upon which Issuer's securities are then
listed, subject to official notice of issuance, which notice shall be given by
Issuer upon issuance. Grantee will provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed hereunder. The
costs and expenses incurred by issuer in connection with any Registration
pursuant to this Section 4.1 (including any fees related to qualifications under
Blue Sky Laws and SEC filing fees) (the "Registration Expenses") shall be borne
by Issuer, excluding legal fees of Grantee's counsel and underwriting discounts
or commissions with respect to Option Shares to be sold by Grantee included in a
Registration.
SECTION 4.2 Transfers of Option Shares. The Option Shares may not be
sold, assigned, transferred, or otherwise disposed of except (i) in an
underwritten public offering as provided in Section 4.1 or (ii) to any purchaser
of transferee who would not, to the knowledge of the Grantee after reasonable
inquiry, immediately following such sale, assignment, transfer or disposal
beneficially own more than 5% of the then-outstanding voting power of the
Issuer; provided, however, that Grantee shall be permitted to sell any Option
Shares if such sale is made pursuant to a tender or exchange offer that has been
approved or recommended by a majority of the members of the Board of Directors
of Issuer (which majority shall include a majority of directors who were
directors as of the date hereof).
ARTICLE 5
REPURCHASE RIGHTS; SUBSTITUTE OPTIONS
SECTION 5.1 Repurchase Rights. (a) Subject to Section 6.1, at any time on
or after the Exercise Date and prior to the Expiration Date, or, if the Option
has been exercised prior to the Expiration Date, for 120 days after the
Expiration Date, Grantee shall have the right (the "Repurchase Right") to
require Issuer to repurchase from Grantee (i) the Option or any part thereof as
Grantee shall designate at a price (the "Option Repurchase Price") equal to the
amount, subject to reduction at the sole discretion of Grantee pursuant to
clause (iii) of Section 6.1(a), by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Exercise Price, multiplied by the number of Option Shares
as to which the Option is to be repurchased and/or (ii) such number of Option
Shares purchased by Grantee as Grantee shall designate at a price (the "Option
Share Repurchase Price") equal to the Market/Offer Price multiplied by the
number of Option Shares so designated. The term "Market/Offer Price" shall mean
the highest of (i) the highest price per share of Issuer Common Stock offered or
paid in any Marine Acquisition Proposal, or (ii) the highest closing price for
shares of Issuer Common Stock during the six-month period immediately preceding
the date Grantee gives the Repurchase Notice (as hereinafter defined). In
determining the Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by Grantee and reasonably
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acceptable to Issuer, which determination, absent manifest error, shall be
conclusive for all purposes of this Agreement.
(b) Grantee shall exercise its Repurchase Right by delivering to Issuer
written notice (a "Repurchase Notice") stating that Grantee elects to require
Issuer to repurchase all or a portion of the Option and/or the Option Shares as
specified therein. The closing of the Repurchase Right (the "Repurchase
Closing") shall take place in the United States at the place, time and date
specified in the Repurchase Notice, which date shall not be less than two
business days nor more than ten business days from the date on which the
Repurchase Notice is delivered. At the Repurchase Closing, subject to the
receipt of a writing evidencing the surrender of the Option and/or certificates
representing Option Shares, as the case may be, Issuer shall deliver to Grantee
the Option Repurchase Price therefor or the Option Share Repurchase Price
therefor, as the case may be, or the portion thereof that Issuer is not then
prohibited under applicable Law from so delivering. At the Repurchase Closing,
(i) Issuer shall pay to Grantee the Option Repurchase Price for the portion of
the Option which is to be repurchased or the Option Shares Repurchase Price for
the number of Option Shares to be repurchased, as the case may be, by wire
transfer of immediately available funds to an account specified by Grantee at
least 24 hours prior to the Repurchase Closing and (ii) if the Option is
repurchased only in part, Issuer and Grantee shall execute and deliver an
amendment to this Agreement reflecting the Option Shares for which the Option is
not being repurchased.
(c) To the extent that Issuer is prohibited under applicable Law from
repurchasing the portion of the Option or the Option Shares designated in such
Repurchase Notice, Issuer shall immediately so notify Grantee and thereafter
deliver, from time to time, to Grantee the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five Business Days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a Repurchase Notice is prohibited under applicable Law from
delivering to Grantee the full amount of the Option Repurchase Price and the
Option Share Repurchase Price for the Option or Option Shares to be repurchased,
respectively, Grantee may rescind the exercise of the Repurchase Right, whether
in whole, in part or to the extent of the prohibition, and, to the extent
rescinded, no part of the amounts, terms or the rights with respect to the
Option or Repurchase Right shall be changed or affected as if such Repurchase
Right were not exercised. Issuer shall use its reasonable best efforts to obtain
all required regulatory and legal approvals and to file any required notices to
permit Grantee to exercise its Repurchase Right and shall use its reasonable
best efforts to avoid or cause to be rescinded or rendered inapplicable any
prohibition on Issuer's repurchase of the Option or the Option Shares.
SECTION 5.2 Substitute Option. (a) In the event that Issuer enters into
an agreement (i) to consolidate with or merge into any Person, other than
Grantee, any Subsidiary of Grantee or the Company (each an "Excluded Person"),
and Issuer is not the continuing or surviving corporation of such consolidation
or merger, (ii) to permit any Person, other than an Excluded Person, to merge
into Issuer and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger, the then outstanding shares of
Issuer Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property or the then
outstanding shares of Issuer Common Stock shall after such merger represent less
than 50% of the outstanding voting securities of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets to any Person, other than an Excluded Person, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that, unless earlier exercised by Grantee, the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Issuer
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments; provided, however, that if
such a conversion or exchange cannot, because of applicable Law be the same as
the Option, such terms shall be as similar as possible and in no event less
advantageous to Grantee than the Option.
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(b) In addition to any other restrictions or covenants, Issuer agrees that
it shall not enter or agree to enter into any transaction described in Section
5.2(a) unless the Acquiring Corporation (as hereinafter defined) and any Person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and agree for the benefit of Grantee to comply with this
Article V.
(c) For purposes of this Section 5.2, the term "Acquiring Corporation"
shall mean (i) the continuing or surviving person of a consolidation or merger
with Issuer (if other than Issuer), (ii) Issuer in a consolidation or merger in
which Issuer is the continuing or surviving or acquiring Person, and (iii) the
transferee of all or substantially all of Issuer's assets.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Total Profit. (a) Notwithstanding any other provision of this
Agreement, in no event shall Grantee's Total Profit (as hereinafter defined)
exceed $50.0 million (the "Limitation Amount") and, if the total amount that
would otherwise be received by Grantee otherwise would exceed such amount,
Grantee, at its sole election, shall either (i) reduce the number of shares of
Issuer Common Stock subject to this Option, (ii) deliver to issuer for
cancellation Option Shares previously purchased by Grantee, (iii) reduce the
amount of the Option Repurchase Price or the Option Share Repurchase Price, (iv)
reduce the fee payable to Grantee pursuant to Section 9.5(a)(i) of the Merger
Agreement, (v) pay cash to Issuer, or (vi) any combination thereof, so that
Grantee's actually realized Total Profit, shall not exceed the Limitation Amount
after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below) which would
exceed the Limitation Amount; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
5.1, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 5.1, less (y) Grantee's purchase price for
such Option Shares, (iii) (x) the net cash amounts or the fair market value of
any property received by Grantee pursuant to any consummated arm's-length sales
of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, less (y) Grantee's purchase
price of such Option Shares and (iv) the amount received by Grantee pursuant to
Section 9.5(a)(i) of the Merger Agreement.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposal assuming
that the Option was exercised on such date for such number of Option Shares and
assuming that such Option Shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price (less customary brokerage commissions) for shares of Issuer Common
Stock on the preceding trading day on the NYSE (or on any other nationally
recognized exchange or trading system on which shares of Issuer Common Stock are
then so listed or traded).
SECTION 6.2 Further Assurances; Listing. (a) From time to time, at the
other party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further action
as may be necessary or desirable to consummate the transactions contemplated by
this Agreement, including, without limitation, to vest in Grantee good and
marketable title, free and clear of all Liens, to any Option Shares purchased
hereunder. Issuer agrees not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights
or securities, the Marine Rights Agreement or similar agreement, dissolution or
sale of assets, or by any other
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voluntary act) the observance or performance of any of the covenants, agreements
or conditions to be observed or performed hereunder by it.
(b) If the Issuer Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on the NYSE (or any other national
securities exchange or trading system), Issuer, upon the request of Grantee,
will promptly file an application to list the shares of Issuer Common Stock or
such other securities to be acquired upon exercise of the Option on the NYSE
(and any other national securities exchange or trading system) and will use
reasonable best efforts to obtain approval of such listing as promptly as
practicable.
SECTION 6.3 Division of Option; Lost Options. The Agreement (and the
Option granted hereby) are exchangeable, without expense, at the option of
Grantee, upon presentation and surrender of this Agreement at the principal
office of Issuer, for other agreements providing for Options of different
denominations entitling Grantee to purchase, on the same terms and subject to
the same conditions as are set forth herein, in the aggregate the same number of
Option Shares purchasable hereunder. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft or destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new agreement of like
tenor and date.
SECTION 6.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 6.5 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to Grantee to:
Pride International, Inc.
5845 San Felipe, Suite 3300
Houston, Texas 77057
Attention: Robert Randall
Facsimile: (713) 952-6916
with a copy to:
Baker Botts L.L.P.
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: L. Proctor Thomas
Facsimile: (713) 229-7785
(b) if to Issuer to:
Marine Drilling Companies, Inc.
One Sugar Creek Center Boulevard,
Suite 600
Sugar Land, Texas 77489
Attention: Jan Rask
Facsimile: (281) 243-3070
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with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
Attention: Nick D. Nicholas
Facsimile: (713) 226-0237
SECTION 6.6 Interpretation. When a reference is made in this Agreement to
Articles, Sections, Exhibits or Schedules, such reference shall be to an Article
or Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 6.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
SECTION 6.8 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement and the other agreements of the parties referred to herein constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.
SECTION 6.9 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Texas (without giving effect to
choice of law principles thereof).
SECTION 6.10 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 6.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
SECTION 6.12 Submission to Jurisdiction; Waivers. Each of Grantee and
Issuer hereby (i) consents to submit itself to the personal jurisdiction of any
Texas state court sitting in Harris County, Texas or any Federal court located
in the Southern District of Texas, Houston, Division 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 any Texas state
court or any Federal court sitting in the Southern District of Texas, Houston
Division, and (iv) waives any right to trial by jury with respect to any action
related to or arising out of this Agreement or any of the transactions
contemplated herein.
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SECTION 6.13 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 6.14 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor will any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive to, and not exclusive
of, any rights or remedies otherwise available.
IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be
duly executed as of the date first above written.
ISSUER:
MARINE DRILLING COMPANIES, INC.
By: /s/ JAN RASK
----------------------------------
Jan Rask
President and Chief Executive
Officer
GRANTEE:
PRIDE INTERNATIONAL, INC.
By: /s/ PAUL A. BRAGG
----------------------------------
Paul A. Bragg
President and Chief Executive
Officer
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PRIDE INTERNATIONAL, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON ______, __, 2001
The undersigned shareholder hereby appoints PAUL A. BRAGG AND ROBERT W.
RANDALL, and each of them, with full power of substitution and with
discretionary authority, the attorneys of the undersigned to vote all shares
registered in the name of the undersigned at the Special Meeting of Shareholders
of Pride International, Inc. ("Pride") to be held on _______, 2001, at 9:00
a.m., at ___________, Houston, Texas _______, or at any adjournment or
postponement thereof, with respect to the proposal to approve the Agreement and
Plan of Merger, dated as of May 23, 2001, and the issuance of shares of Pride
common stock relating to the proposed mergers involving Pride and Marine
Drilling Companies, Inc., and all other matters which may come before the
special meeting or any adjournment or postponement thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED FOR THE PROPOSAL. THE BOARD OF DIRECTORS OF PRIDE RECOMMENDS A
VOTE FOR THE PROPOSAL.
IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
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FOLD AND DETACH HERE
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2
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[X] PLEASE MARK YOUR
VOTE AS IN THIS
EXAMPLE.
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FOR AGAINST ABSTAIN
[ ] [ ] [ ]
1. Approval of the Agreement and Plan
of Merger, dated as of May 23, 2001,
and the issuance of shares of Pride
common stock relating to the proposed
mergers.
Signature______________________________________________ Date: ___________, 2001
Sign exactly as name appears hereon. Joint owners should each sign. When signing
as attorney, executor, officer, administrator, trustee, or guardian, please give
full title as such.
PLEASE VOTE